Electronic income

AfCFTA can boost regional revenue by 9% to $571 billion

The African Continental Free Trade Area (AfCFTA) has the potential to bring significant economic and social gains to the region, leading to increased incomes, reduced poverty and faster economic growth.

Moreover, if fully implemented to harmonize investment and competition rules, the trade pact could increase regional revenues by up to 9%, to $571 billion, and create nearly $18 million. additional jobs, many of which are better-paying, higher-quality jobs, with female workers making the biggest gains, and by 2035 the resulting job and income growth could help up to 50 million people escape from extreme poverty.

That projection is contained in a new World Bank report, “Making the Most of the African Continental Free Trade Area,” released Thursday and produced in partnership with the AfCFTA Secretariat.

Implementing the trade deal would also lead to bigger wage gains for women and skilled workers, according to the report. “Wages for women workers are projected to increase by 11.2% in 2035 compared to the level of wages without the agreement, outpacing the 9.8% growth in wages for men,” the report said.

The report, Making the Most of the African Continental Free Trade Area, builds on work done in 2020 (www.worldbank.org/afcfta2020report), when the World Bank initially assessed the economic potential of the AfCFTA.

Under its first phase, which came into effect in January 2021, the AfCFTA will gradually eliminate tariffs on 90% of goods and reduce barriers to trade in services.

The new report, released on Thursday (today), examines the effects of the expanded trade market on the continent’s ability to attract investment, both within and outside Africa, and the resulting economic impact .

Mari Pangestu, Managing Director for Development Policy and Partnerships, World Bank, said, “The AfCFTA comes at a critical time when regional cooperation is needed to address heightened risks and build the resilience of supply chains. procurement, to support green, resilient and inclusive growth in Africa. .

“Countries must work together to make the AfCFTA a reality and reap its many benefits, including reducing barriers to trade and investment, enhancing competition, and ensuring fair and efficient functioning of markets through clear and predictable rules.”

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The report examines two scenarios to assess the benefits for a market of over 1.3 billion people with a combined GDP of US$3.4 trillion.

Key findings indicate that the AfCFTA has the potential to encourage greater foreign direct investment (FDI) needed for Africa to diversify into new industries, such as agribusiness, manufacturing and services, and reduce the region’s vulnerability to commodity boom-and-bust cycles.

“Deeper integration beyond trade and trade facilitation measures, which harmonizes investment, competition, e-commerce and intellectual property rights policies could boost market efficiency and competitiveness, reduce regulatory risks and attract even more foreign direct investment.

“By 2035, this integration would increase incomes by 9%, or $571 billion, and create 18 million new jobs, with 2.5% of the continent’s workers moving to new industries. This would bring the number of people moving out of extreme poverty to 50 million,” the report says.

The report finds that an increase in FDI could increase Africa’s exports by up to 32% by 2035, with intra-African exports increasing by 109%, particularly in the manufacturing sectors. “All countries in Africa will see their intra-African exports increase, including Tunisia (165%), Cameroon (144%), Ghana (132%), Tanzania (126%) and South Africa (61%). cent),” he added.

The World Bank said that with barriers to trade and investment reduced, the export sectors likely to grow the most are textiles and clothing; chemical, rubber and plastic products; and processed foods. Further integration would reduce trade costs and stimulate capital inflows, boosting exports of service sectors such as transport; communication and reception.

Wamkele Mene, Secretary General of the AfCFTA Secretariat, said, “Today, Africa is one of the least integrated regions in the world. African countries trade more with the outside world than with each other. The pact can help countries simplify and harmonize trade and transit procedures, improve infrastructure, transport and logistics, and boost the flow of goods, services, capital and people that are so vital to Development.

According to the Bank, to unlock these potential gains in trade, investment and jobs, countries must first successfully conclude negotiations and the most ambitious goals of the treaty must be achieved by each country.

The report, Making the Most of the African Continental Free Trade Area, highlights several other areas that countries could reform to amplify the economic gains from trade.

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AfCFTA can boost regional revenue by 9% to $571 billion

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AfCFTA can boost regional revenue by 9% to $571 billion

AfCFTA can boost regional revenue by 9% to $571 billion