Namibia must pave way for AfCFTA gains
FINDINGS of a new World Bank report released last week highlighting that the African Continental Free Trade Area (AfCFTA) represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion, should allow our responsible authorities to take more progressive steps towards the potential gains of this continental deal.
If implemented fully, the trade pact could boost regional income by seven percent or US$450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035.
The report suggests that achieving these gains will be particularly important given the economic damage caused by Covid-19, which is expected to inflict up to US$79 billion in output losses in Africa in 2020.
The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.
Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalisation accompanied by a reduction in non-tariff barriers – such as quotas and rules of origin – would boost income by 2.4 percent, or about US$153 billion. The remainder – US$292 billion – would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.
For Namibia in particular, successful implementation of AfCFTA would help cushion the negative effects of Covid-19 on economic growth by supporting regional trade and value chains through the reduction of trade costs. In the longer term, AfCFTA would provide a path for integration and growth-enhancing reforms. By replacing the patchwork of regional agreements, streamlining border procedures, and prioritising trade reforms, AfCFTA could help Namibia increase its resilience in the face of future economic shocks.
Albert Zeufack, the World Bank’s chief economist for Africa notes in the report that AfCFTA has the potential to increase employment opportunities and incomes, helping to expand opportunities for all Africans adding that the deal is expected to lift around 68 million people out of moderate poverty and make African countries more competitive.
According to the report, the agreement would reshape markets and economies across the region, leading to the creation of new industries and the expansion of key sectors. Overall economic gains would vary, with the largest gains going to countries that currently have high trade costs.
Indeed, implementation of the agreement would also spur larger wage gains for women (an increase of 10.5 percent by 2035) than for men (9.9 percent). It would also boost wages for skilled and unskilled workers alike – 10.3 percent for unskilled workers, and 9.8 percent for skilled workers.
What is imperative for Namibia at this stage is to implement policies that can maximise the agreement’s potential gains while minimising risks. Without doubt, creating a continent-wide market will require a determined effort to reduce all trade costs. This will require legislation to enable goods, capital, and information to flow freely and easily across borders. If Namibia is able to do so, it will be able to attract foreign investment and increase competition that can increase productivity and innovation by domestic firms. Government will also need to prepare its workforce to take advantage of new opportunities with new policies designed to reduce the costs of job-switching.