African Free Trade Area: Opportunities and Challenges

The Pursuit of Independence in the 21st CenturyIn two years, we can expect an African Free Trade Area. That is according to South African President Jacob Zuma earlier this week during a meeting with the BRICS Business Council. A continent-wide free trade area has the potential to promote intra-African trade. At the same time, several challenges must be addressed to boost intra-African trade.

The African free trade area will consist of 26 countries from the Southern and East African regions. Furthermore, it combines several regional trading blocs–Southern African Development Community (SADC), East African Community (EAC), and Common Market for Eastern and Southern Africa (COMESA).

A free trade area reduces or eliminates tariff barriers that hinder trade between member countries.

An African free trade area presents a number of opportunities for the African countries and businesses seeking to invest in and access markets throughout the continent. Zuma highlighted these opportunities when meeting with the BRICS countries—Brazil, Russia, India, China, South Africa.

Opportunities – Africa

  • Single market worth US$2.6 trillion
  • Promotes intra-African trade, which stood at only 10% in 2011
  • Output expected to expand by 50% by 2015 (Zuma’s prediction reported in the news media)
  • Africa’s spending power expected to rise 30% by 2015 (Zuma’s prediction reported in the news media)

Opportunities – Foreign investors

Challenges

  • Poor infrastructure
  • Administrative and legal barriers

Africa’s growth and establishment of a wider free trade area also has the potential to give the African countries the ability to grow and shape their own economies. (See The Pursuit of Independence in the 21st Century). A free trade area also has the potential to benefit foreign investors and exporters. For those companies in the services sector, such as telecommunications, banking, retail and construction, pay close attention.

*To find out what contributes to Africa’s growth, check out the McKinsey and Company study

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About Dr. Sarita D. Jackson

is the President and CEO of the Global Research Institute of International Trade, a think-tank/consulting firm that examines trade policies and their impact on domestic businesses. Prior to heading GRIIT, Dr. Jackson was a tenured associate professor of political science in North Carolina and worked as a trade policy consultant for an Arlington-based consulting firm. She has participated in trade policy projects and conducted research on free trade negotiations in Botswana, Antigua and Barbuda, Dominica, Dominican Republic, Mexico and Panama. Dr. Jackson has also traveled to Chile and Argentina to study their political systems and economic integration policies.
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One Response to African Free Trade Area: Opportunities and Challenges

  1. Kim says:

    In the wake of Nelson Mandela’s death, did anyone see the interview that Bono did with CNN’s Anderson Cooper? Bono, who worked with Mandela and the African National Congress to end apartheid, said something profound. He said Africa’s economic future is largely up to Africans. If the continent’s leaders develop a Pan-African mentality and not get side tracked by internal, tribal conflicts, it could become a world power. In making their comments, he and Cooper noted Mandela’s Pan-Africanist philosophy: We are one. One other note: I’m hoping the journalists–somewhere I read that there were 2,500 of them– sent to cover South Africa will find some positive stories to focus on , in addition to the not so positive. Some balance would be appreciated.

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