A new World Bank study reveals that AfCFTA will help the countries to reduce poverty and broaden economic inclusion.
Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalisation 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.
World Bank’s Chief Economist for Africa, Albert Zeufack said: “AfCFTA has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans.”
Zeufack added that 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,” said Zeufack.
The report suggests that achieving these gains will be particularly important given the economic damage caused by the Covid-19 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.
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.
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 resilience in the face of future economic shocks.
According to the WB report, the agreement would reshape markets and economies across the region, leading to the creation of new industries and the expansion of key sectors.
Overall economic gains would vary, with the largest gains going to countries that currently have high trade costs. Côte d’Ivoire and Zimbabwe—where trade costs are among the region’s highest—would see the biggest gains, with each increasing income by 14 percent.
AfCFTA would also significantly boost African trade, particularly intraregional trade in manufacturing. Intra-continental exports would increase by 81 percent while the increase to non-African countries would be 19 percent.
Implementation of the agreement would also spur larger wage gains for women (an increase of 10.5 percent by 2035) than for men (9.9 percent).
It would also boost wages for skilled and unskilled workers alike—10.3 percent for unskilled workers and 9.8 percent for skilled workers.
The WB is taking broad, fast action to help developing countries strengthen their pandemic response by supporting public health interventions, working to ensure the flow of critical supplies and equipment, and helping the private sector continue to operate and sustain jobs.
The bank will deploy up to $160 billion in financial support over 15 months to help more than 100 countries protect the poor and vulnerable, support businesses, and bolster economic recovery. This includes $50 billion of new IDA resources through grants and highly concessional loans.