African Free Trade Area Expected to be a Catalyst for Growth and Development

The African Continental Free Trade Agreement (AfCFTA) agreement might eliminate poverty and inequality while stimulating sustainable and inclusive growth by implementing productivity-boosting measures. 

The free trade zone, which formally opened in January, is one of the African Union’s Agenda 2063 flagship projects. 

The AfCFTA has enormous potential to promote economic growth and transform the continent’s development prospects if additional steps are taken to achieve and properly divide its many potential benefits, which will not happen by themselves. 

Only 17 of Africa’s 49 countries have had inclusive growth. Growth has reduced poverty but increased inequality in 18 of the remaining states, while the remaining 14 nations have experienced a lack of inclusion as well as expanding inequality. 

The remarkable growth in Africa in the 2000s did not convert into significantly improved livelihoods for the majority of Africans, as the income gap between rich and poor grew. Around 34% of African households live below the international poverty threshold of $1.90 per day, and approximately 40% of total wealth is owned by one-tenth of the continent’s population. Furthermore, the COVID-19 pandemic, which has exacerbated disparities and vulnerable populations, has resulted in an additional 37 million Sub-Saharan Africans living in extreme poverty. 

Africa’s untapped export potential is $21.9 billion, accounting for 43% of intra-African exports, with an additional $9.2 billion available through partial tariff liberalisation under the AfCFTA over the next five years. 

Long-term collaboration in investment and competition policies will also be required to overcome market dominance by a few actors and lower regulatory obstacles to market entry. Vulnerable groups have lost funds and are struggling to provide for their family as a result of pandemic-induced border closures. To establish a more inclusive AfCFTA, complementary measures to support women and young people in trade, small businesses, and the least developed African countries are required.