IN every success story, people always praise the results, but most people don’t buy into the concept, the original idea, and its benefits. This is the case when it comes to the adoption of the African Continental Free Trade Area (AfCFTA) which entered into force on January 1, 2021. This initiative is an important step towards improving the means of subsistence of the populations of the African continent by creating a single market for intra-African trade and investment.
Although critics are quick to point out the flaws of the African Union initiative, the success of the AfCFTA will be a process and not an event, as expressed by W. Gyude Moore – a former Liberian minister who is now a principal investigator at the Center. for global development, “We have to start somewhere! “
The World Bank in its 2020 financial report indicated that Africa represents 2.1% of world trade, only has a share of 2.7% of world GDP while it represents 16% of the world population, and especially trade between African nations is only 8%.
These statistics clearly reflect that the African continent has not yet maximized its potential despite a potential domestic market of 3 billion people.
These are the challenges that the AfCFTA seeks to rectify as its objectives are to boost intra-African trade through the creation of a single market for goods and services facilitated by the free movement of goods and people across the country. eradication of tariff and non-tariff barriers. .
The benefits of such an initiative are decisive for the economic growth of the African continent of the interior, as the AfCFTA prioritizes the free movement of capital, which would translate into high mobility of capital and capital flows on the continent. the continent.
This would imply that African companies could operate on the continent without any government bureaucracy and without endless bureaucratic processes thanks to the relaxation of visa rules and permits, which would improve the ease of doing business on the continent.
One can imagine the exponential growth of African business entities such as Liquid Telecoms which had already entered the Zimbabwean, Zambian, South African, Congolese, Nigerian and Egyptian markets before the adoption of the AfCFTA on January 1, 2021, the adoption of AfCFTA can bring an opportunity for growth, by Africans and for Africa.
It would also improve competitiveness, innovation and the production of quality goods that could even be competitive on a global economic scale.
In addition, the creation of a single market increases the potential for setting up businesses that can be listed on the continent on the stock exchange due to the fact that a potential market base of 3 billion people will always attract people who wish to invest. in viable businesses.
Such benefits would be realized through the rationalization and harmonization of economic and trade policies within the continent in accordance with the objectives of AfCFTA, as it is also responsible for cooperating with member states on investment and competition policies.
The advantage of having policies consistent with a continental objective is that they promote regional trade and cooperation, as trade opportunities open up to a larger market.
Most importantly, the small and medium enterprise sector should benefit, especially youth and women owned businesses, as the African Union Trade and Industry Commission is already undertaking a program to understand the challenges. facing SMEs and come up with viable strategies on how to finance the growth of African SMEs with a particular focus on youth and women.
Another invisible benefit of eliminating tariffs and harmonizing trade policies under the AfCFTA is that it reduces the costs of trade between Africans.
In addition, the respective institutions of the border posts of the respective African countries, such as immigration and revenue collection institutions, will be trained and supervised in accordance with the objectives of AfCFTA, eliminating corrupt activities at border posts, saving time. and allowing income to flow back into the national system. fiscus.
From this perspective, increased economic activity in Africa translates into an increase in the fiscal pool for governments, which would result in more revenue that can be channeled into infrastructure development and industrialization.
As such, governments and those who wish to explore the AfCFTA are advised to hurry and reap the benefits of this initiative, because as the saying goes, the early bird always gets the bigger worm.
Kudakwashe Mataire is a Masters student in International Business at the University of Zimbabwe.