Co-funded by the European Union

The consequences of the African Continental Free Trade Agreement on jobs and investments

  • The largest free-trade area in the world was launched on January 2021 after only 5 years from the beginning of negotiations
  • The agreement is expected to favour investments, decrease poverty and increase jobs

The African Continental Free Trade Area (AfCFTA) represents a major opportunity for Africa.

It is the result of the African Continental Free Trade Agreement among 54 of the 55 African Union nations. 36 countries have already completed the domestic steps required from the agreement for the ratification to be binding on them.

The agreement aims to reduce all trade costs and enable Africa to integrate further into global supply chains – it will eliminate 90% of tariffs, focus on outstanding non-tariff barriers, and create a single market with free movement of goods and services. Cutting red tape and simplifying customs procedures will bring significant income gains. Beyond trade, the pact also addresses the movement of persons and labour, competition, investment and intellectual property”.

In Africa, the private sector accounts for four-fifths of total production, two-thirds of total investments, and three-fourths of total credit to the economy and employs 90 % of the employed working age population. Inclusive economic growth has the power to transform societies, boost prosperity, and enable citizens to thrive. As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional market is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investment”, said Amadou Sako, External Advisory for Africa for the International Organisation of Employers (IOE), during a digital Conference on “Fostering Intra-trade in Africa” held on 24 February 2021.

During the IOE conference, many interesting points on how to best harness the opportunities of this trade agreement for jobs and investments were addressed, namely the need to:

  • overcome the challenges of the trade agreement and remove potential barriers, with the support and thanks to the convening power of the private sector and employers’ organisations (Stephen Obiro, President of Business Africa) and by building partnership between the private sector and state entities (Mohamed Ndao, Founder of the Okapi Supply Trading Advisory);

  • take advantage of the policy and regulatory reforms lead by the implementation of the agreement, like the ease of business, structural transformation, customs modernisation, trade in services, decent jobs, and income increase. The agreement is expected to lift 100 million Africans out of poverty by 2025 (Francis Mangeni, Head of Trade Promotion AfCFTA);

  • improve the market in which companies operate and favour regional integration that is a major tool for building peace and prosperity. AfroChampions, a pan-African business organisation (see our past news here) will be fully supportive of the future developments of the agreement and claims that USD 1.3 million investment to implement the African integration are needed (Paulo Gomes, co-chair of the AfroChampions);

  • equally bring into the agreement topics such as social security, gender equality, sustainable development, informality and labour migration (Cynthia Samuel – Olonjuwon, ILO Regional Director for Africa);

  • engage the informal sector and MSMEs and to empower African youth with modern skills (Aissatou Diallo, Senior AfCFTA International Trading Center).

Professor Mthunzi Mdwaba, IOE Vice-President to the International Labour Organisation, underlines the importance of employers’ and business membership organisations (EBMOs) in the process of building this free trade area and benefitting of it. “In many African countries, the engagement of EBMOs in trade negotiations allow for access to a myriad of skilled expertise including industry associations.  EBMOs, in particular, are well-placed to participate in national policymaking as they are capable of bringing in up-to-date information and data that can support empirical policymaking. In addition, EBMOs are also able to bring in actual experience and expertise from businesses not only operating locally but also regionally, thereby highlighting the barriers of trade and investment in doing business. In addition to supporting national policymaking, EBMOs can support their members by providing them with up-to-date information on intra-trade in Africa so that businesses are well informed about doing business”.