The African Continental Free Trade Area (AfCFTA) has the potential to deliver significant economic and social benefits to the region by increasing incomes, reducing poverty, and accelerating economic growth, according to a new report by the World Bank in partnership with the AfCFTA Secretariat.
18 Million Additional Jobs
According to a report published on Thursday, June 30, the AfCFTA could generate nearly 18 million additional jobs, many of which would be better paid and of higher quality, with women benefiting the most.
By 2035, the resulting growth in jobs and incomes could lift up to 50 million people out of extreme poverty. The implementation of the trade agreement would also lead to greater wage gains for women and skilled workers. Women’s wages are projected to be 11.2% higher by 2035 compared to a scenario without the agreement, surpassing the 9.8% growth in men’s wages.
“The AfCFTA comes at a critical time when regional cooperation is essential to address heightened risks and strengthen supply chain resilience, supporting green, resilient, and inclusive growth in Africa,” said Mari Pangestu, Managing Director for Development Policy and Partnerships at the World Bank. She emphasized that “it is now up to member states to work together to make the AfCFTA a reality and to benefit from its numerous advantages, particularly by reducing trade and investment barriers, fostering competition, and ensuring that markets operate fairly and efficiently through clear and predictable rules.”
A Combined GDP of $3.4 Trillion
Titled “Making the Most of the African Continental Free Trade Area,” the report builds on work conducted in 2020, when the World Bank first assessed the economic potential of the AfCFTA. Under its first phase, which took effect in January 2021, the AfCFTA is gradually eliminating tariffs on 90% of goods and reducing barriers to trade in services. The new report examines how a larger trade market can enhance the continent’s ability to attract investment—both from within Africa and abroad—and the resulting economic impact. It explores two scenarios to evaluate the benefits of a market encompassing over 1.3 billion people with a combined GDP of $3.4 trillion. Key findings indicate that the AfCFTA has the potential to encourage the Foreign Direct Investment (FDI) necessary for Africa to diversify into new industries such as agribusiness, manufacturing, and services, while reducing the region's vulnerability to commodity boom-and-bust cycles. Deeper integration—beyond trade facilitation measures—that harmonizes policies on investment, competition, e-commerce, and intellectual property rights could boost market efficiency and competitiveness, reduce regulatory risks, and attract even more FDI.
9% Income Growth Through Trade
By 2035, this integration could increase incomes by 9%, equivalent to $571 billion, and create 18 million new jobs, with 2.5% of the continent’s workforce transitioning to new industries. It could also lift 50 million people out of extreme poverty. According to the report, increased FDI could boost African exports by up to 32% by 2035, with intra-African exports rising by 109%, particularly in the manufacturing sector.
With reduced barriers to trade and investment, export sectors expected to see the most growth include textiles and apparel, chemicals, rubber and plastics, and processed foods. Deeper integration would also lower trade costs and increase capital inflows, driving export growth in service sectors such as transport, communications, and hospitality.
“Today, Africa is one of the least integrated regions in the world, with African countries trading more with external markets than among themselves. This agreement can help countries simplify and harmonize trade and transit procedures, improve infrastructure, transport, and logistics, and stimulate the flow of goods, services, capital, and people—essential for development,” noted Wamkele Mene, Secretary-General of the AfCFTA Secretariat.
To unlock these potential trade, investment, and employment benefits, countries must first successfully conclude negotiations and achieve the treaty’s most ambitious objectives. The report highlights several other areas where reforms could maximize the economic benefits of trade.
Credit: Afrimag