The African Continental Free Trade Area: a step in the right direction

Posted in Transport Southern Africa Blog post

South Africa joined 48 other African countries in signing the African continental Free Trade Area agreement (AcFTA) in July this year. The agreement has the potential to transform global trade imbalances and create enormous opportunities for its members and their transport industries, particularly as African nations edge closer to reaching an open borders agreement. To realise the potential of the AcFTA, more nations will need to be persuaded that its disadvantages, mainly in the form of free movement of persons, are outweighed by its advantages.

The AcFTA aims to significantly boost intra-African trade and investment by eliminating import duties and non-tariff barriers. The agreement aims to create a continent-wide marketplace of over 1.2 billion people with an economy of 2.5 trillion US Dollars. The removal of obstructions to the movement of goods and people within Africa would have obvious advantages, namely: the creation of a single continental market for goods and services; the enhancement of competitiveness in industry and enterprise; and the fostering of economic growth by harmonising a relatively unsynchronised trade environment.

The agreement goes further in that it aspires to pave the way for the establishment of a central African currency and a “Continental Customs Union”. Doing business in Africa can often be challenging to foreign investors. This is, in part, due to the fact that there are over 50 currencies, 55 regulatory frame-works, several different legal regimes left behind by former colonial powers and developed in different ways during independence, numerous non-tariff barriers and a severe lack of infrastructure within the African continent. A uniform approach to all these barriers will yield significant economic benefits for the continent. The AcFTA will essentially provide a single rule book for doing business and trading in Africa.

From a legal perspective, one of the biggest challenges will be to develop continental legislation that governs trade and transport in a way that takes into account the differing common law and civil law systems that have developed to varying degrees since independence. The EU had managed to do so, and there is no reason why the technical issues cannot be resolved. However, it will require considerable political will, and some African leaders will be required to relinquish a degree of their regulatory authority to a central power.

The hesitation, certainly on South Africa’s part, in signing the agreement was partly due to its free movement of persons provisions. The fear is that such provisions would result in an influx of migrants from other member countries who seek to rely on South Africa’s public health and other services.

As the continent of opportunity, Africa needs to show the world that its numerous countries and systems are able to develop a uniform approach to trade and transport if it is to fully benefit from its abundance of natural resources. AcFTA is a definite step in the right direction.

The Inside Africa team would like to thank Jenine Naidu, Candidate Attorney, for her contribution to this blog post.

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Africa is as dynamic a market as it is diverse. We understand that changes impacting your business can arise rapidly and vary significantly across the continent.

Our understanding of Africa’s markets stems from extensive experience on the ground. Through our Inside Africa blog, we aim to apply this insight to provide you with timely commentary on the latest developments across Africa, as well as insight into the many nations that make up this vast continent.

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