What is the African Continental Free Trade Area and why does it matter to the Islamic economy?
What is the African Continental Free Trade Area (AfCFTA) and why does it matter to the Islamic economy?
On August 17, the African Continental Free Trade Area (AfCFTA) permanent secretariat was officially commissioned with its headquarters in Accra, Ghana.
The AfCFTA is a free trade area for the whole of the African continent that comprises 55 countries.
54 of those countries have signed the agreement for the AfCFTA althouth only 28 have ratified it currently.
AfCFTA requires members to progressively remove tariffs on at least 97% of tariff lines that account for 90% of intra-Africa imports. Average tariffs are currently 6.1%, which are currently higher for businesses exporting within Africa than when they export to countries outside the continent.
The point of this is to facilitate more trade between African countries and businesses as costs to trade will be significantly lowered.
Small and medium-sized enterprises (SMEs) make up around 80% of the continent's businesses, and the free trade area is meant to help them tap into regional destinations and use these as stepping stones for overseas expansion.
The AfCFTA matters to the Islamic economy chiefly because 28 of the 55 member states of the African Union are also part of the Organisation of Islamic Cooperation (OIC). Whether or not they have ratified the AfCFTA, this enormous initiative will have an impact on trade for the continent as a whole.
With sectors such as halal and Islamic finance growing in African countries (including non-OIC states), the AfCFTA will definitely have an impact on the Islamic economy.
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