Zimbabwean president Emmerson Mnangagwa and his South African counterpart, Cyril Ramaphosa, both signed the free trade accord in Rwanda. Photo: Getty Images
  • A massive new African trade deal has been signed.
  • It means that trade will flow between countries with no (or much lower) import tariffs.
  • The free trade area will be the largest in the world by number of countries included.
  • Moody's estimates South Africa will be among the countries which benefit most.

A new Africa free trade area has been launched, which means that no (or much lower) tariffs will be levied on exports and imports between most countries on the continent.

South Africa is expected to be one of the biggest beneficiaries of the Agreement on the African Continental Free Trade Area (AfCFTA), which was signed by African leaders on Wednesday in Kigali, Rwanda.

The free trade area will be the biggest in the world in terms of the number of countries involved.

South Africa was not one of the 44 countries that signed the free trade agreement. Instead, President Cyril Ramaphosa signed the Kigali declaration, which supports the establishment of the free trade area. 

In a statement, the Presidency said that the free trade agreement will be signed once it has been ratified by South African stakeholders and Parliament.

Ramaphosa expects that the new deal will "yield great benefits for all countries on the continent as well as big business, small companies and micro-traders." 

But the credit ratings agency Moody’s said in a report that countries such as South Africa, Kenya and Egypt were most likely to benefit "thanks to their large manufacturing bases and relatively robust infrastructure, particularly given their access to electricity."

Other countries will be hampered by their poor infrastructure, corruption and ineffective customs documentation, the report said. 

Nigeria – which vies with South Africa to be the largest economy on the continent – did not sign the deal, and in a series of tweets its president Muhammadu Buhari defended the country’s decision to stay out of it for now, saying Nigeria didn’t want to become a "dumping ground for finished goods".

Still, Nigeria will set up a presidential committee to investigate the terms of the agreement.

A report back is expected in two weeks.

Uganda also didn’t sign. 

Other African leaders celebrated their participation in the agreement.

Some 44 countries out of the 54 signed the free trade agreement, while 27 went even further, allowing the free movement of all persons within African countries. 

Ellis said the AfCFTA could stimulate further trade integration in Africa. "This could improve the region's credit profiles, given the greater stability and sophistication that intra-regional trade could offer compared with traditional commodity exports to the rest of the world.”

Only 15% of African exports go to other African countries. The rest (mostly raw materials) go overseas. In Europe, 70% of exports are received by other countries in Europe.

The United Nations has estimated that the AfCFTA could boost intra-Africa trade by 53% by eliminating import duties and non-tariff barriers. It could create an African market of more than 1.2 billion people with an economy worth $2.5 trillion. 

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