The African Continental Free Trade Area Is in Effect From Today

The African Continental Free Trade Area (AfCFTA) went into operation on January 1 with the aspiration of becoming the world's largest single market.

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"The African Continental Free Trade Area will change the economic fortunes of our continent," said South Africa’s President Cyril Ramaphosa, who is also the leader of the African Union (AU).

At the virtual launch ceremony, the AfCFTA Secretary Wamkele Mene pointed out that this new trade deal will provide the continent with an opportunity to fight poverty and dismantle the inherited colonial economic model.

The AfCFTA has a GDP of about US$3.4 billion and a potential market of 1.2 billion consumers, which could expand to 2.5 billion people by 2050.

It is one of the most significant milestones towards African integration into the global economy, but it is not without challenges that could make true trade integration difficult.

Currently, Africa is divided into several subregional integration agreements that have historically competed rather than cooperated with each other.

"Therefore, their convergence and compatibility with the AfCFTA will be a great challenge," South African economist Nomahlubi Jakuja said.

Non-tariff barriers can also lead to trade costs significantly higher than the tariffs themselves, which will be eliminated in 90 percent of the products.

Before the pandemic, the UN Economic Commission for Africa (UNECA) estimated that the AfCFTA could increase intraregional trade by over 50 percent by 2022, which would translate into higher growth, more foreign investment, and more industrialization.