OPINION: With little fanfare, the African Continental Free Trade Area (AfCFTA) came into existence on 1 January, with potential benefits for increased cross-border oil and gas trading.
Fifty-four fast-growing African nations, excluding Eritrea, are now members of — on paper at least — the world’s largest free trade area, bringing together about 1.3 billion people with a total gross domestic product of $3.4 trillion.
A low-key launch ceremony was held in Accra, Ghana on New Year’s Day, presided over by South Africa’s President Cyril Ramaphosa, the current chairperson of the African Union, which is AfCTFA's driving force.
Only 16% of Africa’s total trade is intra-continental, so AfCTFA aims to remedy this by, over decades, eliminating tariffs and non-tariff barriers — moves which, if successful, could generate an additional $24 billion of business annually.
The goals are to boost industrialisation and generate vital jobs for Africa's young and fast-growing population, even though many nations are nowhere near ready due to lack of money, infrastructure, skills and governance.
Oil, gas and refined products are already among the top 10 most traded products in Africa by value, with AfCFTA expected to stimulate further growth.
Nigeria believes free trade will help it become a regional oil refining hub; Angola plans to export gas to its neighbours; while Namibia and Botswana aim to be solar power exporters.
However, few expect dramatic changes in Africa because border closures and travel bans imposed as a result of Covid-19 have fractured two fundamental props of free trade.
AfCFTA will underpin an evolution, not a revolution, in intra-African commerce.
(This is an Upstream opinion article.)