African Continental Free Trade Agreement – What You Need To Know


January 1st, 2021 marked the beginning of the African Continental Free Trade Agreement (AfCFTA), a major step forward to make conducting business across Africa easier whilst opening a market of 55 countries and a population of over 1.3 billion people.

The African Continental Free Trade Agreement (AfCFTA) was created to boost intra-African trade, expedite the movement of goods across borders, improve service provision, create more investment opportunities, improve intellectual property rights protection, and competition policy.

While there are similarities with the European Union (EU), African governments will still need to enact policies that would help with currency conversions and free movement across African borders.

How many countries have ratified the African Continental Free Trade Agreement?

As at January 1st, 2021, 54 of 55 African countries have signed the agreement, and 31 African Union member states have ratified it.

Source: Africa-EU Partnership

What are the benefits of AfCFTA?

The African Continental Free Trade Agreement is bound to impact how business is done in Africa as it will open new markets, increase partnerships, and create more jobs. In addition, this Free Trade agreement is in line with the African Union (AU) agenda for the industrialization of Africa by 2063.

Hence, it is good to start thinking of expansion of your customer-base and potentially forming strategic partnerships on a wider level from 2021 onwards.

Below are questions to ask yourself:

  • Are the services I provide needed outside my home country?
  • How can I serve markets outside my home country?
  • If I don’t have the means of setting up outside my country, which collaborative avenues can I seek?
  • If necessary, who can I contact to get clarifications on legal and taxation matters?
  • How can I position my brand to get the attention of foreign customers?
  •  I don’t currently have a business, but I have great skills that can be leveraged anywhere. Which platforms can help me achieve this?

Finding the answers to the above questions about your business will guide you to benefit from the African Continental Free Trade Agreement.

How to take full advantage of the African Continental Free Trade Agreement?

You can gain the first-mover advantage by paying attention to the market. One way of doing this is via the internet, and reading business reports.

  • The internet provides you with opportunities to grab attention and position yourself to a wider market.
  • Rethink your business strategy, see how you can improve your customer acquisition methods in target markets.
  • Is your website accessible to audiences outside your country?
  • Have you made your website available in other languages?
  • Are the prices of the products/services you sell/offer displayed in the currency of the country the website is being viewed from?
  • Are you targeting customers outside your home country using social media tools to advertise?

Content Marketing and Social Media advertising can help you target and attract customers from different markets.

If you need inspiration on how to reach outside your regular customer base, look no further than the story of Chika Russell, the founder of Chika’s Foods.

Free Trade agreements help in boosting the activities of local economies, strengthening ties between countries and this extends to boosting the activities of Small and Medium Enterprises (SMEs).

How will SMEs benefit from AfCFTA?

Countries with strong economies are a reflection of their Small and Medium Enterprises. SMEs represent 95% of enterprises according to the Organization for Economic Cooperation and Development (OECD).

Hence, for any country to thrive economically, it needs vibrant SMEs. SMEs account for around 80% of businesses in the continent, which makes them a key factor to the industrialization agenda of the AU.

However, one challenge that SMEs have faced in Africa is the inability to penetrate into advanced markets such as Europe and North America. The African Continental Free Trade Agreement solves this issue by providing SMEs the opportunity to access regional markets before expanding to markets outside the shores of Africa.

Africa, with a combined GDP of $3 trillion, represents an opportunity not to be missed by forward-thinking SMEs.

Small businesses can now export their goods to other African nations without the burden of high custom tariffs and spend less time at national borders when importing/exporting goods.

According to an AU report, businesses in Africa face an average of 6.1% on tariffs whilst exporting inside the African continent as compared to outside Africa, and AfCFTA seeks to progressively reduce these fees on intra-African trade.

Removing these barriers will allow a small leather business in Kano, Nigeria to easily supply a fashion house in Durban, South Africa leather products to make fashion accessories.

The benefit of AfCFTA to African Women

It is estimated that over 60% of informal cross-border trades in Africa is done by women. The new trading agreements in place will encourage informal traders – mainly women – to use formal channels that offer more protection, hence reducing occurrences of sexual harassment, goods confiscation at borders, etc. which have lingered for ages.

Whilst the African Continental Trade Agreement is still in its infancy, it is a step in the right direction by the African Union: i.e., opening up Africa for business, removing the burdens of borders, and lowering trading fees will ultimately contribute to the industrialization that Africa needs. 

Did you find this article helpful? What are some of the things you wish the AU would put in place?

Share your thoughts in the comments section below.

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One Response

  1. Amos has given us a very helpful and insightful explanation and exploration of this important new development in Africa. He has certainly pointed us to new horizons and possibilities, and suggested some solutions for entrepreneurs and SMEs – great, thank you!

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