Country-level Implications of Implementation of the African Continental Free Trade Area Agreement on Inequality and Poverty

Abstract

The Agreement establishing the African Continental Free Trade Area (AfCFTA) entered into force on 30 May 2019. Trading under the Agreement began on 1 January 2021. However, the first trade only took place after the launch by AfCFTA Secretariat in October 2022 of the Guided Trade Initiative (GTI), expected to test and then facilitate implementation of the Agreement by all State Parties. As of 15 April 2023, 54 of the 55 African Union (AU) member States had signed the Agreement; of which 46 had ratified it. It is against this backdrop that, in 2021, the United Nations Economic Commission for Africa (ECA) and the Centre for International Research and Economic Modelling (CIREM) undertook a new comprehensive assessment of the economic implications of the Agreement’s implementation. The analysis relies on CGE modelling. ECA went a step further to use findings from the CGE analysis, along with collected household surveys data, to feed into a microsimulation model for inequality and poverty analysis at country-level. Findings from the microsimulation indicate that full implementation of the AfCFTA could reduce both inequality and poverty in the 10 African countries covered by the analysis (Cameroon, Ethiopia, Kenya, Morocco, Namibia, Rwanda, Senegal, Tanzania, Uganda and Zimbabwe). The magnitude of poverty reduction varied significantly across countries and across individuals within a country, depending on the socio-economic characteristics of households.