The invasion of Ukraine, by Russia, has increased the global prices of key commodities. Most notably, surging oil and food prices are straining the fiscal balances of many countries and have increased food insecurity concerns. Worryingly, 39m more people fell into extreme poverty in 2020 and 2021, reversing a long-term trend of decreasing poverty.
In this context, sub-Saharan Africa imports about 85% of its wheat, and several countries source a large proportion of these imports directly from Ukraine and Russia. Indeed, lessons learned from the pandemic – related to the supply of personal protective equipment and vaccines – have underscored that the region needs to achieve free but secure trade. Looking ahead, policymakers will need to navigate this uncertainty with fewer policy options.
Key benefits of implementing AfCFTA
Accelerating the implementation of the African Continental Free Trade Area (AfCFTA) would provide the region with much needed stimulus and drive the region’s long-term recovery and growth. Comprising 55 countries with a population of 1.3bn and combined GDP of about $3.4 trillion, the AfCFTA is the largest free trade area in the world, both by area and by the number of countries. Currently, 54 of the 55 African countries have signed the agreement, and 41 countries have ratified it.
Deeper integration would boost incomes, create jobs, catalyse investments, and facilitate the development of regional supply chains. Intra-African trade remains small compared with the continent’s external trade. In 2020 just 18% of exports were to other African countries, lower than the equivalent shares in North America (30%), Asia (58%) or Europe (68%).
Moreover, the World Bank estimates that, if implemented properly, by 2035 the AfCFTA is set to lift 30m Africans out of extreme poverty and 68m from moderate poverty. The same study finds that the AfCFTA has the potential to increase intra-African trade by 81% and boost wages by 10% by 2035.
Importantly, intra-African trade comprises a smaller share of commodities, and a higher share of manufactured goods, than Africa’s trade with the rest of the world. More specifically, primary commodities account for over 70% of the latter while the share of manufactured goods in intra-African exports is about 45%, with primary commodities accounting for a third.
Therefore, intra-Africa trade is less exposed to the volatility of global commodity prices and optimized to effect structural transformation. Accordingly, African policymakers have more agency in shaping a recovery that shifts away from commodity dependency and towards regional integration.
Published By:- African Business
Opinion by Chido Munyati
Published On;- May 19, 2022