Africa’s free-trade bloc can drive inclusive growth – if done right, says UN report

Women farming cassava in Sierra Leone, 2018. UNCTAD said the recent creation of Africa's free trade area will drive inclusive growth on the continent if accompanied by stronger support measures for women and young traders.(Credit: Unsplash/Annie Spratt)

An Africa-wide free-trade pact that came into force this year could be a “game-changer” in realising the continent’s development ambitions if measures to reduce poverty and inequality are properly addressed, according to a UN report released on Wednesday.

The African Continental Free Trade Area (AfCFTA) officially opened for business in January 2021, bringing together 55 countries into a single market of 1.2 billion people with a combined economy of $2.5 trillion.

The deal – creating the world’s biggest free trade area – promises to boost business among African countries by phasing out cross-border tariffs on most goods, simplifying customs procedures and allowing the continent to strengthen its own value chains.

Around 30 million Africans could be lifted out of extreme poverty through higher incomes and new jobs, according to estimates by the World Bank. But this won’t happen through trade policies alone, UN experts warn.

“The Africa free trade area can deliver considerable inclusive economic growth for the continent but for this to happen, we need measures to boost productivity and expand opportunities,” UNCTAD’s secretary-general Rebeca Grynspan told reporters on Wednesday.

“Growth by itself will not necessarily deliver inclusive growth,” she added.

This means creating more opportunities for marginalised groups, for example, such as women, who produced only 33 per cent of GDP across the continent in 2018, as well as young traders and small businesses.

UNCTAD’s report, Economic Development in Africa 2021, makes other recommendations, such as speeding up investments in infrastructure that will better connect urban and rural regions, promoting investment and competition policies, and providing equal access to socioeconomic opportunities.

It also calls for measures to ensure that informal traders, which in some African countries account for 90 per cent of trade, do not lose out under the free trade agreement and are better integrated.

Over a third of households under the poverty line

According to UNCTAD’s findings, less than half of African countries have recorded inclusive growth in the last 20 years, leaving 34 per cent of households on the continent still living below the international poverty line of $1.9 per day.

Although poverty levels have declined, inequalities widened between and within African countries.

“Africa’s unprecedented growth in the 2000s has not translated into significantly improved livelihoods for most Africans, as the income gap between the rich and the poor has widened,” the report said.

The pandemic further exacerbated inequalities, resulting in an additional 37 million people in sub-Saharan Africa living in extreme poverty.

“Poverty and inequality are not inescapable. They are products of political choices and public policy,” said Grynspan.

“This report will support African governments and development partners to better leverage the AfCFTA to tackle both poverty and inequality to ensure the expected gains from free trade are more inclusive.”