What is the AfCFTA?

The AfCFTA holds numerous benefits for the African continent.

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Trade:

A fundamental objective of the AfCFTA is to foster an increase in both intra-African and extra-African trade. According to the projections put forth by the World Bank (2020), a notable surge in the total volume of exports is expected by the year 2035, with an approximate growth rate of almost 29% when compared to the baseline scenario. In this trajectory, intracontinental exports are expected to undergo a substantial upswing, exceeding 81%, while a parallel expansion of 19% is anticipated in exports to non-African nations. This development holds particular significance for countries such as Cameroon, Egypt, Ghana, Morocco, and Tunisia, where export values are expected are expected to rise by double or even triple.

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As a consequence, the intrinsic worth of intracontinental trade is predicted to experience a notable rise, increasing from the current US$294 billion to a substantive US$532 billion by the year 2035. Amidst these transformative shifts, high rises in export values are foreseen for nations including Egypt, Morocco, South Africa, Nigeria, Kenya, and Côte d’Ivoire.

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Output:

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The implementation of AfCFTA will also yield a substantial regional output increase, estimated at US$ 211 billion by the World Bank by 2035. This outcome, however, displays variation when analysed across sectors. Notably, the  natural resources and services sectors are anticipated to witness the most significant gains, with projected growth rates of 1.7%. Correspondingly, the manufacturing sector is expected to observe a growth rate of 1.2%, while a contrasting trajectory is foreseen for agriculture, which is projected to experience a decline of 0.5%.

In terms of the volume of output, the services sector will undergo the most substantial expansion, projected at US$ 147 billion, followed by manufacturing with US$ 56 billion and natural resources with US$17 billion. It is noteworthy that the decline in agricultural output finds a counterbalance in the expansion observed in most parts of Africa, excluding North Africa. The latter region is anticipated to shift towards manufacturing, chemical products, and services. Additionally, trade in natural resources is expected to experience growth in Central and West Africa under the AfCFTA. This overarching trend underscores the pivotal role that rising incomes play in propelling the expansion of services across all regions.

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Poverty and Job Creation:
The potential impact of the AfCFTA on poverty is significant. Full implementation by 2035 could uplift an additional 30 million individuals, equivalent to 1.5 per cent of the continent's population, out of extreme poverty. Notable variations emerge at regional and national levels, with West Africa foreseeing a reduction of 12 million, while Central and East Africa would witness decreases of 9.3 million and 4.8 million, respectively.

The most substantial gains would occur in countries with high initial poverty rates, such as Guinea-Bissau, Mali, Sierra Leone, Togo, Liberia, Niger, and the Central African Republic. Additionally, comprehensive AfCFTA implementation could elevate 67.9 million individuals beyond moderate poverty (at US$5.50, PPP-adjusted per day) by 2035. Enhanced household consumption, facilitated by increased trade openness, is expected to reinforce this outcome, with six nations – Ethiopia, Nigeria, Tanzania, the Democratic Republic of Congo, Kenya, and Niger – accounting for a significant proportion of those lifted from moderate poverty.

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The World Bank study finds that the AfCFTA influences job reallocation as employment shifts from less competitive sectors to more advantageous ones. Shifts in employment will be observed by activity and according to demographic and urbanization trends. Agriculture and wholesale/retail trade would constitute half of continental employment. The agricultural sector's share of employment is expected to decline from 35.9% in 2020 to 29.7% in 2035, while wholesale/retail trade's share may rise from 16.9% to 20%.

Agriculture's employment role varies across regions; for example, it's projected to be 10.7% in North Africa, while East Africa might have 47.8%. The AfCFTA could also increase employment in energy-intensive manufacturing, public services, recreational and other services, and trade services, as indicated by a net rise in worker volume. Female wages rise faster in most regions due to the expansion of female labour-intensive industries.