Answer to Question #152868 in Economics of Enterprise for Bismark

Question

Discuss the contribution of African Continental Free Trade Agreement on Ghana's economy

Answer 1

Dictatorship and rampant corruption flourish in the post-colonial expanses of Africa. The countries are economically underdeveloped and heavily indebted. After gaining independence, the economies did not transform. Most African economies remain primary producers of agricultural commodities, oil, gas, and minerals, and generate very little or no added value. They are highly dependent on foreign humanitarian aid. Unemployment is high, especially among young people, and most people earn their living in the informal sector. Poverty remains widespread.

The ACFTA Agreement is an African Union (AU) project designed to facilitate intra-African trade. It was originally launched in 2012; its instruments are not yet fully operational. When that happens, many argue that the project has the potential to transform the continent's economy.

Support for the ACFTA Agreement by African countries after the launch of the project and especially after the start of negotiations in 2015 is overwhelming - so far only Eritrea has not signed it. Nigeria, Africa's largest economy, initially doubted that the country would be flooded with cheap imports, but eventually signed the agreement.

The ACFTA Agreement is a multidimensional agreement covering trade in goods and services, investment, intellectual property rights, and competition policy. The ACFTA Agreement aims to “support and achieve sustainable and inclusive socio-economic development, gender equality and transformation of the signatory states”.

Moreover, the agreement intends to “promote industrial development through the diversification and development of the regional value chain, agricultural development, and food security”. Inter-African trade accounted for only 16 percent of total exports in 2017, according to the United Nations Conference on Trade and Development (UNCTAD). The largest trader in South Africa, which imports refined petroleum products and exports corn and other commodities. It is followed by Nigeria and Egypt, which export crude oil and associated gas, as well as clothing and textiles, and import other products.

With support from the AU and the United Nations Economic Commission for Africa (ECA), ACFTA is promoted by ministers and heads of state and government. The agreement has its own secretariat located in Ghana.