World Bank, global lender has stated that free trade among African countries has great potential to promote Foreign Direct Investment (FDI).
According to the World Bank, free trade will not only boost FDI but also, increase the window of opportunity for African countries into enjoying many other benefits.
To make this achievable, trade agreements like the African Continental Free Trade Agreement (AfCFTA) need to be fast-tracked since trade between African borders still faces restrictive constrains which stifle growth, World Bank said.
“According to our new research on trade integration, it is noted that borders between African countries rank among the most restrictive in the world, one reason why there is relatively little intra-continental trade and investment.”
World Bank
The global lender asserts that trade and investment have been the key drivers of growth for developing economies – lifting hundreds of people out of poverty.
It is based on this that the World Bank encouraged that governments focus on easing intra-trade across the continent.
So far Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia are participating in AfCFTA’s Guided Trade Initiative (GTI), representing five regions across the continent, the lender noted.
World Bank again noted that if the African Continental Free Trade Area (AfCFTA) is implemented, it will form a single market across the continent, bringing together 54 countries with a total population of 1.3 billion and a combined GDP of $3.4 trillion (Sh423.8 trillion).
It would also reduce obstructions to trade and investment and enhance competition, raising the attractiveness of Africa for regional value chains and to investors, the lender says in part.
“The first phase of the agreement that took effect in January 2021, would gradually eliminate tariffs on 90 per cent of goods and reduce barriers to trade in services. That alone would expand trade and could raise real income by about seven per cent by 2035.”
World Bank
An Overview of the AFCFTA
AfCFTA was adopted in March 2018, and entered into full force in May 30, 2019.
At the time of commencement, 24 countries had deposited their instruments of ratification. This number rose to 54 signatories of which 43, had deposited their instruments of ratification, as of May, 2022.
In July, 2019, the AfCFTA was launched at the 12th Extraordinary Session of the AU Assembly of Heads of State and Government in Niamey – Niger. Trade under the AfCFTA commenced on January 1st, 2021.
AfCFTA is the world’s largest free trade area, bringing together the 55 countries of the African Union (AU) and eight (8) Regional Economic Communities (RECs) with the overall mandate to create a single continental market with a population of about 1.3 billion people and a combined GDP of approximately US$ 3.4 trillion.
The AfCFTA is one of the flagship projects of the African Union’s long-term action plan, Agenda 2063: The Africa We Want, for transforming the continent into a global powerhouse.
AfCFTA, as part of its mandate is to eliminate trade barriers and boost intra-Africa trade and more specifically, advance trade in value-added production across all service sectors of the African Economy. It will also contribute to establishing regional value chains in Africa, enabling investment and job creation.
The effective implementation of the AfCFTA is driving industrialization, increasing employment opportunities and attracting investment, hence, improving Africa’s competitiveness in the medium to long term.
His Excellency, Wamkele Mene, is the first to be elected Secretary-General, in charge of coordinating the implementation of the Agreement. The AfCFTA Secretariat is hosted in Accra, Ghana.
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