African leaders are set to put their signature to an agreement that will launch the African Continental Free Trade Area (AfCFTA) in Kigali, Rwanda, on Wednesday.
The UN Economic Commission for Africa (UNECA) has estimated the agreement’s implementation could increase intra-African trade by 52 percent by 2022, compared with trade levels in 2010.
Here’s what you need to know about the biggest trade agreement signed since the World Trade Organisation (WTO) was established.
What is AfCFTA?
African heads of government agreed to establish a continental free trade area in 2012 and started negotiations in 2015.
The agreement is set to be signed by all 55 member states of the African Union, bringing together 1.2 billion people with a combined gross domestic product (GDP) of more than $2 trillion.
The draft agreement commits countries to removing tariffs on 90 percent of goods, with 10 percent of “sensitive items” to be phased in later.
The agreement will also liberalise services and aims to tackle so-called “non-tariff barriers” which hamper trade between African countries, such as long delays at the border.
Eventually, free movement of people and even a single currency could become part of the free trade area.
Why a single market for Africa?
By creating a single continental market for goods and services, the member states of the African Union hope to boost trade between African countries.
Intra-African trade is relatively limited; UNCTAD, the main UN body dealing with trade, said it made up only 10.2 percent of the continent’s total trade in 2010.
David Luke, coordinator of the African Trade Policy Centre at UNECA, hopes the free trade area will correct this “historical anomaly”.
“Colonialism created a situation where neighbours stopped trading with each other. The main trading route was between African countries and European countries and between African countries and the US,” he told Al Jazeera.
Removing barriers to trade is expected to not just grow trade within Africa, Luke said, but also grow “the kind of trade this continent needs”.
Between 2010 and 2015, fuels represented more than half of Africa’s exports to non-African countries, while manufactured goods made up only 18 percent of exports to the rest of the world, a UNECA report said.
Within Africa, 43 percent of goods traded are manufactured products.
Commodity prices are volatile, making economies that rely on their export vulnerable. Moreover, Luke said, the export of commodities tends to be capital- rather than labour-intensive.
“When you have this kind of economy, your young people cannot find jobs. And when they cannot find jobs, you see them trying to get to Europe and drowning in the Mediterranean,” Luke said.
“If you are making the basic things that everybody consumes, then you are creating jobs.”
Luke hopes the free trade area will also make Africa more competitive outwardly.
“If you can move further up the supply chain, you are better placed in a global context as well,” he said.