Report: AfCFTA has potential to lift 30 million people out of extreme poverty

The African Continental Free Trade Area (AfCFTA) has the potential to lift 30 million people out of extreme poverty but achieving its full potential will depend on putting in place significant policy reforms and trade facilitation measures, a new report says.

The tentative World Bank report—presented to member states in Accra, Ghana early last week as the West African country hosted a series of meetings of African trade ministers and senior trade officials to advance the cause of the AfCFTA—will be published soon.

An executive summary, which this reporter has seen, states that the agreement which was first signed by 44 African leaders on March 21, 2018, in Kigali, full implementation of AfCFTA would contribute to a further poverty decline by lifting an additional 30 million people from extreme poverty or 1.5 per cent of the continent’s population.

“In West Africa, the poverty headcount would decline by 12 million people, while the decline for Central and East Africa would be 9.3 and 4.8 million, respectively,” it reads in part.

“At the moderate poverty line at $5.50 a day in purchasing power parity terms, AfCFTA has the potential to lift 67.9 million people, or 3.6 per cent of the continent’s population, by 2035.”

According to the World Bank, in 2015, some 415 million people in Africa lived in extreme poverty – at purchasing power parity of $1.90 a day.

The purchasing power parity is used to account for changes in the poor’s living costs.

This measure reflects the depth of poverty as well as its incidence.

As a result of revisions in purchasing power parity exchange rates, the Bank says, poverty rates for individual countries cannot be compared with poverty rates reported in earlier editions.

Across the continent, however, poverty rates vary widely: it is 41.1 per cent in sub-Saharan Africa but less than 3 percent in North Africa. It is 77.7 per cent in the Central African Republic but just 0.4 per cent in Algeria and Egypt.

Under baseline simulations, the headcount ratio of extreme poverty in Africa is projected to decline to 10.9 per cent by 2035 from 34.7 per cent in the latest estimate (2015).

Experts have noted that the AfCFTA agreement will create the largest free-trade area in the world measured by the number of countries participating.

The pact connects 1.3 billion people across 54 countries with a combined GDP valued at $3.4 trillion.

According to Vera Songwe, the Executive Secretary of the UN Economic Commission for Africa (UNECA), the implementation of the agreement could result in $1.8 billion welfare gains and creation of 2 million new jobs for the eastern African region.

Better opportunities for unskilled and female workers

According to the new report, AfCFTA’s implementation would also create better opportunities for unskilled and female workers.

The report says that the continent would see a net increase in the proportion of workers in energy-intensive manufacturing, trade services, and public and recreational services.

These effects, however, would not be distributed equally across countries, it warns.

Agricultural employment would increase by 60 per cent of countries and wages for unskilled labour would grow faster where there is an expansion in agricultural employment.

“By 2035, wages for unskilled labour would be 9.3 per cent higher than the baseline; the increase for skilled workers would be 5.8 per cent. Wages would grow slightly faster for women than for men as output expands in key female-labour-intensive industries.

“By 2035, wages for women would increase 9.6 per cent with respect to baseline, compared to 9.2 per cent for men.”

The operational phase of the AfCFTA was launched during the 12th Extraordinary Session of the Assembly of the AU in Niamey, Niger on July 7.

The Niamey meeting made a number of important decisions, including that: the AfCFTA be hosted by Ghana; and that July 1, 2020, be the date to start trading within the AfCFTA regime.

So far 28 countries have deposited their instruments of ratification with the AUC, and hence became state parties.

jkaruhanga@newtimesrwanda.com

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