4 things Africa must do to make AfCFTA work – IMF Chief
Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, stated that Africa must focus on reducing Trade Barriers, regional supply chains, economic diversification and focus on youth-led job creation to make the African Continental Free Trade Area (AfCFTA).
She disclosed this on Friday as the IMF discussed its paper that talks about the potential for the AfCFTA.
The 4 Points
Georgieva stated that the paper will focus on the minds of policymakers to unleash development, adding that the 3 points that African policymakers need to focus on are:
- Reduction of trade barriers, if Africa decides to follow the ASEAN example, and bring trade barriers from 6% down to 1% that would be a major step in the direction; she said Africa needs to remove tariff barriers and non-tariff trade barriers.
- Use trade as an engine for integration in global supply chains and make regional supply chains vibrant.
- Diversify the economy, when countries trade more, they deepen specialization that boosts productivity.
- A vibrant youthful population for jobs, as trade is a massive generator for jobs, if we are to get 800 million jobs necessary over the next decade; we need trade to be the engine of job development.
AfCFTA’s progress
She also noted that since 2018, countries of the continent have embraced AFCFTA, adding that 54 out of 55 have signed, and 44 have ratified already.
- “But of course, legislating is only the beginning, what matters is what policies are put in place so the continent can capture the advantage of trade which are enormous for Africa.
- “What has been a disadvantage, more barriers to trade, limited intra continental trade can be turned around and be an opportunity, if the AfCFTA is implemented, trade barriers removed, long trade barriers removed and logistics transportation improved, intra continental can grow by 53%
She added that trade outside of the continent can grow by 15%, and that translates into tremendous benefits in terms of an increase in income, which is a 10% increase in income as a result.
- “Just imagine what can be done with that kind of increase, it is also remarkable, the identification by what needs to be” she added.
Backstory
Nairametrics reported last week that the International Monetary Fund (IMF) said that the African Continental Free Trade Area (AfCFTA) initiative can help African countries reduce climate change risks. The IMF stated this in its departmental paper on the continent, titled: “Trade Integration in Africa: Unleashing the Continent’s Potential in a Changing World”. The departmental paper was released on May 5.
Reviewing climate change effects
According to the IMF, rising average temperatures are expected to lower gross domestic product (GDP) growth and exacerbate food insecurity in Africa. Also, the rising frequency of natural disasters associated with climate change would also be expected to disrupt economic activity at an increasing frequency on the continent.
Solutions abound within Africa
The IMF paper, however, stated that despite these challenges, regional trade integration in Africa can be an important element of a climate adaptation strategy in any of the following ways:
- Regional trade integration could boost countries’ resilience by reducing their overreliance on sectors that are at increased risk of being adversely affected by climate change-related natural disasters.
- By facilitating the flow of goods across borders, regional trade integration would help countries diversify sources of climate-vulnerable products.
- Regional trade integration could open opportunities for increased regional trade related to climate-related infrastructure, services, and finance.
- Increased global competition for commodities and critical minerals may allow some African economies to deepen their pre-existing integration into global value chains as upstream suppliers of raw materials.
- The AfCFTA presents African countries with an opportunity to diversify their export destinations, import sources and patterns of cross-border value chain integration by boosting regional trade.
- Under the AfCFTA, most African economies would see a decline in the concentration of their export destinations, with generally larger declines for countries that currently have a relatively high export concentration. A greater diversity of export destinations would in turn increase economic resilience.
