The African Continental Free Trade Area (AfCFTA) was launched on 1 January 2021, opening a new common market for the SME sector.  The market aims to contribute towards the expansion of intra-African trade by lowering barriers to trade and the movement of people and capital across the continent. AfCFTA will promote sustainable and inclusive development, gender equality, structural transformation, and improved food security for the member countries. Its ambitions are key building blocks of the African Union’s goal to create an African Economic Community.  According to the World Bank, trade under AfCFTA is estimated to impact 1.3 billion people across Africa with a combined gross domestic product (GDP) of $3.4 trillion and thus a potential of lifting 30 million Africans out of extreme poverty.

The African SME sector and business community is a key beneficiary of this new common market in regard to the trade of goods and services as well as competition policy protocols (WEF, 2021). SMEs in trade, processing and manufacturing will now have access to cheaper raw materials and intermediate inputs plus an expanded market base. This will be realized through the gradual phasing out of 90% of tariffs on the exchange of goods between African countries and elimination of non-tariff barriers like excessively lengthy customs procedures, licensing requirements, and costly sanitary and phyto-sanitary measures (ITC, 2018). The construction, tourism, energy, health, and social services sectors will enjoy benefits of the wider labour market, easy movement of persons across the countries and the fair pricing from a conducive and competitive business environment for both existing players and new entrants. The operationalization framework of AfCFTA also has put in place trade instruments that will enable the private sector access development and blended financing to leverage investments through the Pan-African Payments and Settlement System (PAPSS)with support from the African Export and Import Bank (AFREXIMBANK). SMEs will also have access to reliable market and trade information through the online systems such as the Monitoring, Reporting and Elimination of Non-Tariff Barriers (www.tradebarriers.africa) and the African Trade Observatory (https://ato.africa).

In each country, the Government Ministry of Trade is the lead implementer of the AfCFTA agreement and it ensures that policies, interstate infrastructure and connectivity all harness the trade activities.  The AfCFTA is not only a major opportunity but also a gate way for SMEs growth and development because once finalized it will become one of the world’s largest trade areas.  Individual SMEs and SME umbrella organizations need to take full advantage of the benefits from this common market by engaging the Ministry of Trade to get awareness of the issues at hand, voice their concerns, and understand the active role they have to play. The success and realization of these efforts by the different players will ultimately reduce the cost of doing business for SMEs.

More information about AfCFTA can be found here