One step closer to a pan-African free trade zone.
Just one signature changed the future of the entire African continent. On April 2, Gambia became the 22nd country to ratify the African Continental Free Trade Area (AfCFTA), the largest free-trade agreement to be signed since the establishment of the World Trade Organization in 1995. Last year, 44 heads of state endorsed the creation of AfCFTA. If ratified by all 55 African countries, the agreement will bring together 1.3 billion people with a combined GDP of more than $2.5 trillion.
It is a major and historic move toward the continent’s full economic integration, dreamt by the fathers of the Organization of African Unity in the 1960s. “It is truly a huge deal,” says Margaret McMillan, a professor of economics at Tufts University in Massachusetts. “It has the potential to create a large market, instead of many relatively small markets, that will allow African companies to take advantage of scale economies and increase intra-African trade.” However, the creation of the trade area, McMillan adds with a note of caution, is only the first step: “The project will only succeed to the extent that countries are able to enforce the free-trade principles espoused by the agreement.”
There are many obstacles that could hinder its progress. While some of the largest economies, such as Egypt and South Africa, are already on board, Nigeria—which accounts for about one-sixth of the continent’s output—has yet to commit. Additionally, Africa lacks proper cross-border infrastructure, and less than half of the $100 billion needed annually to close the infrastrucutre gap is now being spent. “The treaty doesn’t overcome the high physical costs of transportation within and between African countries,” McMillan adds. “It must be accompanied by serious efforts to improve infrastructure.”
The rewards will largely outweigh the sacrifices, she believes, with long-term benefits in job creation, modernization and diversification of the economies of African countries that are almost impossible to overstate.