AfCFTA to expand pan-African payment system to 31 nations
This year, over half of the African nations are expected to embrace the rules of the continent-wide free-trade agreement, marking significant progress towards the full integration of the region into a unified market.
Out of the 47 countries that have ratified the African Continental Free Trade Area (AfCFTA), 31 are set to participate in the guided trade initiative, a substantial increase from the seven involved in 2023, as stated by AfCFTA Secretary-General Wamkele Mene during a World Economic Forum panel in Davos.
The pilot program will introduce a pan-African payments and settlement system, utilizing local currencies to address foreign exchange shortages and currency-convertibility limitations across the continent. This initiative represents a significant step toward fostering economic collaboration and removing trade barriers among African nations.
Key Takeaways
The frictional cost of trade in Africa, attributed to the need to access currencies not commonly traded, is approximately $5 billion annually. This underscores the significance of establishing a regional payment and settlement system. Simultaneously, trade ministers are reportedly crafting regulations for digital trade to enhance online commerce across the continent. The African Development Bank anticipates that the digital economy in the region will surge to $712 billion by 2050, a substantial increase from the $115 billion recorded in 2023. AfCFTA, with a potential market encompassing 1.3 billion people and a combined GDP of $3.4 trillion, holds the prospect of becoming the world's largest free-trade zone by area when fully operational by 2030. The initiative aims to facilitate greater economic integration, reduce trade barriers, and foster a more interconnected and prosperous African economy.
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