Economic Development in Africa Report 2021: Reaping the ...

1 UNCTADECONOMIC Development IN Africa Report 2021 UNITED NATIONSUNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENTA frica has experienced remarkable growth since 2000, yet this has not translated into significantly improved livelihoods for most Africans. Fewer than half of countries in Africa have experienced inclusive growth in recent decades. This Report aims to equip Governments in Africa and Development partners with knowledge of how the African Continental Free Trade Area can be beneficial for inclusive growth and how complementary policies are necessary to make the Free Trade Area inclusive within and across countries in Africa . To realize the export potential of Africa , intra-African tariff barriers and non-tariff barriers need to be reduced, and productive capacities need to be increased to facilitate regional trade. Regional productive capacities, value chain Development in agrifood processing and the vehicles industry are identified as potential drivers of transformative growth .

2 An analysis is provided of how the expected gains from trade, production, investment and growth opportunities under the African Continental Free Trade Area can be inclusive. For the benefits of the Free Trade Area to be fully harnessed and inclusive, informal trade and its stakeholders should be considered in both design and implementation. I call on African policymakers to read the 2021 edition of the Economic Development in Africa Report as it provides valuable and unique insights on the challenges to sustainable Development on the African continent. Above all, the recommendations in the Report on the African Continental Free Trade Area, including the Development of a practicable and effective dispute settlement mechanism, are essential reading for all of us who wish to see Africa prosper and achieve the Sustainable Development Goals in a timely, inclusive and united manner. Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development The UNCTAD Economic Development in Africa Report 2021 makes an important contribution to the understanding of the benefits of the African Continental Free Trade Area.

3 It is unique in that it considers elements of inclusive growth and how the African Continental Free Trade Area could foster Economic diversification and stronger resilience, although the gains will not be immediate. Complementary measures to support women and young people in trade, small businesses and the least developed African countries are required to achieve a more inclusive African Continental Free Trade Area. Wamkele Mene, Secretary-General of the African Continental Free Trade Area SecretariatECONOMIC Development INReport 2021 Reaping THE POTENTIAL BENEFITS OF THE African Continental Free Trade AreaFOR INCLUSIVE growth I call on African policymakers to read the 2021 edition of the Economic Development in Africa Report as it provides valuable and unique insights on the challenges to sustainable Development on the African continent. Above all, the recommendations in the Report on the African Continental Free Trade Area, including the Development of a practicable and effective dispute settlement mechanism, are essential reading for all of us who wish to see Africa prosper and achieve the Sustainable Development Goals in a timely, inclusive and united manner.

4 Rebeca GrynspanSecretary-General of the United Nations Conference on Trade and Development The UNCTAD Economic Development in Africa Report 2021 makes an important contribution to the understanding of the benefits of the African Continental Free Trade Area. It is unique in that it considers elements of inclusive growth and how the African Continental Free Trade Area could foster Economic diversification and stronger resilience, although the gains will not be immediate. Complementary measures to support women and young people in trade, small businesses and the least developed African countries are required to achieve a more inclusive African Continental Free Trade Area. Wamkele Mene Secretary-General of the African Continental Free Trade Area Secretariat African Economic transformation must be inclusive, and not just about growth . Stronger African regional cooperation through an effective implementation of the African Continental Free Trade Area is expected to unlock new opportunities for diversification and trade.

5 The UNCTAD Economic Development in Africa Report 2021 makes a significant contribution to achieving Agenda 2063 by emphasizing the important role of equipping women and marginalized groups with the necessary productive resources to promote prosperity on the continent. K. Y. AmoakoFounder and President of the African Centre for Economic Transformation and former Executive Secretary of the Economic Commission for AfricaUNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENTE conomic Development in Africa Report 2021 Reaping the Potential Benefits of the African Continental Free Trade Area for Inclusive GrowthGeneva, 2021 2021, United NationsAll rights reserved worldwideRequests to reproduce excerpts or to photocopy should be addressed to the Copyright Clearance Center at other queries on rights and licences, including subsidiary rights, should be addressed to: United Nations Publications405 East 42nd Street,New York, New York 10017 United States of AmericaEmail: designations employed and the presentation of material on any map in this work do not imply the expression of any opinion whatsoever on the part of the United Nations concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or of any firm or licensed process does not imply the endorsement of the United Nations publication issued by the United Nations Conference on Trade and ISBN: 978-92-1-113004-1eISBN: 978-92-1-005602-1 ISSN: 1990-5114eISSN: 1990-5122 Sales No.

6 Development in Africa Report 2021ivAcknowledgementsEconomic Development in Africa Report 2021: Reaping the Potential Benefits of the African Continental Free Trade Area for Inclusive growth was prepared, under the overall supervision of Paul Akiwumi, Director of the Division for Africa , Least Developed Countries and Special Programmes of the United Nations Conference on Trade and Development (UNCTAD), by Junior Davis (team leader), Grace Gondwe, Carlotta Schuster, Anja Slany, Sine Tepe, Komi Tsowou and Ali Yedan, with research assistance by Cynthia Adzika, Chiara Maero, Tinotenda Mataire, Esther Joseph Mpagalile and Anele Simon. The analysis draws on insights from institutional collaboration with the International Trade ad hoc expert group meeting on Reaping the potential benefits of the African Continental Free Trade Area for inclusive growth was held on 22 April 2021 to conduct a peer review of the draft Report .

7 The meeting brought together specialists in African trade, investment, trade law, tax, gender-related issues and Development economics. The following experts participated in the meeting and/or provided comments on the draft Report : Olayinka Lawal Bandele (Commonwealth Secretariat), Lance Hadley (Sauti East Africa ), Romain Houssa (University of Namur, Belgium), Kholofelo Kugler (Advisory Centre on World Trade Organization Law), Azwimpheleli Langalanga (Tutwa Consulting Group), Joy Waruguru Ndubai (Vienna University, Global Tax Policy Centre), Ify Ogo (United Nations Development Programme, Regional Bureau for Africa ), Julia Seiermann (International Trade Centre), Julia Spies (International Trade Centre) and Frederik Stender (German Development Institute). The following UNCTAD staff members participated in the meeting and/or provided comments: Celine Bacrot, Vincent Beyer, Lisa Borgatti, Stefanie Garry, Mahlet Girma, Taisuke Ito, Christian Knebel, Janvier Nkurunziza, Patrick Osakwe, Ralf Peters, Matfobhi Riba, Antipas Touatam, Rolf Traeger, Yves Kenfack Tsafack, Giovanni Valensisi, Anida Yupari and Simonetta UNCTAD, the Intergovernmental Support Service provided editing of the Report , with support from the Editing Section of the Languages Service at the United Nations Office at Geneva; Nad ge Hadjemian prepared the overall design and the cover; Gilles Maury designed the infographics; and Ngadjie Siani and Elena Stroganova provided administrative support.

8 Layout of the Report was undertaken by Juan Carlos Korol, of the United Nations Office at the Potential Benefits of the African Continental Free Trade Area for Inclusive GrowthvNotesUse of the term dollar ($) refers to United States country-level figures are available from UNCTAD on term billion signifies 1,000 of a dash between years (for example, 2000 2001) signifies the full period involved, including the initial and final years. Reaping the Potential Benefits of the African Continental Free Trade Area for Inclusive GrowthviiContentsForeword xiiAbbreviations xvINTRODUCTION Reaping the potential benefits of the African Continental Free Trade Area for inclusive growth 11. Inclusive growth 52. Regional integration 83. Objectives and structure of the Report 13 CHAPTER 1 Inclusive growth in Africa Recent trends: Poverty and inequality in Africa Assessment Case studies of different types of inclusive growth Intra-African trade for inclusive growth Inclusive growth in the aftermath of the pandemic 44 CHAPTER 2 People, informality and inclusivity Measuring the magnitude of informal cross-border trade Demographic dimension of informal cross-border trade Vulnerability of informal cross-border trade actors Entrepreneurship in the informal sector among women and young people Formalization of informal traders and entrepreneurs Concluding remarks 84 Economic Development in Africa Report 2021viiiCHAPTER 3 Shared prosperity through the African Continental Free Trade Area.

9 Realizing export potential and challenges towards greater inclusiveness of trade Regional trade provides greater opportunities for export diversification Unlocking new export opportunities in merchandise through the African Continental Free Trade Area Prosperity through liberalization in services trade Tackling trade frictions for inclusive growth Tackling supply-side constraints for inclusive growth Coherence in trade, investment and competition policies Concluding remarks 129 CHAPTER 4 An integrated framework and cost-efficient trade measures Streamlined trade measures across Africa , to achieve continental integration Integrated framework for the implementation of an inclusive free trade area Cooperation, peace and political stability for an inclusive free trade area Well-functioning dispute settlement mechanisms to ensure an inclusive free trade area Concluding remarks 167 CHAPTER 5 Main messages and policy recommendations Main messages Policy recommendations Future avenues of research 182 REFERENCES 184 Reaping the Potential Benefits of the African Continental Free Trade Area for Inclusive GrowthixFIGURES 1.

10 Two definitions of inclusive growth 6 2. Africa : Overlapping memberships in subregional trade agreements 9 3. Inclusive growth : Linkages between the 2030 Agenda, Agenda 2063 and Economic Development in Africa Report 2021 15 4. Africa : Poverty headcount rates 19 5. growth incidence curves 27 6. growth incidence curves 28 7. Sudan: growth incidence curve, 2009 2014 29 8. Cameroon: growth incidence curve, 2001 2014 30 9. growth incidence curves 31 10. Zambia: Consumption, poverty headcount, Gini index and gross domestic product per capita 37 11. Extra-African exports 39 12. Intra-African exports 40 13. Extra-African services exports 42 14. Intra-African services exports 43 15. Africa : Size of informal economy 49 16. Expected years of schooling, selected countries in Africa , 2019 70 17. Complementarity index of intraregional exports and imports, yearly average, 2015 2019 90 18. Untapped static and dynamic export potential, by sector 94 19. Additional export potential through anticipated partial tariff liberalization under the African Continental Free Trade Area, by sector 96 20.