In Africa, the number of people living under the poverty line has continued to rise. In 2019, 478 million people lived in extreme poverty. It was estimated that 490 million people in Africa would live under the poverty line of 1.90 PPP$/day in 2021, says the United Nations Conference on Trade and Development (UNCTAD). The number of the poor in Africa must have gone beyond 500 million people, considering the level of poverty in Nigeria, the largest country in Africa.
Poverty in Africa is alarming. The World Bank noted that many people are poor in Africa due to unemployment, underinvestment in infrastructure, and fiscal crises. Africa’s unemployment problem is a thing of global concern. One common feature of unemployment in Africa is that it mainly affects the youths. About 60 percent of the African youth population is facing the problem of unemployment, says Business Insider Africa.
Infrastructure inadequacy is an economic challenge in Africa. The new estimates by the African Development Bank suggested that the continent’s infrastructure needs amounted to $130–$170 billion a year, with a financing gap of $67.6–$107.5 billion.
Many African countries are heavily indebted. Nearly 40 percent of sub-Saharan African countries are at risk of slipping into a major debt crisis, as noted by the Brookings Institution. A large sum of their revenues is spent on debt services and repayments. Africa’s high debt profile is a problem challenging the growth and development of the continent.
However, optimism is very high among African governments that the African Continental Free Trade Agreement (AfCFTA) will promote the exports of goods and services to contribute immensely to the growth and development of their economies, thereby reducing poverty in the continent.
The World Bank has also expressed optimism that the AfCFTA can increase Africa’s trade, employment opportunities, and incomes due to its large population. The World Bank stated that AfCFTA would lift about 68 million people from moderate poverty and make African countries more competitive. The successful implementation of the agreement and careful monitoring of its impacts on all workers will promote the maximisation of AfCFTA objectives.
The main objective of the AfCFTA is to create a single continental market for goods and services to promote trade and investment among African countries and with the rest of the world. This is a very ambitious objective that requires enormous efforts and strategic planning to achieve.
According to the African Union, Africa hardly benefits from the boom in manufactured exports because its export comprises mainly of primary commodities, and its shares of intra-trade and with the rest of the world have been low. In world trade by continent, Africa’s share of exports and imports were 2.4 percent and 3 percent respectively in 2019.
In intra-Africa, its exports and imports were 19.7 percent and 12.6 percent in 2019 respectively. These statistics show that trade in Africa is still low. The above statistics may rise by exploring the possibilities of the AfCFTA by African countries.
African countries need huge investments to achieve the objectives of the AfCFTA. African countries need to develop their export-related manufacturing capacities to make it easier for African businesses to integrate into the global supply chain.
A robust manufacturing capacity will help African countries to produce durable products for consumption within the continent and sell to other countries. An increase in manufacturing will help African countries to achieve the objective of the AfCFTA and help reduce poverty on the continent.
Manufacturing costs must be reduced through viable economic policies, to give African-made products a better front to compete favourably in the global market. The provision of adequate infrastructure will reduce production costs in Africa; infrastructural development is a prerequisite for industrialisation and trade.
It is vital to create awareness of the existence of the AfCFTA and its benefits among African citizens to enable them to seize the opportunities it offers. African countries need to show higher commitment to the objectives of AfCFTA to accelerate trade.
The development of export-related industries can be achieved through access to cheap bank loans and financing. The African governments need to make bank loans available to export-related manufacturers and other producers through the national banks of industry and development at relatively low rates. Such loans need to be spread over the long term to reduce the impacts of loan servicing on manufacturers.
African governments need to reduce borrowing to promote industrial development. Industrial development has the potential of promoting African countries’ exports, thereby increasing the growth and development of the continent.
Felix Ashakah is an economics lecturer at Western Delta University, Oghara
