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World Bank: AfCFTA to boost Africa’s income by $450bn by 2035
The World Bank says the COVID-19 pandemic has disrupted trade and triggered up to $79 billion in output losses in Africa alone this year. But the bank stressed that the African Continental Free Trade Agreement has the potential to boost Africa’s income by $450 billion by 2035. Winston Osuchukwu, co-Founder of Trans-Sahara Incorporated joins CNBC Africa for more.
Tue, 28 Jul 2020 14:00:50 GMT
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AI Generated Summary
- Africa faces significant output losses due to the COVID-19 pandemic, but the AfCFTA offers a promising pathway to enhance income levels through optimized supply chains and reduced import dependency.
- Structural adjustments are crucial for Africa to navigate growth slowdowns caused by the pandemic and lay a foundation for long-term economic resilience.
- Preparation and collaboration are essential for companies to capitalize on the AfCFTA's vast opportunities, with a focus on infrastructure development, global competitiveness, and strategic partnerships.
The COVID-19 pandemic has wreaked havoc on global trade, causing Africa to suffer up to $79 billion in output losses this year alone, according to the World Bank. Despite this grim reality, the African Continental Free Trade Agreement (AfCFTA) stands as a beacon of hope, with the potential to elevate Africa's income by a staggering $450 billion by the year 2035. Winston Osuchukwu, co-Founder of Trans-Sahara Incorporated, discussed the implications of these projections on CNBC Africa.
The aftermath of the pandemic has seen a shift towards shorter and more optimized supply chains globally. Osuchukwu believes this trend could work in Africa's favor, leading to increased in-sourcing and reduced dependency on imported goods. Foreign countries, particularly those like China and Vietnam, may also show interest in relocating their manufacturing operations to African nations.
The setbacks caused by COVID-19 are expected to slow down Africa's growth trajectory. Osuchukwu emphasizes the importance of making necessary structural adjustments amidst these challenges to pave the way for long-term economic growth. The AfCFTA holds immense promise in lifting people out of poverty, but Osuchukwu stresses that significant groundwork is required to ensure its success. The agreement serves as a framework that necessitates meticulous attention to detail in terms of regulations and policies to drive efficient operations.
Drawing parallels to the European Union (EU), Osuchukwu warns against the consequences of inadequate preparation. He cites the fractures within the EU as a cautionary tale, urging African governments to prioritize thorough preparation to reap the economic benefits envisioned by the AfCFTA. Nigeria, in particular, must equip its companies to compete effectively within the agreement, focusing on infrastructure development and enhancing competitiveness on a global scale.
Addressing concerns around capacity, Osuchukwu underlines the importance of leveraging partnerships to scale operations effectively. He suggests that companies seeking access to larger markets will likely collaborate with established players rather than solely relying on greenfield investments. As the AfCFTA paves the way for the largest free trade area globally, businesses will seek local partners to manufacture goods within the market, showcasing the significance of strategic alliances.
The issue of rules of origin poses a critical challenge within the trade agreement, as companies may attempt to pass off non-African goods as locally produced. Osuchukwu emphasizes the need for stringent mechanisms to prevent exploitation of weak links in the system. Harmonizing rules across all member countries is imperative to mitigate such risks and ensure the integrity of the trade framework.
In conclusion, Osuchukwu highlights the urgency for governments to commit to the rigorous groundwork essential for the success of the AfCFTA. By fortifying regulations, enhancing infrastructure, and fostering competitive environments, African nations can harness the transformative potential of this landmark agreement. As businesses navigate the complexities of regional trade integration, strategic partnerships and adherence to robust standards will be key to unlocking Africa's economic prosperity.
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