Africa’s Free Trade Area will drive prosperity on continent

2023-09-27 22:15:21
Africa’s Free Trade Area will drive prosperity on continent

The African Continental Free Trade Area (AfCFTA) will help to develop the continent's industry and agriculture and drive prosperity, the African Business said in a report.

AfCFTA has been hailed, rightly, as having the potential to very considerably alter the continent’s fortunes for the better.

A good deal of this conviction is based on the AfCFTA’s principal mandate which is to forge regional value chains (RVCs).

Likewise, just as the AfCFTA fosters the establishment and consolidation of RVCs, so do strong RVCs provide the web of interconnected cogs and springs that keep the AfCFTA going deeper and further. The AfCFTA and RVCs are mutually reinforcing factors in the pursuit of Africa’s integration and development agenda.

African economies have been characterised by a heavy reliance on the export of raw materials, often failing to capture the full value of these resources. This traditional export model not only limits economic diversification but also perpetuates vulnerability to external shocks.

The AfCFTA offers a unique chance to reverse this trend by fostering intra-regional trade and encouraging the creation of RVCs.

The development of RVCs involves a multi-step process that encompasses various stages of production within a region, from raw material extraction and processing to production of intermediate goods, to final product assembly.

By focusing on these interconnected processes, African nations can collaborate to enhance their production capacities, technology sharing, and skills development, leading to a more robust and integrated economy.

The power of the AfCFTA to boost sustainable development by fostering RVCs comes out clearly in modelling by the UN Economic Commission for Africa, which has demonstrated that full implementation of the AfCFTA by all AU member states could boost intra-African trade by over a third ($196bn) by 2045 compared with a situation without AfCFTA.

Importantly, the impact of the AfCFTA is felt the most in the industrial sector, where ample opportunities exist for different state parties to specialise in the production of specific parts and components of the final product, seamlessly connected by RVCs.

ECA analysis has confirmed that, with a few exceptions, the bulk of the absolute gains in national exports to the rest of Africa following AfCFTA implementation is concentrated in industrial products.

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