Business and Economics Journal

Assessing Africa�¢����s Two Billion Populated Market by 2063: The Facts and Fallacies of a Continental Free Trade Area (CFTA)

Abstract

Kenneth T Tanyi

This paper analyses the continuous efforts made by African Heads of States and Governments of the African Union (AU) in promoting the AU Agenda 2063 in seeking to harness the continent’s comparative advantages on its youthful population, emerging middle-class consumers, rich natural resources and young labor force capable of transforming Africa in the next 50 years. The undeniable benefits of inter and intra-African trade, trade facilitation, the gradual dismantling of tariff barriers across African borders and their sensitive impacts on national sovereignty and a multiple of geopolitical regional trade arrangements shall be reviewed in this paper in an effort to address current challenges hindering Africa’s regional integration and sustainable development. With key objectives of facilitating trade finance for young African youths and female entrepreneurs, the harmonization of trade policies between AU Member states and existing Regional Economic Communities (RECs) is necessary in accessing Africa’s full potential market estimated at 2.8 billion people by 2063. The paper in its final section reveals astonishing trade benefits of regional markets with attributed roles of various stakeholders involved in mobilizing efforts towards a comprehensive approach for Africa’s emergence by 2063. An augmented multi-linear gravity model regression analysis is used to portray the positive and unexploited trade potentials of African regional markets in promoting trade integration on the “acquis” of existing regional initiatives. Special attention also is given to the Association of South East Asian Nation (ASEAN) Free Trade Area (FTA) alongside existing regional FTA initiatives in Africa (such as the South-Eastern African Tripartite FTA) as benchmarks on the basis of their socio-economic and political similarities, languages, infrastructures, colonial heritages and variable geometry resemblance to the CFTA. An exclusive out-ofsample benchmark approach is used on the gravity model to empirically test for autocorrelation between the selected dependent and independent variables (Trade flow, Gross Domestic Product, Population, and geographical distance between countries). Result of the study show projectable gains that can be generated from the establishment of a Pan- African Continental FTA with practical steps of grabbing Africa’s rich populated markets. The gravity model uses beta estimated coefficients from the ASEAN FTA to benchmark trade potential in five regions in Africa. The paper’s methodology involves applying these statistically tested unbiased estimates on a sample of 15 randomly selected African countries per region for an evaluation period of 18 years. All the explanatory variables were tested to be statistically significant in explaining trade flows and their beta estimates used in extrapolating on the CFTA’s trade potentials in five regions and consequently building towards a single integrated and economically vibrant Africa by 2063!