The delayed African free trade deal, if fully implemented, could boost incomes across the continent, pull millions out of poverty and cushion against the negative fallout from COVID-19, the World Bank says in a newly published report.
The agreement on the creation of an African Continental Free Trade Area (AfCFTA) was due to come into force on 1 July, but thist proved unworkable after the novel coronavirus forced widespread border closures and halted talks between governments over the removal of tariffs.
It may now begin operating from the start of 2021.
The pandemic is expected to cost Africa up to US$79 billion in lost economic output this year alone, with the additional risk of millions of job losses.
“In this context, successful implementation of AfCFTA would be crucial,” the report says. “[It] is a major opportunity for Africa, but implementation will be a significant challenge. Lowering tariffs is only the first step.”
Once in force, the AfCFTA will bring together 1.3 billion people across 55 countries with a combined gross domestic product of $3.4 trillion.
An additional $450 billion on real income
World Bank researchers estimate that the trade deal will lift 30 million Africans out of extreme poverty and 68 million from moderate poverty by 2035.
Full implementation could increase real income in Africa by 7%, or nearly $450 billion, mainly by reducing the cost of trade through eliminating tariffs and red tape.
Côte d’Ivoire and Zimbabwe – the countries with the highest costs of trade – could experience income gains of 14%.
The volume of total exports would increase by almost 29%, the World Bank says, with exports between African nations rising by 81%. Exports to non-African countries would increase by 19%.
The report estimates that, “compared with a business-as-usual scenario, implementing AfCFTA would lead to an almost 10% increase in wages, with larger gains for unskilled workers and women”.
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