5 REASONS WHY AFRICA IS THE NEW GLOBAL SOURCING HUB
The implementation of the African Continental Free Trade Area (AfCFTA) represents an important milestone in achieving an economically integrated Africa. This presents an unprecedented trade advantage for both local and foreign investors. In January 1, 2021 the African Continental Free Trade Area (AfCFTA) finally took effect.
What is the AfCFTA? The AfCFTA is the world’s largest trading area since the establishment of the World Trade Organization with 54 out of the 55 countries out of the African Union (AU). The AfCFTA was birthed by the African Continental Free Trade Agreement signed in March 2018 by 44 AU countries. Other AU countries signed on over time as the official start of trading under the provisions of the agreement approached. The establishment of the AfCFTA is a feather in the cap for Africa’s continental trade system. The size of the trade area presents promising economic development and sustainable growth that will encompass all market sectors and participants. It is to be noted that the timing of the initiative launch is expected to contribute to the easing of the pandemic’s economic damages.
Below are five reasons why the establishment of AfCFTA pushes African into a much more favorable and profitable light in terms of global sourcing
The AfCFTA has the potential to increase employment opportunities and incomes, helping to increase opportunities for all Africans. The AfCFTA is expected to lift approximately 68 million people out of moderate poverty and make African countries more competitive in the global market. The United Nations 2030 Agenda for Sustainable Development includes goals that the AfCFTA contributes to. For example, Goal 8 of the Agenda is decent work and economic growth and Goal 9 is the promotion of industry. The AfCFTA initiative also contributes to Goal 17 of the Agenda as it reduces the continent’s reliance on external resources, encouraging independent financing and development. The economic potential as well as available resources of African countries under the banner of the AfCFTA makes them ideal for sourcing various goods and products
Trade integrity can be defined as international trade transactions that are legitimate, properly priced and transparent. The concept of trade integrity under AfCFTA offers an opportunity to promote good governance in many African countries in a novel way.
Trade within the free trade area will be on a uniform legal basis built on the principles of lawfulness and transparency, so the marketing of illicitly procured or produced goods will become more difficult. This obviously applies to the sale of goods produced by child labour or forced, illegal fishing or mining, trade fraud etc.
CREATING A SINGLE MARKET
The primary goals of the AfCFTA is to create a single market for goods and service to increase trading among African countries. This will mean the elimination of trade barriers, tariff and the cooperation with member states in the AfCFTA on investment, amicable settlement of disputes and other trade liberating strategies. This will make the African market an ideal hub for sourcing virtually anything at considerably affordable rates.
WOMEN STAND TO GAIN
Women are key stakeholders in the development of the African economy under AfCFTA, consisting of 70% of informal traders. Through such work, women can be vulnerable to harassment, violence, confiscation of goods and even imprisonment. Tariff reductions under the AfCFTA will enable informal women traders to operate through formal channels, bringing better protection. Furthermore, a growing manufacturing sector would provide new job opportunities, especially for women.
The AfCFTA will be the opportunity to reduce the gender income gap and the opportunity for small and medium-sized enterprises (which account for a majority of jobs in Africa) to access new markets.
Diversifying exports, accelerating growth, competitively integrating into the global economy, increasing foreign direct investment, increasing employment opportunities and incomes, and broadening economic inclusion are just a few of the positive economic outcomes AfCFTA can bring.
The AfCFTA also fosters competitive manufacturing. With a successful implementation of this new trade initiative, there is potential for Africa’s manufacturing sector to double in size from $500 billion in 2015 to $1 trillion in 2025, creating 14 million stable jobs.