The World Bank says, the full implementation of the African Continental Free Trade Agreement (AfCFTA) will reduce current extreme poverty levels from 34.7 per cent to 10.9 per cent by 2035.
In addition, more than half of the Continent’s population will live on more than $5.5 (adjusted for Purchasing Power Parity) a day by 2035 – after the trade pact between the 55 African States has seen its full implementation.
“By 2035 and under baseline conditions, the headcount ratio for extreme poverty in Africa is projected to decline to 10.9 per cent. The headcount ratio of extreme poverty is expected to decline from 34.7 percent in 2015 to 15.5 percent by 2030 and 10.9 percent by 2035,” read part of the World Bank’s report on the implementation of the AfCFTA.
“More than half of Africa’s population is likely to live on more than $5.50, adjusted for purchasing power parity (PPP), a day by 2035. Under baseline projections, the proportion of people who live above moderate poverty, here defined above an international threshold of PPP US$5.50 a day, is expected to increase in Africa from 21.9 percent in 2015 to more than half of the population by 2035, which is equivalent to a net increase of half a billion people,” added the World Bank.
According to the World Bank, the reduction in poverty and improvement in the living standard of Africans after the implementation of AfCFTA will be due to the expansion “in a higher demand for basic public services such as education,
health, electricity, and water.”
The percentage reduction in existing poverty levels on the Continent translates into some 30 million Africans being lifted out of extreme poverty with another 67 million being lifted out of moderate poverty.
Accordong to the World Bank, “West Africa would observe a decline of 12 million attributable to AfCFTA, while Central and East Africa would observe declines of 9.3 million and 4.8 million, respectively. At the country level, the largest gains in poverty reduction from implementation of AfCFTA would occur in countries with high initial poverty rates such as Guinea-Bissau (10.2 percentage points), Mali (7.6), Sierra Leone (7.2), Togo (7.2), Liberia (5.7), Niger (5.4), and the Central African Republic (5.1).”
Full implementation of the agreement could lift 67.9 million in the continent out of moderate poverty (at $5.50, PPP-adjusted, a day) by 2035 and in part because of the influence of the large boost in household consumption expected from trade openness, about half of the people lifted from moderate poverty would be located in six countries: Ethiopia (8.2 million), Nigeria (7 million), Tanzania (6.3 million), the Democratic Republic of Congo (4.8 million), Kenya (4.4 million), and Niger (4.2 million).
AfCFTA, the World Bank further posits would result in member countries of the trade pact gaining almost $450 billion in real income by 2035.
The gains in income the World Bank noted, will in part come from decreased tariffs, which remain stubbornly high in many countries in the region with greater gains coming from lowering trade costs by reducing non-tariff barriers and improving hard and soft infrastructure at the borders – trade facilitation measures.
The Bretton Wood institution in its report however, noted that the real income gains from the implementation of the trade pact, will not be evenly distributed citing Ivory Coast and surprisingly Zimbabwe as countries likely to earn higher real incomes from the agreement.
Ghana, per the World Bank stands to gain a little over 6 per cent in real income from the $450 billion expected earnings from the trade pact.
“Real income gains from full implementation of the agreement could increase by 7 percent, or nearly $450 billion, but the aggregate numbers mask the heterogeneity of impacts across countries and sectors. At the very high end are Côte d’Ivoire and Zimbabwe with income gains of 14 percent each. At the low end, a few countries would see real income gains of around 2 percent—including Madagascar, Malawi, and Mozambique,” said the World Bank.
According to the World Bank, the AfCFTA would significantly boost African trade, particularly intra-regional trade in manufacturing.
The volume of total exports would increase by almost 29 percent by 2035. Intra-continental exports would increase by over 81 percent, while exports to non-African countries would rise by 19 percent.
Intra-AfCFTA exports to AfCFTA partners, the World Bank predicts, would rise speedily, especially for Cameroon, Egypt, Ghana, Morocco, and Tunisia, with exports doubling or even tripling.
Of the real sectors of the economy, the manufacturing sector is expected to gain the most with 62 per cent increment in production activities followed with modest gains in the services sector and smaller gains in agriculture.
