November 26, 2024
African bloc to expand free-trade pilot to 31 countries
More than half of African nations will use the rules of a continental free-trade pact this year as the region moves closer to fully integrating into a single market.
Of the 47 countries that have ratified the African Continental Free Trade Area, 31 will join the so-called guided trade initiative, up from seven in 2023, AfCFTA Secretary-General Wamkele Mene said at a World Economic Forum panel in Davos Tuesday.
Last year’s trial included processed agricultural products, manufactured goods and services, he said. Uganda, for example, exported some of its excess 2 billion litres of milk to Algeria, while a ceramic-tile manufacturer in Ghana shipped the product to Cameroon.
“AfCFTA enabled a 20% reduction in duty,” Mene said. “That is 20% competitiveness as of the start of trade.”
The expanded pilot will include a pan-African payments and settlement system using local currencies to overcome the continent’s foreign-exchange shortages and convertibility limitations.
“The frictional cost of trade on the continent — because people need to access currencies that they don’t trade in — it’s about $5 billion a year, which actually could go back into the economies,” Mary Vilakazi, the incoming chief executive officer of South African lender FirstRand, said at the forum.
Trade ministers are formulating regulations on digital trade to boost online commerce on the continent, according to Mene. The African Development Bank estimates the region’s digital economy will catapult to $712 billion by 2050, from about $115 billion in 2023.
AfCFTA has a potential market of 1.3 billion people with a combined gross domestic product of $3.4 trillion, and could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030.
The World Bank forecasts the accord will increase trade within the region by 80% to $532 billion by 2035, partly helped by improved technology-driven efficiency.
