A report on the implementation of the African Continental Free Trade Agreement (AfCFTA) by the World Bank indicates member countries of the trade pact stand to gain 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.
”Under the AfCFTA scenario, manufacturing exports would gain the most, 62 percent overall, with intra-Africa trade increasing by 110 percent and exports to the rest of the world rising by 46 percent. Smaller gains would be observed in agriculture—49 percent for intra-Africa trade and 10 percent for extra-Africa trade. The gains in the services trade are more modest—about 4 percent overall and 14 percent within Africa,” read the report.
The World Bank says its report is to help guide policy makers on the negotiation and implementation of the AfCFTA. It notes that creating a continent-wide market will require a determined effort to reduce all trade costs through legislations aimed at enabling goods, capital, and information to flow freely and easily across the African borders.
“AfCFTA is a major opportunity for Africa, but implementation will be a significant challenge. Lowering tariffs is only the first step. Reforming nontariff and trade facilitation measures will require substantial policy reforms at the national level. These reforms may require politically difficult decisions in some cases. However, the agreement’s opportunities can be used to help policy makers overcome these challenges and implement the substantive reforms that are needed to make Africa as competitive as any other region in the world,” the World Bank noted.
The African Continental Free Trade Area (AfCFTA) agreement will create the largest free trade area in the world measured by the number of countries participating. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) valued at US$3.4 trillion.
It has the potential to lift 30 million people out of extreme poverty, but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures.
As the global economy is in turmoil due to the COVID-19 pandemic, creation of the vast AfCFTA regional market is a major opportunity to help African countries diversify their exports, accelerate growth, and attract foreign direct investments.
