In an effort to unify its trade, Africa has signed a new free trade agreement that will essentially establish the African Union as a one bloc market—and one of the world’s largest free trade areas.
Forty-four African countries have signed the African Continental Free Trade Area (AfCFTA), which is expected to create a free-flow of goods and services across the continent. The model for the agreement mimics the European Union’s version.
Countries in Sub-Saharan Africa in particular, have been ramping up investments in apparel and textile manufacturing, hoping to drive jobs and economic growth, and this move is expected to help facilitate that growth as raw materials and inputs will be able to move more easily between one country and the next. This is expected to contribute to a more competitive manufacturing sector and the ability for companies to benefit from economies of scale.
If all 55 members of the African Union ratify the agreement, it will bring together 1.2 billion people and a combined GDP of $2 trillion, according to Africa News. Kenya, South Africa, Lesotho, Morocco, Madagascar, Egypt, Mauritius, Ethiopia—all shaping up to be key on the continent for apparel and textiles sourcing—have all signed the agreement. South Africa, Kenya and Egypt, in particular, are expected to reap the most benefits of the deal as they already enjoy the biggest manufacturing bases.
“Once in force AfCFTA will be the largest trade zone in the world, increasing intra-African trade by 52 percent by the year 2022, remove tariffs on 90 percent of goods, liberalize services and tackle other barriers to intra-Africa trade, such as long delays at border posts,” Africa News reported Dr Ibrahim Assane Mayaki, former Nigerian prime minister and current CEO of the African Union’s NEPAD planning and coordinating agency, as saying.
Now that the framework for the agreement has been signed, it remains for the signatory countries to ratify it, which they have 120 days from signing to do. From there, the AfCFTA would take effect 30 days after ratifying the agreement. Negotiations on the deal began in 2015 and talks went through eight rounds before the agreement was reached in December. The remaining 11 African nations will also have to decide to sign the agreement to make it a true continent-wide free trade deal. For the agreement to come into effect, however, just 22 countries have to formally ratify it.
Addressing the agreement’s signing, World Trade Organization Director-General Roberto Azevêdo, said, “The signing of the African Continental Free Trade Area is an historic moment. It will boost the flow of goods and services between the nations of the African Union, putting trade at the heart of their strategy for growth and development. By doing so it has the potential to deliver a huge economic boost to the continent and to strengthen their ability to trade with the wider world.”