Cost reduction, economic diversification, and decreased dependency are three key channels through which the African Continental Free Trade Area (AfCFTA) agreement can positively impact the African economy. This triple recommendation emerges from the 9th edition of the "CFC Africa Insights" report focusing on the theme "AfCFTA: Harnessing the Potential of Intra-African Trade."
The AfCFTA will reduce import costs and broaden consumer choice, according to the report by the Casablanca Finance City Authority (CFCA) and Fitch Solutions' BMI subsidiary. It notes that eliminating tariffs will lower the cost of imported goods from elsewhere in Africa, thus benefiting consumers across the continent.
The agreement will give consumers the opportunity to purchase goods that were previously inaccessible to them, the same source estimates.
Regarding the second channel, the AfCFTA encourages economic diversification and the establishment of cross-border value chains.
In this regard, the report specifies that despite its large population, the continent is primarily composed of small, sparsely populated countries. In 2023, the median African country had only 14.1 million inhabitants, compared to 23.9 million in Asia and 18.1 million in South America.
This market fragmentation hinders economic specialization, the report argues, noting, however, that intra-African trade is more diversified, with 43.2% of all goods shipped in Africa being manufactured products, compared to only 17.8% of the continent's exports to other regions of the world.
Furthermore, the AfCFTA encourages the development of manufacturing sectors in Africa, with nearly 85% of the projected new trade focusing on high-value-added manufactured products. This should contribute to the creation of 16 million manufacturing jobs across the continent, according to the Brookings Institute.
Additionally, the establishment of cross-border value chains will facilitate the transfer of technologies and business processes, thus promoting regional integration and preparing African economies for the fourth industrial revolution.
Thirdly, the AfCFTA will reduce Africa's dependency on foreign markets, the report states, asserting that most African economies are geared towards consumers in Europe and Asia.
This edition of the "CFC Africa Insights" report was presented on Wednesday in Casablanca by BMI economist John Ashbourne, during the CFCA's "CFC Insights" conference, attended by the Minister of Industry and Trade, Ryad Mezzour, the Director-General of the Casablanca Finance City Authority (CFCA), Saïd Ibrahimi, and the Special Representative of the President of the African Development Bank (AfDB) for the Africa Investment Forum, Yacine Fal.
