AfCFTA expected to drive African growth

The African Continental Free Trade Area (AfCFTA) is expected to drive sustainable and inclusive growth. Image credit: Leon Louw for WhyAfrica.

AfCFTA expected to drive African growth    

According to a report titled the Economic Development in Africa Report 2021, the African Continental Free Trade Area (AfCFTA) could reduce poverty and inequality while spurring sustainable and inclusive growth. The report was launched by the United Nation’s trade and development body UNCTAD.

This article was first published by UNCTAD

The report emphasises the importance of financing infrastructure that links urban and rural areas, and ensures equal access to opportunities and resources

“The AfCFTA has immense potential to spur economic growth and transform the continent’s development prospects if additional measures are taken to realise and fairly distribute its many potential benefits, as these gains will not come automatically”, said UNCTAD Secretary-General Rebeca Grynspan.

According to the report, only 17 out of 49 African countries have enjoyed inclusive growth. For 18 of the States remaining, growth has led to a reduction in poverty, but increased inequality, while the remaining 14 nations have suffered a lack of inclusion as well as widening inequality.

Africa’s unprecedented growth in the 2000s has not translated into significantly improved livelihoods for most Africans, as the income gap between rich and poor has widened, the report says.

About 34% of African households live below the USD1.90 per day international poverty line, and about 40% of the total wealth is owned by approximately one ten-thousandth per cent of the continent’s population, according to the report.

Moreover, the COVID-19 pandemic, which has exacerbated inequalities and vulnerabilities of marginalised groups, resulted in an additional 37 million sub-Saharan Africans living in extreme poverty.

Poverty and inequality are not inescapable. They are products of political choices and public policy”, said Grynspan.

Creating inclusive growth

The report says that more international trade can also improve interregional knowledge sharing, which could increase efficiency, help spread new technologies, and redistribute wealth.

Intra-African trade – currently at a low 14.4 per cent of total African exports – would benefit greatly from regional trade, the report finds.

When considering informal cross-border trading, records show higher intra-regional commerce, particularly in agriculture.

The analysis illustrates that informal cross-border trade can account for up to 90 per cent of official trade flows in some countries and contribute to up to 40 per cent of total trade within regional economic communities. such as the Southern African Development Community (SADC).

It also functions as a booster for the poorest segment of the population and marginalized groups, such as many women workers and youth.

Cooperation essential to overcome market dominance

The report finds that Africa’s untapped export potential amounts to USD21.9-billion, or 43% of intra-African exports, with an additional USD9.2-billion through partial tariff liberalisation under the AfCFTA over the next five years.

And long-term cooperation in investment and competition policies will be essential to overcome market dominance by a few actors and reduce regulatory barriers to market entry, the report says.

Due to pandemic-induced border closures, vulnerable groups have lost savings and struggle to provide for their families: “Complementary measures to support women and young people in trade, small businesses and the least developed African countries are required to achieve a more inclusive AfCFTA”, said Wamkele Mene, Secretary-General of the AfCFTA Secretariat.

“This report will support African Governments and development partners to better leverage the AfCFTA to tackle both poverty and inequality to ensure the expected gains from free trade are more inclusive”, the UNCTAD chief said.

This article was first published by UNCTAD

AfCFTA expected to drive African growth

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