African free trade pact gives China a chance to deepen its engagement

Africa’s continental trade pact offers significant opportunities not only for African economies but also for their foreign trade partners – none more so than the largest, China.

While China is perhaps best known in Africa for funding infrastructure megaprojects, its spending on infrastructure has decreased in recent years, even as it maintains its foreign direct investment (FDI).

To take full advantage of the African Continental Free Trade Area (AfCFTA), both elements will be necessary. While tariffs and other trade barriers have fallen, African economies still need the productive capacity to make desirable goods at competitive prices, and the logistics to export them efficiently, if intra-African trade is to increase.

For African countries, the benefits are obvious. Currently, most of the continent’s exports consist of commodities and raw materials that are then processed elsewhere. A larger continental market will have more capacity to process these resources and use them for manufacture, meaning more of their value – and associated job creation – will stay within Africa.

China can also win from this development. By investing in Africa, Chinese companies get a return on their investment; and the opening up of the intra-African market allows them to sell beyond the borders of the country where they set up. We are yet to see any moves in this direction by China, but the AfCFTA becoming operational could be the trigger for such a strategy.