A trade deal that removes barriers helps drive Africa’s economic growth.

min read

The agreement establishes a continent-wide market spanning 54 nations with a total population of 1.3 billion and a combined GDP of $3.4 trillion. Its initial stage, effective from January 2021, aims to progressively eliminate tariffs on 90 percent of goods and ease trade barriers for services. According to a 2020 World Bank report, this could result in a 7 percent income increase, equivalent to $450 billion, by 2035, thereby reducing extreme poverty from 277 million to 237 million.

A new collaborative study by the World Bank and the AfCFTA Secretariat considers the added benefits arising from an expected surge in foreign direct investment (FDI), both internal and external to Africa, due to the trade deal. FDI is crucial as it brings much-needed capital, technology, and skills to elevate living standards and lessen Africa’s reliance on volatile commodity exports. In this projection, real income could further rise to approximately 8 percent in 2035, leading to a reduction of extreme poverty by 45 million.

The recent report also envisions the potential outcomes if the agreement expands as planned to harmonize investment policies, competition regulations, e-commerce norms, and intellectual property rights. Deeper integration in these spheres would foster equitable and efficient markets, amplify competitiveness, and draw even greater FDI by mitigating risks related to shifting regulations and policies. This scenario forecasts income gains of 9 percent by 2035 and a reduction of extreme poverty by 50 million.