Publication: Making the Most of the African Continental Free Trade Area: Leveraging Trade and Foreign Direct Investment to Boost Growth and Reduce Poverty
Date
2022-06-30
ISSN
Published
2022-06-30
Author(s)
Echandi, Roberto
Maliszewska, Maryla
Steenbergen, Victor
Abstract
The creation of the African
Continental Free Trade Area (AfCFTA) provides a unique
opportunity to boost growth, cut poverty, and reduce
Africa’s dependence on the boom and-bust commodity cycle. A
World Bank (2020) report estimates that the AfCFTA has the
potential to raise income in the continent by 7 percent by
2035 and lift 40 million people out of extreme poverty,
mainly by spurring intraregional trade (termed the “AfCFTA
trade scenario” for purposes of this analysis). Reductions
in nontariff barriers on goods and services and improvements
in trade facilitation measures will account for about two
thirds of the US$450 billion in potential income gains by
removing long delays across most of the continent’s borders
and lowering compliance costs in trade, making it easier for
African businesses to become integrated into regional and
global supply chains. This report builds on that earlier
study by including potential gains arising from greater
flows of foreign direct investment (FDI), termed the “AfCFTA
FDI broadscenario,” and from deeper integration beyond
trade, the “AfCFTA FDI deep scenario.” FDI has traditionally
been low in Africa. The AfCFTA is likely to attract
cross-border investment by eliminating tariff and nontariff
barriers and replacing the existing patchwork of bilateral
and regional trade deals with a single, unified market.
Investors in any one of 55 member countries will have access
to a continent of 1.3 billion people with a combined GDP of
US$3.4 trillion. Integration in global and regional value
chains offers a further magnet for FDI and the jobs,
investment, and know-how that FDI brings.
Citation
“Echandi, Roberto; Maliszewska, Maryla; Steenbergen, Victor. 2022. Making the Most of the African Continental Free Trade Area: Leveraging Trade and Foreign Direct Investment to Boost Growth and Reduce Poverty. © Washington, DC: World Bank. http://hdl.handle.net/10986/37623 License: CC BY 3.0 IGO.”