A pandemic-delayed African free trade deal, if fully implemented, could boost incomes across the continent, pull millions out of poverty and cushion against the negative fallout from COVID-19, the World Bank wrote in a report on Monday.
The African Continental Free Trade Area (AfCFTA) was due to come into force on July 1, but that proved unworkable after the virus forced widespread border closures and halted talks between governments over the removal of tariffs.
It may now begin operating from the start of 2021.
The pandemic is expected to cost Africa up to US$79B in lost economic output this year alone with the additional risk of millions of job losses.
“In this context, a successful implementation of AfCFTA would be crucial,” the report said. “(It) is a major opportunity for Africa, but implementation will be a significant challenge. Lowering tariffs is only the first step.”
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Once in force, the AfCFTA will bring together 1.3 billion people across 55 countries with combined gross domestic product of US$3.4T.
World Bank researchers estimated the trade deal would lift 30 million Africans out of extreme poverty and 68 million from moderate poverty by 2035.
Full implementation could increase real income in Africa by 7%, or nearly US$450B, mainly by reducing the cost of trade through the elimination of tariffs and red tape.
Ivory Coast and Zimbabwe – countries with the highest costs of trade – could see income gains of 14%.
The volume of total exports would increase by almost 29%, according to the World Bank, with exports between African nations rising 81%. Exports to non-African countries would increase 19%.
“The report estimates that compared with a business-as-usual scenario, implementing AfCFTA would lead to an almost 10% increase in wages, with larger gains for unskilled workers and women,” the report said.