How the New African Trade Deal Will Help Alleviate Poverty

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SEATTLE — As of December 2018, 44 African countries have signed the African Continental Free Trade Agreement (AfCFTA). What started as a prospective idea in 2012, the historic deal took eight rounds of tense negotiations among African leaders to reach consensus. Intended to create a single continental market for goods and services and eliminate tariffs on intra-African trade, the AfCFTA will go into effect as soon as 22 countries ratify the agreement.

African Trade Deal Explained

The ramifications of the new African trade deal will be far-reaching. What will be the world’s largest free trade area since the creation of the World Trade Organization, almost $4 trillion in a combined business and consumer spending will fall under the AfCFTA’s umbrella. According to the U.N. Economic Commission for Africa, trade within the continent could increase by a staggering 52 percent. Because of the complex nature of the deal and the diverse array of economies that make up the African Union, it is hard to say whether the AfCFTA will be a sweeping success for the 1.3 billion people affected.

However, the AfCFTA has the potential to greatly improve living conditions in Africa’s developing communities. The continent is home to 22 of the world’s 25 poorest countries and many of these nations will benefit greatly from the potential economic boost incited by the AfCFTA. In the text below three ways in which the deal could help alleviate poverty and improve living conditions across Africa are presented.

Economic Growth and Job Creation

A major tenet of the African trade deal is the elimination of tariffs. With an average tariff rate of 6.1 percent, intra-African trade costs businesses more than if they export outside the continent. The deal will incentivize companies to import and export within Africa, which could promote struggling manufacturing and agriculture industries. Almost 75 percent of Africa’s current exports come from extractive industries like oil and mining. These industries are volatile, can instigate conflict and are export based, rarely benefiting countries within the continent. By promoting manufacturing and agriculture, countries can diversify their economies, creating jobs and decreasing unemployment rates.

Youth unemployment across Africa hovers around 12 percent and roughly half of all African college graduates are jobless. This private sector boost will bring an influx of new, non-extractive based jobs to countries like DR Congo, Angola, Guinea or Cote D’Ivoire, countries relied on mining and oil industries. Almost 80 percent of African businesses are small to medium enterprises that are hurt most by tariffs and are more likely to conduct inter-continental trade. The implementation of the AfCFTA could spur small business growth and entrepreneurship, leading to an increase in local, community-oriented jobs.

Facilitating Health Care

As a whole, the continent spends 6 percent of annual GDP on health care, relatively low in comparison with the global average of 9.9 percent. However, the AfCFTA could have a significant impact on private health sectors across the continent. With GDP expected to rise, funding for health care and public health initiatives could also increase, giving way to a system better suited to handle disease outbreaks.

Many countries in Africa, particularly in the sub-Saharan region, are burdened by medicine shortages. According to the National Center for Biotechnology Information, roughly 6 million Africans die every year from treatable diseases like tuberculosis and malaria, while the WHO estimates that almost half of the continent’s population are at risk due to essential medicine shortages. Eliminating tariffs on medicines and medical supplies is one step that could improve access to these essential resources. Eight African countries have vaccine tariffs above 5 percent, including Chad, Ghana, DR Congo and Sierra Leone, nations disproportionately affected by preventable diseases.

Improving Food Security

Food insecurity has been an ongoing problem in many of Africa’s developing countries. Hunger in the region stems from a number of complications including conflict, political corruption, economic dysfunction and environmental inconsistency. Adverse economic conditions are a major barrier to increased food security, as many countries cannot afford to import food if agricultural production is low. However, with the elimination of tariffs, the AfCFTA makes it easier and more affordable for countries to export and import food within the continent. Countries like Senegal, who rely on imports for almost 50 percent of their grain consumption, will benefit financially from the eradication of tariffs.

There is a strong link between food security and investments in food infrastructure. Countries with inadequate food production and distribution systems have higher rates of undernourishment. But with the AfCFTA expected to spark growth among small to medium enterprises, private sector food production and distribution could subsequently improve.

Future of African Trade Deal

Africa is home to some of the worlds fasted growing economies. Twenty African countries have forecasted economic growth for the coming decade that exceeds the global average. The AfCFTA is designed to ensure this economic growth is sustainable by streamlining intercontinental trade and diversifying African markets. And while a stout list of barriers still stand in the way of improving living conditions and alleviating poverty, the African trade deal has the potential to bring new jobs to communities across the continent, improve health care and access to medicine and bolster food security.

The AfCFTA still has a few final steps before its implementation. Nigeria, one of Africa’s most economically influential nations, still hasn’t signed on. Meanwhile, five countries still need to ratify the deal before it is put into effect. The African Union is hopeful that by the end of March the 22 required countries will have authorized the deal and that by 2020 the international community could have a powerful new trading partner.

– Kyle Dunphey

Photo: Flickr

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