Leveraging the African Continental Free Trade Area for the reduction of poverty and inequality in Southern Africa

Abstract

The theme of the present report is leveraging the African Continental Free Trade Area for the reduction of poverty and inequality in Southern Africa. The theme is in line with the African Union Theme for 2023, which was “Acceleration of the African Continental Free Trade Area implementation”. In the present report, therefore, the central issues pertaining to the implementation of the Agreement Establishing the African Continental Free Trade Area in Southern Africa are examined, along with the potential for poverty and inequality reduction in the subregion, considering the heterogeneity within and between countries. The report also includes a critical analysis of the challenges and opportunities relating to the reduction of poverty and inequality presented by the Area in Southern Africa. In the report, recommendations are advanced for policy options and measures that could maximize the potential benefits of the Area to reduce poverty and inequality in Southern Africa. While the Area promises to boost intra-African trade, assessment is needed of its effects on the marginalized sectors of the economy, in particular informal cross-border trade, in which most of the participants are women and young people. The present report follows on from many studies, based on analyzing a combination of computable general equilibrium models and microsimulations, that include predictions of the Area’s likely positive impact on poverty, inequality and disaster vulnerability reduction. The chief findings presented in the report are: That trade helps to foster the development of productive capacity, thereby creating jobs for, among others, poor people; That income earned from paid work contributes to poverty reduction; Supranational integration processes can reduce poverty through channels that include boosting the volume of trade, investment and migration, and increasing the direct benefit to impoverished people of that trade, investment and migration.