East Africa to Gain Over 2 Million Jobs From AfCFTA

East African region is projected to gain close to two million jobs from an increased economic activity if the African Continental Free Trade Area (AfCFTA) is successfully implemented, according to a joint report by Economic Commission For Africa and TradeMark East Africa.

The AfCTA will be operational starting July 1.

“The two organisations that share a pan-African vocation and the conviction that greater intra-regional trade and investment is the way forward,” part of the report reads.

The report titled ‘Creating a Unified Regional Market – Towards the Implementation of the African Continental Free Trade Area in East Africa’ indicated that East African firms were relatively small compared to their peers, particularly in West and Southern Africa.

“The implementation of the AfCFTA could result in welfare gains amounting to USD  1.8 billion for East Africa, creating more than 2 million new jobs.”

“It will be difficult for companies to compete at the continental level unless there is significant upscaling of economic activities… Put simply, in many sectors, companies in East Africa need to be larger if they are going to succeed in a wider continental market.”

Further, it stresses that many of those new employment opportunities are likely to emerge in sectors where there is a heavy predominance of female labour, thereby contributing to the economic empowerment of women in the region.

At current growth rates, East Africa’s economy will surpass  US$ 1 trillion by 2021.

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Elimination of tariffs and non-tariff barriers

The elimination of tariffs and non-tariff barriers required by the Agreement will boost intra-African trade and improve developmental prospects for East Africa

Consequently, the agreement cites the likely loss of some tax earnings.

A total tariff-revenue loss for Kenya, Uganda, Ethiopia, Tanzania, and Rwanda is estimated at $248 million in the report. 

“The revenue losses in cases like this may well be considered by policymakers a price worth paying for the added dynamism of the domestic economy – which overtime will, in itself, lead to higher government revenues through VAT and other taxes.”

“There would be a small price to pay once AfCTA is effected as Kenya will lose an estimated tariff revenue loss of 3.2 percent, which is an equivalent of 0.6 percent of the total national revenue,” Dr Andrew Mold, the acting director of UNECA said in Nairobi on Thursday during the launch of the report.

Kenya charges import duty of 25 percent on finished goods and 10 percent on intermediate goods as long as they originate from outside the Comesa and East African Community. 

“What will have a big impact is making sure our borders operate seamlessly,” said Frank Matsaert, the head of Trade Mark East Africa

Currently, 54 of the 55 African Union member states have signed the AfCFTA, promising to create the single largest trade bloc in the world with 1.3 billion people and a $2.5 trillion (Sh250 trillion) market.