This archive report was first published on 8 October 2021.
On January 1, 2021, the African Continental Free Trade Area (AfCFTA) came into effect, marking a significant milestone in the continent's economic integration. The African Development Bank (AfDB) has since announced plans to support trade valued at $7 billion over the next five years to spur the growth of the AfCFTA.
The AfDB aims to facilitate the development of the AfCFTA by guaranteeing loans given to companies to sell their products across the continent. This move is expected to benefit small and medium-sized companies, climate-friendly enterprises, and women-owned businesses.
According to David Luke, coordinator of the African Trade Policy Centre at the United Nations Economic Commission for Africa, trade within the continent is expected to grow by 52% in the next decade if adequate support is given to businesses. The AfCFTA has already relaxed rules of origin and non-tariff barriers, allowing traders of all sizes to explore the 1.3 billion people market across the continent.
The AfCFTA is expected to improve intra-African trade, which currently stands at between 16% and 18%. It is also expected to champion value addition, reducing the continent's exposure to volatility emanating from trading in raw materials, as well as cutting Africa's overreliance in global supply chains proven unsustainable by the COVID-19 pandemic.
The AfCFTA is the world's largest free trade area since the formation of the World Trade Organization. Other organizations, including the Afreximbank and Africa Finance Corp, have also pledged support for the AfCFTA, with the Afreximbank planning to make $40 billion in funding available over the next five years.
