World Bank’s recent report has revealed that the African Continental Free Trade Area (AfCFTA) could increase regional income by seven percent or $450 billion, ameliorate wage growth for women and pull 30 million people out of extreme poverty by 2035 if fully implemented.
The report revealed that the AfCFTA presents a major opportunity for countries to increase growth, reduce poverty and widen economic inclusion and suggested that realising these gains will be important considering the economic damage created by the COVID-19 (coronavirus) pandemic which is expected to generate up to $79 billion in output losses in Africa in 2020.
According to the World Bank, COVID-19 has already disrupted trade across the continent.
While talking about how AfCFTA will help Africa, World Bank’s Chief Economist for Africa, Albert Zeufack said: “Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures.
“Tariff liberalization, accompanied by a reduction in non-tariff barriers—such as quotas and rules of origin—would boost income by 2.4 percent, or about $153 billion. The remainder—$292 billion— would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.
“Successful implementation of AfCFTA would help cushion the negative effects of COVID-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would provide a path for integration and growth-enhancing reforms for African countries.
“By replacing the patchwork of regional agreements, streamlining border procedures, and prioritising trade reforms, AfCFTA could help African countries increase their resiliency in the face of future economic shocks.
“The African Continental Free Trade Area has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans.
“The AfCFTA is expected to lift around 68 million people out of moderate poverty and make African countries more competitive. But successful implementation will be key, including careful monitoring of impacts on all workers –women and men, skilled and unskilled—across all countries and sectors, ensuring the agreement’s full benefit.”
According to the report, the agreement would reposition markets and economies across Africa and this will lead to creation of new industries and the growth of key sectors.
Overall economic gains would vary among nations with the biggest gains going to countries that presently have high costs of trade.
Côte d’Ivoire and Zimbabwe, where trade costs are highest would record the biggest gains, with each country increasing income by 14 percent.
Also, the report stated that AfCFTA would boost African trade significantly, in particular intraregional trade in manufacturing. Intra-continental exports would rise by 81 percent.
Furthermore, implementation of the agreement would bring about larger wage gains for women (an increase of 10.5 percent by 2035) than for men (9.9 percent). Also, it would boost wages for skilled and unskilled workers,10.3 percent boost for unskilled workers and 9.8 percent boost for skilled workers.
