The Edge of Reality: The African Continental Free Trade Area

LAGOS (Capital Markets in Africa) – In March 2018, member countries of the African Union took a significant step to boost regional trade and economic integration by establishing the African Continental Free Trade Area (AfCFTA). As of 29 April 2019, 22 countries have deposited their instruments of ratification of the AfCFTA agreement with the African Union, meeting the threshold for the agreement to come into effect. Accordingly, the AfCFTA came into force on 30 May 2019, although negotiations on specific features of the agreement are ongoing. With palpable excitement that the dream of creating a continental single trade market has edged reality, we interviewed Itumeleng Mukhovha to assess what this really means in practical terms.

1. Why is the AfCFTA being talked about as a game changer?
Expanded international and regional trade flows have played a significant role in Africa’s rapid growth in recent years. The AfCFTA marks another milestone toward deeper regional integration, sustainable economic growth and structural transformation. If all 55 countries join the AfCFTA, it will be the world’s largest free trade area covering 1.2 billion people with a collective GDP of USD 2.5 trillion. By way of comparison, the Northern American Free Trade Agreement and EU-Japan Economic Partnership Agreement each cover a collective GDP of USD22 trillion. However, when added together, they do not cover as many people as the AfCFTA will cover if every African country joins. As a matter of fact, the success of the AfCFTA will make it the world’s largest free trade area since the establishment of the World Trade Organisation in 1995.

In addition, the United Nations Economic Commission for Africa predicts that the AfCFTA will surge intra-African trade from 15 to 25 percent, or USD 50 billion to USD 70 billion, by 2040. Similarly, the International Monetary Fund projects that the AfCFTA will significantly increase the continent’s overall ranking on the Global Competitiveness Index. To this end, the significance of the AfCFTA cannot be overstated.

An extract from the INTO AFRICA July 2019 Edition: Trading Africa’s Prosperity. The article is written by Itumeleng Mukhovha, Corporate M&A Associate, Baker McKenzie South Africa. To read the full article, please download by clicking: INTO AFRICA PUBLICATION: July 2019 EDITION.

Itumeleng Mukhovha is a Corporate M&A Attorney at Baker McKenzie, Johannesburg, a Global Shaper of the World Economic Forum, a writer and a philanthropist who is making positive contributions in disadvantaged communities in South Africa. She was listed as one of the Top 200 Outstanding Young South Africans in 2018 by Mail and Guardian; and was included on Avance Media’s list of the Top 100 Most Influential Young South Africans, also in 2018.