The African Continental Free Trade Area (AfCFTA) could serve as a catalyst for economic and social benefits within Africa, potentially increasing incomes, reducing poverty, and encouraging robust economic expansion, as outlined in a recent report by the World Bank in collaboration with the AfCFTA Secretariat. The report posits that, with comprehensive implementation and standardization of investment and competition regulations, AfCFTA could enhance regional incomes by up to 9 percent, or $571 billion, and potentially generate 18 million additional jobs. These jobs are anticipated to offer higher wages and improved quality, particularly benefiting female workers. By 2035, it’s estimated that the economic boost could lift as many as 50 million individuals out of extreme poverty.
Wage improvements are forecasted to be more significant for women, with an expected increase of 11.2 percent by 2035, compared to a 9.8 percent rise for men. The findings build upon previous World Bank analyses, considering the effects of a larger trade market on investment attraction and economic outcomes. The report, titled “Making the Most of the African Continental Free Trade Area,” suggests that AfCFTA could drive investment both from within the continent and globally, aiding Africa in diversifying into industries like agribusiness, manufacturing, and services, while lessening reliance on volatile commodity markets.
With AfCFTA in effect since January 2021, the initial phase aims to progressively eliminate tariffs on 90 percent of goods and minimize trade barriers in services. Further integration efforts that streamline investment, competition, e-commerce, and intellectual property rights are projected to heighten market efficiency and draw more foreign direct investment, thereby creating jobs and increasing the number of people escaping extreme poverty to 50 million by 2035.
The report also indicates a possible surge in Africa’s exports by 32 percent by 2035, with intra-African exports potentially growing by 109 percent, particularly in the manufacturing sector. All African countries are expected to experience a rise in intra-African exports, with notable increases in Tunisia, Cameroon, Ghana, Tanzania, and South Africa. Reductions in trade and investment barriers could especially grow export sectors like textiles, apparel, chemical products, and processed foods, as well as service sectors such as transport and hospitality.
Wamkele Mene, Secretary-General of the AfCFTA Secretariat, noted the current low levels of trade integration in Africa and the transformative potential of the AfCFTA in streamlining trade procedures and enhancing infrastructure to boost development. The World Bank report underscores the necessity for countries to finalize negotiations and fully implement the treaty to realize these potential benefits, suggesting additional reforms to maximize the economic gains from trade.
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