The African Continental Free Trade Area (AfCFTA) could boost the continent’s income by 450 billion U.S. dollars if fully implemented, says a World Bank report released on Monday evening.
According to the report, the pan African trade pact would significantly boost continental trade, particularly intraregional trade in manufacturing.
“Of the 450 billion dollars in income gains from AfCFTA, 292 billion dollars would come from stronger trade facilitation — measures to reduce red tape and simplify customs procedures,” says the report dubbed the African Continental Free Trade Area Economic and Distributional Effects.
The report is designed to guide policymakers as they continue the process of negotiating and implementing the agreement.
The findings suggest that achieving income gains will be particularly important given the economic damage caused by the COVID-19 pandemic, which is expected to cause up to 79 billion dollars 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,” says the survey.
The findings indicate that although Africa has made substantial progress in recent decades in raising living standards and reducing poverty, increasing trade can provide the impetus for reforms that boost productivity and job creation, and thereby further reduce poverty.
The World Bank estimates that by 2035, implementing the trade agreement would also contribute to lifting an additional 30 million people from extreme poverty and 68 million people from moderate poverty.
The analysis also indicates that by 2035, the volume of total exports would increase by almost 29 percent relative to business as usual.
“Intra-continental exports would increase by more than 81 percent, while exports to non-African countries would rise by 19 percent. This would create new opportunities for African manufacturers and workers,” says the report.
The report notes that these gains would come, in part, from decreased tariffs, which remain stubbornly high in many countries in the region.
“Even greater gains would come from lowering trade costs by reducing non-tariff barriers and improving hard and soft infrastructure at the borders — so-called trade facilitation measures,” says the report.
“These measures would reduce red tape, lower compliance costs for traders, and ultimately make it easier for African businesses to integrate into global supply chains. These reforms would be difficult, but the rewards would be substantial,” it notes.
The World Bank says that in the few sectors where AfCFTA’s implementation results in job losses, governments will need to be ready to support workers with adequate safety nets and policies to retrain them.
“Policymakers will also have to prepare for AfCFTA’s distributional impacts — across sectors and countries, on skilled and unskilled workers, and on female and male workers. Doing so will enable them to design policies to increase the readiness of their workforce to take advantage of new opportunities,” says the report.