Significant progress was made in advancing the African Continental Free Trade Area (AfCFTA) agreement, despite initial uncertainties about its success. By 2019, the agreement was reached, and just two years later, in January 2021, it became operational with 55 AU member states signing the agreement.
RMB Africa Focus S3: E5 | Smooth landing for African trade
What was discussed
Crystal Orderson deep dives into the African Continental Trade Area agreement, looking at the profound impact this initiative has had in opening the doors of intra-African trade and reshaping Africa’s economic landscape, significantly boosting the attractiveness of investment on the continent.
The African Continental Free Trade Area
“The World Bank projects an estimate of $450 billion in intra-African trade by 2035.”
Previously, trading within Africa incurred a 6.1% tariff on imported goods, which drove most of the continent's trade towards Asia, North America, and the EU. With the introduction of AfCFTA, these tariffs have been reduced or eliminated by 90%. Institutions like the World Bank project that AfCFTA could facilitate $450 billion in trade by 2035 and increase intra-African exports by over 81%.
“AfCFTA has created major opportunities for manufacturing and agriculture.”
Overcoming logistical challenges
Since the implementation of AfCFTA, there have been notable practical changes, particularly in addressing the logistical challenges of intra-African trade. However, airlines like Kenya Airways, Ethiopian Airlines and SAA are working to streamline trade The African Continental Free Trade Area routes. Given the diversity of trade regimes across the 55 African countries, with distinct economic unions in West, Central, and Southern Africa, progress is gradual but tangible.
The Guided Trade Initiative
“Products with African-sourced certification are eligible for lower customs fees.”
This initiative involves Cameroon, Egypt, Ghana, Kenya, Mauritius, Tanzania, Tunisia and Rwanda and is pivotal to improving intra-African trade. Under this pilot programme, nearly 100 products were approved for specific trade, leading to the first-ever shipments under AfCFTA, such as Kenya and Rwanda exporting batteries and coffee to Ghana.
In addition, the use of the Rules of Origin Certificate, which verifies that items are made with African-sourced materials, has facilitated lower customs fees for eligible products. Making the trade of African-made goods even more attractive.
Successes in Côte d'Ivoire
“Côte d'Ivoire has recently signed an agreement with the World Bank and RMB.”
Côte d'Ivoire has established itself as a significant player in the cocoa industry. Recently, it has further solidified its economic standing through strategic partnerships and financial initiatives. Notably, Côte d'Ivoire collaborated with RMB and the Multilateral Investment Guarantee Agency, a member of the World Bank Group. These partnerships were crucial in securing short-term funding support via a trade-backed facility. This financial support is critical for Côte d'Ivoire, as it aims to achieve and sustain a growth rate of 6.6%. Such growth is contingent on the confidence and credibility conferred by reputable institutions. RMB played a pivotal role in facilitating this loan, demonstrating a significant vote of confidence in Côte d'Ivoire’s economic potential.
The involvement of the World Bank and RMB signifies a robust endorsement of Côte d'Ivoire’s economic stability and growth prospects. This collaboration has been a game-changer, not only assisting the country with essential development projects but also enhancing its appeal to foreign investors. The financial backing has bolstered Côte d'Ivoire’s ability to attract and promote foreign direct investment, which is vital for its continued development.
Moreover, Côte d'Ivoire’s strategic positioning and economic initiatives underscore its importance in AfCFTA and the Economic Community of West African States (ECOWAS). The country's proactive approach and successful financial collaborations highlight its role as a key player in promoting regional and continental trade and economic integration.