The African Continental Free Trade Area came into operation on 1 January 2021 . This is a considerable achievement. The free trade area is now the world's single largest market for goods and services , when measured by number of countries, after the World Trade Organisation. It is also the largest in terms of geographic area and population size. If implemented as foreseen by the agreement, the free trade area will unlock significant growth for the African continent. The World Bank has estimated that by 2035, trade between African countries could expand by 81%, boosting output by US$450 billion, raising wages by 10%, particularly benefiting women, and lifting 30 million people out of extreme poverty.
These expectations, based on research into the links between trade and economic growth, have generated excitement and political impetus around getting the free trade area working.
Less well understood, however, is the fact that for the agreement to fulfil its promises, the continent's cities are key. They are hubs for production and consumption, and will become significantly more so. But their current set-up, lacking the necessary infrastructure and services, means most of Africa's cities are not yet ready to benefit from and support the free trade area. This will require substantially greater investments in the continent's cities.
This link between urbanisation and trade is analysed in the United Nations Economic Commission for Africa's recently launched publication, Cities: Gateways for Africa's Regional Economic Integration . The importance of cities in unlocking the benefits of the free trade area is premised on three well established advantages of the economic density that cities can provide.
Firstly, firms, which are the primary vehicles for producing goods for export, prefer to be in cities. There, they are closer to a larger pool of labour and to each other. This proximity enables them to specialise but still have access to inputs for their production processes from other firms. They can also learn from each other, which spurs innovation.
Secondly, cities are the physical locations from which most trade takes place. Cities provide the main transport links, including road junctions, ports and airports.
Think of the Port of Mombasa , which serves not only Kenya, but also Burundi, the Democratic Republic of Congo, Ethiopia, Rwanda, Somalia, South Sudan, Tanzania and Uganda. It is also difficult to think of a major city that is not served by an airport.