East Africa to reap big from effective implementation of AfCFTA

Delegates pose for a group photo after the opening session of the Executive Council of Ministers of African Union meeting in Kigali. Timothy Kisambira.

Effective implementation of the African Continental Free Trade Area Agreement (AfCFTA) could result in welfare gains amounting to 1.8 billion U.S. dollars for East African economies, while boosting intra-African exports by more than 1.1 billion U.S. dollars and creating more than 2 million new jobs, according to a new United Nations report.

The newly published report, entitled “Creating a Unified Regional Market, Towards the Implementation of AfCFTA in East Africa” and jointly published by the UN Economic Commission for Africa (ECA) and Trademark East Africa over the weekend, provided a first comprehensive assessment of the potential impact of the continental free trade deal on the East African economies. The report, which discusses the measures and supportive instruments that will be needed towards the success of the AfCFTA, mainly analyzed existing patterns of intra-regional trade and investment as well as the opportunities created by access to more open domestic and regional markets under the free trade pact.

According to the report, the elimination of tariffs and non-tariff barriers required by the AfCFTA “will boost intra-African trade and improve developmental prospects for East Africa, allowing regional firms to tap into the rapidly growing markets both within the region and throughout Africa.” It, however, stressed that many of the expected gains could be undermined if the needs and concerns of the private sector are not heard in order to gain an understanding of the impact on the affected sectors.The report also noted that establishing regular platforms for public-private dialogues can help identifying challenges that would affect the AfCFTA implementation.The report, noting that the arguments for implementing the AfCFTA in East Africa “are particularly compelling,” indicated that East African economies, with a combined GDP of 880 billion U.S. dollars and a population of 420 million, are “still highly fragmented.”

It also stressed that the current dynamism of the region’s economy has been consumption-led, not investment or technology-led. A significant proportion of domestic demand is being met by imports rather than regional production. “The implementation of the AfCFTA could result in welfare gains amounting to USD 1.8 billion for East Africa, creating more than 2 million new jobs,” the report read, adding “the AfCFTA will accelerate the industrialization of the region, as manufacturing will be among the principal beneficiaries from the increase in intra-regional trade and investment.” According to the report, the continental free trade deal would also create new opportunities in high value-added services trade, helping countries to achieve their goals of economic diversification and structural transformation.

Stephen Karingi, Director of Regional Integration and Trade Division at the ECA, said during the report launching event that the AfCFTA would have the potential to increase the value of agricultural and food exports on the continent by 16.8 billion U.S. dollars by 2040. The ECA director also said that the ECA projects the largest percentage increases, accounting over 25 percent in intra-African exports for industrial sectors in textile, wearing apparel, leather, wood and paper, vehicle and transport, agro-foods such milk and dairy products, sugar, beverages, vegetables, fruit, nuts and rice. According to the report, the continental free trade deal liberalizes service sectors as well as merchandise goods, as it envisaged simplifying investment and intellectual property regimes and creating a common platform for competition policy. The AfCFTA, which was launched in March 2018 in Kigali, capital of Rwanda, has a long-standing goal of creating a unified continental market. The African free trade deal now has 54 signatures, and offers hope of a revival of both regional and intra-African trade to boost trade and development in Africa.

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