The Economic Growth of Africa

Africa is the second-largest continent in the world by land mass and the second-largest continent based on population. The largest reserves of diamonds, platinum, gold, and many other resources can be found on the continent. Africa also holds 60% of the world’s arable land and a tenth of the earth’s internal renewable fresh water supply. Although carrying an ample supply of resources, land, and population, Africa is one of the poorest countries in the world. Around 460 million Africans live below the extreme poverty line. In May 2019, the African Union signed the AfCFTA (African Continental Free Trade Area) into place, which can be the first massive step toward economic growth.

The AfCFTA is the largest free trade area in the world. 55 African Union member states signed it, and 46 signees have officially joined the free trade area. AfCFTA plans to spark intra-African trade and eliminates trade barriers between member states. Tariffs on around 90% of goods will gradually be reduced and fully taken out. AfCFTA hopes also to increase job creation and interest in investing in African countries. Based on projections, the free trade area could raise average income by 9% and take 50 million people out of extreme poverty by 2035. One of the first initiatives under AfCFTA was the Guided Trade Initiative (GTI). The GTI creates trade with a specific group of countries within the trade agreement and plans to test the effectiveness of free trade and the operation and policies that come with it. The GTI started with eight countries, including Egypt, Kenya, and Cameroon, but the number of countries is expected to grow annually. Shipments of Ketepa tea, a Kenyan tea company,  to Ghana commenced the kickoff of the new GTI earlier in October. An estimated 96 products are expected to be traded under the GTI, with more expected to join yearly. Although the actions under AfCFTA are still in the start-up stages, the promising outcomes are still apparent across Africa, especially in the agriculture industry.

Agriculture is one of the essential industries in the whole continent. As of 2020, 43.8% of Africans were employed in agriculture. Agriculture also makes up about 35% of the continent’s GDP. Agriculture is expected to grow with AfCFTA and could become one of its prime beneficiaries in the coming years. Smallholder farmers already account for 80% of African food production and could reach larger supply chains while meeting local needs. By 2030, intra-African agricultural trade could increase by 574%, based on projections. The boots also can be seen in other sectors surrounding agriculture, including the fertilizer industry. Russia, the world’s top fertilizer export, is raising prices. The world price of fertilizer has hit a peak not reached since 2008. This and the initiative to turn towards more eco-friendly products have led to a world shortage in fertilizer. The Dangote Group, a Nigerian conglomerate, could help solve this issue. The group created a fertilizer production facility for urea, a low-cost fertilizer. The plant expects to make $400 million from foreign investors. Countries such as Morocco, Ethiopia, and Ghana also plan to invest in fertilizer plants.

The African Continental Free Trade Area is a big step in building the economy of countries all around Africa. Whether it’s projections to raise the average income, help the production of agriculture, or help raise the interest of foreign investment, the AfCFTA is a very intriguing development for all countries involved. Free trade is still beginning but expect African countries to play more significant roles in business and economics in the upcoming years.