By Adedapo Adesanya
The World Bank has said the African free trade deal, if fully implemented, would lift about 30 million Africans out of extreme poverty and 68 million from moderate poverty by 2035.
In its latest report, the global lender noted that deal could boost income across the continent, solve poverty and cushion against the negative impact of coronavirus (COVID-19).
The African Continental Free Trade Area (AfCFTA) was scheduled to commence on July 1, 2020, but was actively delayed by the COVID-19 pandemic.
As a result of the virus, countries were forced to close their borders and this halted talks between governments over the removal of tariffs. As a result, the deal may become fully operational from the start of 2021.
According to the World Bank, the pandemic is expected to cost Africa up to $79 billion in lost economic output this year, with a rise in the unemployment rate.
This led to the bank’s decision that a successful implementation of the AfCFTA would be crucial as it is a major opportunity for Africa. However, implementation will be a major challenge as lowering tariffs is only the first step.
The trade deal has been touted to create an opportunity to connect 1.3 billion people across 55 countries with a combined gross domestic product of $3.4 trillion.
With good implementation, the Bretton Wood institution said it could also increase real income in Africa by 7 per cent or nearly $450 billion, mainly by reducing the cost of trade through the elimination of tariffs and red tape.
It noted that countries with the highest costs of trade such as Ivory Coast and Zimbabwe could see income gains of 14 per cent.
More so, the volume of total exports would increase by almost 29 per cent, with exports between African nations rising to 81 per cent while exports to non-African countries would increase by 19 per cent.
Based on the report, “implementing AfCFTA would lead to an almost 10 per cent increase in wages, with larger gains for unskilled workers and women.”
The AfCFTA was signed on May 30, 2019, for the 24 countries that had deposited their instruments of ratification. It is aimed at boosting intra-African trade by 52.3 per cent, eliminating import duties, and to double trade if non-tariff barriers are also reduced.
One of the main objectives of the AfCFTA is to create a single continental market for goods and services, with free movement of business persons and investments in Africa.
It also sought to expand intra-African trade through better harmonization and coordination of trade freedom while facilitating instruments across the Regional Economic Communities (RECs) and across Africa in general.
The AfCFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for scale production, continental market access and better reallocation of resources. Thus creating a free market and a unified continent.
