The African Continental Free Trade Area (AfCFTA) has the potential to boost the continent's income by $450 billion if implemented fully, a new World bank report has shown.
The report notes that the trade pact could also speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035.
The report suggests that achieving these gains will be particularly important given the economic damage caused by the Covid-19 (coronavirus) pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020.
The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.
Most of AfCFTA’s income gains are likely to come from measures that cut regulations and simplify customs procedures.
Tariff liberalization accompanied by a reduction in non-tariff barriers—would boost income by 2.4 percent, or about $153 billion.
Successful implementation of AfCFTA will 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 prioritizing 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,” said Albert Zeufack, the World Bank’s Chief Economist for Africa.
According to the report, the agreement will also reshape markets and economies across the region, leading to the creation of new industries and the expansion of key sectors.
The pact will significantly boost African trade, particularly intraregional trade in manufacturing. Intra-continental exports are set to increase by 81 percent while the increase to non-African countries would be 19 percent.
So far 40 countries in the continent have AfCFTA agreement has increased to 40 with the most recent being Zambia, Malawi, Algeria and Burundi.
Since AfCFTA’s commencement on January 1, tariffs on 90 per cent of lines are in the process of being eliminated over five years for other African countries, and for least developed countries it will be over a 10-year period.
