How the African Continental Free Trade Agreement (AfCFTA) will provide exponential growth to companies managed by private equity funds in Africa

The African Continental Free Trade Agreement (AfCFTA) is expected to improve a trade imbalance in which exports and imports between African countries represent only 17% of Africa’s total exports whereas, exports are 68% in Europe, 59% in Asia and 55% in the USA. The private equity, alternative and corporate sector should analyse the following developments to AfCFTA.

Tariff structure – Most African governments have agreed to a 90% basket of goods for free movement and 10% of sensitive products will eventually have free movement in the long term (we estimate that to be at least 10 years).

Rules of Origins – Specific details relating to rules of origins have not been concluded and different African countries will still submit their proposals of product-specific rules of origin. The rules of origin will also be unpacked with respect to goods obtained from Special Economic Zones.

Dispute settlement – African countries are still in the process and home base for dispute settlement. This will be important in the success of AfCFTA in attracting African companies to make use of free trade to do business within the African continent.

Secretariat – Rwanda has played a key role in ensuring that the AfCFTA has structure, getting African countries to agree to a certain budget, the located country that will manage the administration and the management organogram of the AfCFTA Secretariat. However, all African countries will have to agree on the implementation of structure, budget, location and management.

For more information on how the AfCFTA components can provide growth opportunities for private equity and African companies please contact us at info@peafrinsights.co.za

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