Africa heading for its own single market

On 21 March 2018, 44 of the total of 55 African states signed the founding treaty for a new pan-African free-trade zone. The foundation of a common single market not only eradicates most of the customs tariffs between the states, but also reduces red tape and liberalises many legal stipulations. Where rules cannot be harmonised, the individual state’s regulations will be able to persist on the basis of mutual recognition. Some individual issues still need to be clarified, for example as regards rules on competition and the zone’s external relationship to third-party countries. All of this will most probably trigger a comprehensive reform of the continent’s economic and political structure. In the long term, the free-trade zone looks set to visibly boost growth in Africa.

The goods trade between African countries has to date been significantly underdeveloped for various reasons. Amongst other things, the ethnic, political and thus also economic fragmentation of the African continent has played a part, the result of colonialism and the predominant role played by exporting commodities overseas. Internal African trade will likely take off strongly in the future, with a plethora of positive economic effects. To name but a few, the largest selling markets on the African continent will lead to economies of scale in production, imported pre-products will become cheaper, and the advantages of specialisation will come more to bear. For African consumers, the goods they require will probably become cheaper and the range of products greater.

The only downside is that Nigeria and South Africa, the two largest economies in sub-Saharan Africa, were not at the table at the founding of the free-trade zone. It remains to be seen how they will act, but both will presumably soon add their signatures to the treaty after rationally weighing up the benefits of the new zone.

In the long term, the new trade regime will without doubt prove advantageous for all concerned. In the short term expectations should not be exaggerated, as a number of hurdles are still standing in the way of progress. They include the poor state of transportation infrastructure, political uncertainties and the high level of corruption. However, the single market project could itself increase the pace of internal reform and structural change in Africa and thus become the starting point for long-term growth on the continent.

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