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ODI–GIZ AfCFTA policy brief series

Briefing/policy paper

Written by Sherillyn Raga, Prachi Agarwal, Derrick Abudu, Yohannes Ayele, Jodie Keane

Briefing/policy paper

Africa hosts some of the world’s fastest growing economies. For instance, in the decade prior Covid-19 (2011-2019), economies grew annually by 9.5% in Ethiopia, 7.1% in Rwanda and 6.7% in Tanzania, based on IMF data. However, economic development remains highly uneven. Out of 54 African countries, 2 are considered high-income countries, 6 are in upper-middle income group, 23 are in lower middle-income group and 23 remain low-income countries, based on World Bank classification. The scarring effects of the Covid19 pandemic, spillover effects of the Russia-Ukraine war, and tightening of global financial conditions are likely to exacerbate the uneven and fragile growth in the continent. With overlapping shocks, several African countries are currently facing challenges of record-high inflation rates, higher borrowing costs, and elevated public debt (19 out 35 low-income countries are in or high risk of debt distress).

Trade is one channel through which African countries can boost growth and economic transformation. However, Africa has only a 3 percent share of global trade as of 2019. At the same time, 44 African countries are considered dependent on commodity exports (i.e., main exports are agricultural products, fuel, minerals, ores and metals). In addition, intra-African trade remains below its potential, accounting for only 16% of total trade as of 2019.

To accelerate intra-African trade and improve Africa’s position in the global market, African governments established the African Continental Free Trade Area (AfCFTA). As of February 2023, 54 out of the 55 African countries (except Eritrea) had signed the AfCFTA and 46 countries had deposited their instruments of ratification to the African Union Commission. Phase 1 of the AfCFTA negotiations covers trade in goods, services and rules of origin. Under Phase 1, tariffs will be progressively liberalised in stages and apart from ‘sensitive’ and ‘exclusion list’ products under the AfCFTA. Tariffs will be liberalised (to zero) for 90% of tariff lines over 10 years for LDCs (least developed countries) and five years for non-LDCs. Phase 2 of the AfCFTA negotiations covers protocols on investment, competition policy and intellectual property rights. These three protocols are expected to be launched in February 2023. Phase 2 negotiations also cover digital trade, and women and youth. In October 2022, the Guided Trade Initiative was launched by the AfCFTA Secretariat to boost trading under the agreement.

In February 2022, ODI and GIZ (on behalf of the German government) launched a policy brief series to broadly investigate opportunities and challenges towards implementation of AfCFTA in eight selected African countries, namely Côte d’Ivoire, Democratic Republic of Congo, Ethiopia, Ghana, Malawi, Niger, Rwanda and Tunisia. The latest briefs provide updates of the first edition of the policy briefs published in February 2022. The briefs aim to inform relevant stakeholders, including the private sector and non-AfCFTA experts, on respective countries’ current socioeconomic development, global trade landscape and opportunities, business environment challenges, intra-African trade performance, and status of the AfCFTA implementation.

Second Edition Policy Briefs (2023)

First Edition Policy Briefs (2022)