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What you need to know about the African Continental Free Trade Area (AfCFTA) and the digital economy

  • March 25, 2023
  • HobyClean Customer Service
Africa Continental Free Trade Area (AfCFTA)

Over the last two decades, the world has rapidly and intentionally become a global village, separated by distances and borders. The world has become interconnected more than ever before with the introduction of the internet.

Using your mobile phone, powered by the internet, you can literally make a phone to anyone anywhere in the world. You can order for goods and services from overseas and receive them without having to travel there personally.

The shared desire for prosperity of countries and their people is what led to the formation of both political and trade unions such as the European Union, the African Union, BRICS and small regional formations like the East African Community (EAC), Economic Community of West African States (ECOWAS), Southern African Development Community Cooperation in Accreditation (SADCA) etc. It is the same desire that led to the signing of the African Continental Free Trade Area (AfCFTA).

Home to over 1.3 billion people and 55 countries, Africa is a land of opportunity. From the serene sites of Cape Town in South Africa, through the Pearl of Africa (Uganda) and the mineral rich Democratic Republic of Congo to the mediterranean sea. Beyond the red blood that flows in our veins, we have more that unites us than what divides us, for example, four countries of Uganda, South Sudan, Sudan and Egypt all share River Nile.

What is African Continental Free Trade Area (AfCFTA)?

According to the African Union (AU), the African Continental Free Trade Area (AfCFTA)  ‘is the world’s largest free trade area bringing together the 55 countries of the African Union (A.U) and eight (8) Regional Economic Communities (RECs)’.

Africa Continental Free Trade Area (AfCFTA)

AfCFTA seeks to create a common continental market among the fifty five member countries that have ‘a combined GDP of approximately US$ 3.4 trillion’ as one of the flagship programs of the ‘Agenda 2063: The Africa We Want, the African Union’s long-term development strategy for transforming the continent into a global powerhouse’.

Brief Background

The engagement on the formation of the AfCFTA started more than a decade ago but did not come into effect until May 30, 2019, ‘after 24 Member States deposited their Instruments of Ratification’ and was officially launched at the ‘12th Extraordinary Session of the AU Assembly of Heads of State and Government in Niamey – Niger, in July 2019,’ according to A.U records. AfCFTA has its headquarters in Ghana’s capital, Accra, and trading commenced on January 1, 2021.

Key AfCFTA objectives;

  1. To boost intra-Africa trade by at least 52.3% through the elimination of import duties and reduce non tariff barriers which will double trade.
  2. To eliminate tariffs on intra-Africa trade, making it easier for African businesses to trade within the continent.
  3. To expand the size of Africa’s economy to $29trillion USD by 2050 as part of the 2063 Agenda.

Steps forward

Whereas there has been a slow start to the fast tracking of the AfCFTA as countries work out the formalities, it is already starting to take shape. Countries like Rwanda have already started to benefit from the continental free trade with its first batch of exports sent to Ghana.

‘On September 30, Rwanda exported its first consignment of goods – a shipment from Igire Coffee, a women-led coffee processing firm that deals in premium coffee – under the African Continental Free Trade Area (AfCFTA) Agreement to Ghana,’ reads part of a publication on the website.

Kenya also exported Exide batteries under a similar agreement to Ghana. Rwanda is one of the first eight countries participating in the AfCFTA Guided Trade Initiative. The other countries include Cameroon, Egypt, Ghana, Kenya, Mauritius, Rwanda, Tanzania and Tunisia.

The Digital Economy

the digital economy continues grow
The digital economy is growing fast

The digital economy is one of the fastest growing spheres of the 21st century, amounting to over 5.2 trillion USD in 2022 in just retail sales and Africa has not been left behind, so much so that Amazon has already entered the African market to also tap into it.

African markets are already benefiting from the global digital economy through trade. Customers are already using products from overseas that have been facilitated by the digital economy through purchase platforms like Ebay, Amazon, Jumia, DHL Africa Shop among others, digital banking services, communication platforms etc.

African consumers are also enjoying digital services and products such as online streaming services like Netflix, Amazon Prime, Spotify, Apple music, YouTube (premium) among others.

The digital economy is already thriving in different sectors of the economy as businesses and individuals benefit at different levels. Content creators are constantly growing while brands are using many of them to advertise their products and services across the continent. Some are using the digital economy to tell the African story e.g Mode Maya from Ghana, Dr. Daniel Masaba of Farm Up from Uganda and many other YouTubers and digital influencers that you can think of.

Digital marketplaces across the continent continue to be developed like HobyClean, Africa’s first discount marketplace while those that were already in place continue to grow although not at the rates they would have preferred. Many of these have either been country-centric or regional at best. These have also faced the same barriers that continue to affect traditional trade that include but not limited to, different tax rates across different African country borders, non-tariff barriers, logistics in the form of transportation among others.

With the AfCFTA, ecommerce is continue to grow

But with the AfCFTA coming to effect, marketplaces like HobyClean will leverage on this to facilitate cross-border trade across the continent. Imagine an ankara vendor in Nigeria being able to sell her clothing to a customer in East Africa or South Africa without having to worry about export/import tariffs or an Egyptian textile company being able to sell its smooth cotton bedsheets to Cameroon, Botswana or Zambia without having to be concerned about trade tariffs but simply the logistics of distribution.

HobyClean is further positioning itself to facilitate trade between manufacturers/suppliers and retailers as well as retailers and customers with its revolutionary technology. It’s still a work in progress (baby steps) but be sure to check it out by downloading the HobyClean customer app or the HobyClean vendor app if you’re a business owner selling something.

The digital economy will still have a few challenges like low internet penetration across the continent. However, with support from the United States government and other development partners through the African Union and non-government organizations, there’s a will to support the Digital Transformation Strategy. For example, the United States, while at the U.S.-Africa Business Forum on December 14 in Washington, DC committed itself to support the Digital Transformation with Africa (DTA) with an investment of over $350 million.

‘A signature initiative of the Biden-Harris Administration, DTA will expand digital access and literacy and strengthen digital enabling environments across the continent. Working with Congress, this initiative intends to invest over $350 million and facilitate over $450 million in financing for Africa in line with the African Union’s Digital Transformation Strategy and the U.S. Strategy Toward Sub-Saharan Africa.’

As the digital economy continues to grow, brands must position themselves to leverage on this new phenomenon of the African Continental Free Trade Area (AfCFTA) to drive cross border trade within the continent and improve access to quality products and services.

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