Liberation of financial services in Africa

The implementation of the African Continental Free Trade Area Agreement could liberalise trade and services across Africa.
Africa’s financial services sector holds untapped potential and could be the gate enabling and assuring the successful implementation of the African Continental Free Trade Area Agreement. Picture: Rogan Ward, Reuters

Africa is on the brink of enacting the African Continental Free Trade Area Agreement (AfCFTA). If enacted, the agreement will liberalise trade and services across the continent. The free trade of services envisioned under the AfCFTA is expected to create new industries and opportunities for investment, placing the continent in a more favourable position in the global market. In turn, this could create tremendous opportunities for Africa’s financial services sector, which will be expected to take a lead role in assuring the successful implementation of the agreement.

If enacted, the AfCFTA will create the largest free-trade area in the world. As it currently stands, the agreement is only four countries short of the necessary 22 that are needed to for it to be enacted.

Read: Economic ‘game changer? African leaders launch free-trade zone

Economic integration of this scale would create a single market of more than one billion people, with a gross domestic product of more than $3 trillion, breaking down existing barriers to the movement of goods, services, people, capital and ideas across the continent. The United Nations Economic Commission for Africa has estimated that the AfCFTA is “expected to boost consumer spending to about $1.4 trillion in 2020 and increase intra-African trade by as much as $35 billion per year, or 52% above the baseline by 2022.” 

In fact, Africa has already seen the benefits of uniting on a smaller scale, in regional economic unions. The AfCFTA seeks to combine the strengths of those unions and to build on them to create an even stronger and, of course, larger union. This acknowledges that what West Africa has to contribute is different from what East Africa brings and they are both different than what Central Africa can add. The hope is that by combining these regional economic unions, there is the prospect, perhaps for the first time in history, of Africa becoming self-sustainable.

One of the key aspects of the AfCFTA is the free trade of services. The expanded market that will be created by the agreement is expected to stimulate trade in services, resulting in financial stabilisation and the promotion of cross-border investments. Not only is there expected to be an influx in exported services, but industries that rely heavily on services –such as the manufacturing and agricultural sectors – are also expected to grow. Unlike trade liberalisation, which is expected to be driven directly by African governments, the liberalisation of services is likely to be led by the private sector, specifically financial institutions, which will play a significant role in influencing policies and implementation.

While growth resulting from the AfCFTA is likely to attract more substantial foreign direct investment, the long-term sustainability of economic growth will be reliant on local, African-based companies taking the lead.

The free trade of services envisioned under the AfCFTA will be bolstered by the free movement of people that will be permitted under the agreement. Businesses and governments will have the ability to tap into talent from different parts of the continent in a way never before feasible.

The success of AfCFTA will rely heavily on Africa’s financial services industry’s ability to serve as the brain of the liberalisation process. As indicated by the World Trade Organisation (WTO), the International Monetary Fund (IMF) and other international economic organisations, the financial services sector should take a lead role in providing the major tools necessary to implement robust trade agreements.

In exchange for serving as the leader of Africa’s trade reform, the financial services sector will likely see tremendous growth. A significantly larger pool of industries and businesses will create a great opportunity for the financial sector to reap the benefits of the AfCFTA. Financial services providers will be able to explore cross-border opportunities with ease and will not be inhibited by complicated and contrasting regulations from individual countries. Foreign investors will likely seize on the reduced restrictions and complications that arise from managing a web of different systems and, as a result, foreign direct investment is expected to flourish.

Success of the AfCFTA is not guaranteed. Smaller regional bodies on the continent have consistently fallen short of expectations and have failed to deliver on their promises to promote economic development.

First and foremost, to succeed in delivering on the AfCFTA, African governments will need to provide tangible support for the liberalisation of trade and services. However, there is some doubt as to the capacity of many governments to provide the level of support required. Due to the novelty of the changes proposed under the agreement, there will be a steep learning curve. Governments must make a commitment to being involved in the learning process and to make adjustments along the way, based on real-time feedback and results. In making this commitment, governments must engage private businesses and incorporate their approaches and perspectives into the implementation of the AfCFTA.

Emphasis will need to be placed on human capital by training individuals to be valuable assets to the formal sector. This should include both government and business policies that encourage technical, skill-specific training, which will provide individuals with the skills they need to quickly and successfully enter the workforce and provide the support required for sophisticated businesses to thrive.

Local businesses will also need to play an active role in the development of the implementing framework for the agreement. Sound technical capacity is an essential element for successful implementation. Businesses will have to insert themselves into the process, providing technical support to governments. Strategic planning on the part of both governments and businesses will be essential.

Now is the time for Africa’s financial services sector to begin taking a lead role in planning for the agreement’s enactment and setting the stage for successful implementation. Africa is on the cusp of significant development, but it will need a nudge to reach its full potential.

Mouhamed Kebe is a partner at Geni & Kebe, which is a member of DLA Piper Africa.


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One currency is required for success. If not implemented, all trade will be, can be, manipulated.

While Africa ponders, mulls and spends billions trying to invent of a Free Trade Zone, Facebook Libra coin comes swooping in liberating financial boundaries across the continent.

In the continent of failed currencies, the stable, currency is king. For now, the USD, tomorrow it’s a cryptocurrency if easily accessible, stable and tradeable online.

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