A continent-wide free-trade pact could help boost economic growth and reduce inequality in Africa as the Covid-19 omicron variant threatens to weigh on output.
Commerce under the African Continental Free-Trade Area that started Jan. 1 could reduce coronavirus-induced economic contractions and “spur sustainable and inclusive growth on the continent if stronger support measures targeting women, young traders and small businesses are implemented,” according to a United Nations report.
Such measures should include introducing affirmative action initiatives in public procurement for marginalized groups and prioritizing support for industries in which trade reforms would have the greatest potential for inclusiveness, the UN Conference on Trade and Development said.
“Inclusive growth is critical for Africa precisely” because poverty and inequality are very high, Junior Davis, head of policy and research branch in the division for Africa and least developed countries at UNCTAD, said in an interview.
Less than half of African countries have recorded inclusive growth in the past 20 years, leaving 34% of households on the continent living on less than $1.90 per day, the agency said. Advancing women’s equality could add 10%, or $316 billion, to the continental gross domestic product by 2025.
All but one of 55 nations recognized by the African Union have signed to join the AfCFTA and more than two-thirds have ratified the accord. Eritrea, which has a largely closed economy, is the holdout.
The bloc has a potential market of 1.3 billion people with a combined GDP of $3.4 trillion, and could be the world’s biggest free-trade zone by area when the treaty becomes fully operational by 2030.
“If the opportunity can be adequately tapped and the potential through the AfCFTA realized, you can build greater resilience to the impact of economic shocks and foster deeper cooperation on regional trade,” according to Davis.
The free-trade pact could bolster intra-African trade exports to 43% of its total from 14.4%, and a further $9.2 billion of export potential could be realized through partial tariff liberalization under the AfCFTA over the next five years, the study found.