UNCTAD expects AfCFTA to cut Africa’s trade deficit by 51%

The implementation of the African Continental Free Trade Area (AfCFTA) is expected to cut Africa’s trade deficit by 51 percent in the nearest future, according to the United Nations Conference on Trade and Development (UNCTAD).

UNCTAD, which stated in its latest report tagged ‘Review of Maritime Transport 2021,’ AfCFTA has important implications for maritime transport and trade, said that the implementation of AfCFTA is also expected to boost intra-African trade by about 33 percent.

It however noted that adequate transport infrastructure and services in Africa, including maritime transport connectivity, are critical to the full realisation of the benefits of AfCFTA.

“The AfCFTA is expected to increase demand for different modes of transport, including maritime transport, which in turn will increase investment requirements for infrastructure and equipment – ports and vessels in the case of maritime transport. AfCFTA could therefore be a game-changer for investment in transport infrastructure and services,” the report said.

UNCTAD stated that a study by the Economic Commission for Africa, with a time horizon of 2030, provides a forecast of the requirements for transport infrastructure, services, and equipment as a result of the implementation of AfCFTA.

Giving a breakdown, it said that in 2019, maritime transport accounted for almost a quarter of total intra-African freight transport demand, which stood at 22 percent.

The study as reported by UNCTAD indicated that the number of tons transported by vessels with the implementation of AfCFTA would increase from 58 million to 132 million tons.

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Meanwhile, the total maritime transport share is expected to increase only by 0.6 percent, from 22.1 percent to 22.7 percent if AfCFTA and priority infrastructure projects are implemented, and by 1.5 percent if AfCFTA is implemented without priority infrastructure projects.

“If priority infrastructure projects are implemented some traffic is expected to shift to rail and road as these projects focus mainly on road and rail transport. The study shows that countries in different sub-regions of the continent will experience a surge in traffic through their ports by 2030 owing to AfCFTA, including Gabon, Ghana, Gambia, Somalia, Comoros, Mauritius, and Mozambique, Madagascar, Namibia,” it stated.

UNCTAD further noted if AfCFTA is not implemented and priority infrastructure projects are implemented by 2030, the size of Africa’s maritime transport fleet is estimated to increase by 43 percent for bulk and 40 percent for container cargo.

“To satisfy intra-African trade demand, the size of the fleet for bulk and container cargo is estimated to increase by 200 percent if AfCFTA is implemented and no infrastructure projects are executed.

“In the scenario where AfCFTA and the different infrastructure projects are implemented by 2030, the fleet is estimated to increase by 188 percent for bulk and 180 percent for container cargo,” it added.

Continuing, it further stated that: “The most significant vessel demand to support trade flows resulting from AfCFTA, compared to the baseline of 2019, will be 35 percent of the total vessel fleet in North Africa, from North Africa to East Africa will be 15 percent, and from North Africa to West Africa will be 11 percent.”

The African Continental Free Trade Area agreement entered into force in 2019, and its implementation commenced in 2021. It aims to increase intra-African trade by eliminating import duties and to double this trade if non-tariff barriers are also reduced.

The Services Protocol of AfCFTA sets out principles for enhanced continental market access and services-sector liberalisation. The five priority sectors identified include transport, business services, communication services, financial services, and tourism.

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