World Bank forecasts AfCFTA to boost Africa’s income by US$450bn
A new assessment carried out by the World Bank has forecast that the African Continental Free Trade Area (AfCFTA) stands to boost Africa’s income by US$450 billion by 2035, representing a gain of 7 percent in the continent’s revenue, while adding US$76 billion to the income of the rest of the world.
Of the US$450 billion in income gains from AfCFTA, US$292 billion would come from stronger trade facilitation including measures to reduce red tape and simplify customs procedures.
This measure will make it easier for African businesses to integrate into global supply chains.
Actualization of these potential gains will require major efforts by countries to reduce the burden on businesses and traders to cross borders, quickly, safely, and with minimal interference by officials, the report indicates.
The report addresses real income implications, trade facilitations, output implications as well as Government revenue implications. Other areas addressed in the report include effects on poverty and employment, among others.
Wages of both skilled and unskilled workers largely in the manufacturing sector are expected to rise on average by at least 9.8 percent and 10.3 percent respectively as Africa’s exports would increase under the trade pact by US$560 billion, the report indicates.
The Pan-African trade pact originally scheduled for July this year had to be postponed to January 2020 due to the disruptions created as a result of the novel Coronavirus Pandemic.
However it is expected to eventually elevate about 30 million people out of extreme poverty, raising incomes of about 68 million people living on less than US$5.50 per day, the report predicts.
Under AfCFTA, extreme poverty would decline across the continent with West Africa expected to see the biggest decline in the number of people living in extreme poverty—a decline of 12 million, which is more than a third of the total for all of Africa.
Currently, phase one operational instruments, which will determine the eligibility of goods to be traded under AfCFTA, most notable among them being Rules of Origin, are yet to be approved.
The implementation of AfCFTA will require Member Countries to liberalize at least 97 per cent of their tariff lines and 90 per cent of imports.
The continental free-trade area would be the world’s largest economic free trade zone, adjudged by spatial size and population, and is expected to increase intra-African trade from the current 12 per cent of total trade by African countries, to 52 per cent by 2023.
However, trade experts have indicated that should the pandemic rage on for much longer, the anticipated 52 per cent target may not be achieved within the set period.