This article uses the structured gravity model to examine the potential effects of the African Continental Free Trade Area (AfCFTA) on trade within the Common Market for Eastern and Southern Africa (COMESA) region. The results show that liberalising trade through the AfCFTA has the potential effect of increasing intra-COMESA trade 1.96 times. Trade diversion is bound to occur with extra-COMESA imports expected to increase by 1.32 times. However, the formation of the AfCFTA is important for COMESA as it leads to an overall improvement in intra-COMESA trade by 88.89%. Furthermore, the results show pure trade creation effects, in terms of exports, suggesting an increase in the welfare of non-COMESA members. The article significantly contributes to the growing body of research on the ongoing deliberations on trade integration and regionalism. It further provides an exciting opportunity to advance extant knowledge by amalgamating trade indicators and model-based analysis to understand the implications of the establishment of the AfCFTA for African countries
This study examines the impact of trade openness in goods and services on economic growth across Africa, utilizing panel data for all 54 countries from 1980 to 2022. The analysis, conducted at both continental and regional economic community levels, finds that trade openness generally exerts a positive effect on economic performance. However, a significant regional heterogeneity emerges. Notably, a decoupling is observed between goods trade expansion and strong GDP growth in Central and East Africa, a weaker relationship in Northern and Southern Africa, and a similarly decoupled pattern for services trade and GDP growth in most regions, except for a positive correlation in North Africa. Furthermore, the results indicate a substitution effect between goods and services trade, with goods trade contributing more substantially to GDP growth. While services trade's contribution is stable, goods trade contribution varies significantly, influenced by multilateral and regional liberalization processes. A key regional divergence is confirmed: goods and services trade act as substitutes in Central Africa but as complements in North Africa. The policy implications emphasize prioritizing services trade facilitation. Aligning with the African Continental Free Trade Area (AfCFTA) Protocol on Trade in Services, this entails reducing barriers, undertaking structural reforms, and investing in critical infrastructure to improve service delivery conditions and attract investment, thereby expanding Africa's total services trade.
This study analyzes the potential effects of the African Continental Free Trade Area (AfCFTA) on fiscal stability, using panel data from 54 African economies that have ratified the AfCFTA from 2010 to 2021. The study uses a dynamic system GMM model to address endogeneity, simultaneity, measurement bias, and reverse causality issues. The findings indicate that the AfCFTA agreement may reduce government revenue and spending. Furthermore, the study found that the AfCFTA could lead to an increase in government debt
This paper explores how AfCFTA tariff reductions affect CO₂ emissions. Using sector-level data, we find that more protected sectors are also more carbon intensive, so liberalization risks favoring “dirtier” activities. However, for EAC and ECOWAS, tariff cuts on liberalized goods reduce average carbon intensity. A full liberalization scenario suggests intra-African trade could rise by 32% while emissions grow by 24%, implying a modest decline in emission intensity. AfCFTA thus expands trade but requires complementary green policies.
This paper analyses how trade misinvoicing, as a direct measure of corruption, affects the economic performance of Africa, given that most of the existing studies on the corruption-economy nexus are based on corruption perception index, world governance indicators, international country risk guide, and other corruption indices. Using GMM and OLS econometric techniques on a sample of 35 African countries from 2008 to 2017, our results show that corruption, as measured by value gap reduces income per capita in the selected African countries. Specifically, a 1 percent increase in the value gap will reduce GDP per capita by 0.309-0.414 percent. The results also show that trade mispricing is positively associated with tariffs. Concerning the control variables, tariffs and external debts have a negative association with national income, as expected. This result survives a robustness check of partner-country trade data sourced from UN Comtrade, a sub-sample of the value gap, and using the CPI measure of corruption. The policy recommendation of this study is to strengthen the regulatory framework for the collection of tariffs and to close any gaps in the reporting of trade data in the selected African countries.
Based on the differences in export diversification between sub-regions, this research aims to determine the type of relationship that may exist between export diversification and economic growth in Sub-Saharan Africa. Using data from 36 countries grouped according to their level of diversification, a panel ARDL model is estimated. The results show that for highly diversified sub-regions, the relationship between export diversification and economic growth is inverted U-shaped, while for concentrated sub-regions, the relationship is U-shaped. Highly diversified countries are advised to integrate further into the African continental free-trade zone, which, by lifting barriers and improving the regulatory framework, offers greater openness to new markets. For less diversified countries, it would be wise to accumulate commodity rents, as this will enable them to bear the costs of implementing diversification policies when the time comes.
This study examines the potential impact of the African Continental Free Trade Area (AfCFTA) on Ethiopia's export growth and real GDP using the General Equilibrium Poisson Pseudo Maximum Likelihood (GEPPML) estimation model. Despite Africa's longstanding efforts toward economic integration, intra-African trade remains low, with Ethiopia's export structure heavily reliant on primary agricultural commodities and limited diversification into high-value or technology-intensive sectors. The paper employs a three-stage GEPPML approach to simulate the effects of AfCFTA, accounting for trade elasticities, multilateral resistance terms, and endogenous income adjustments. The findings indicate that AfCFTA could enhance Ethiopia's export growth by 1.137% and real GDP growth by 2.512%, surpassing continental averages. However, the agreement may also diverge trade, reducing exports from non-member countries to Africa. The study highlights Ethiopia's comparative advantage in agriculture but underscores the need for structural reforms to diversify exports and improve competitiveness. Policy recommendations include enhancing trade facilitation, investing in infrastructure, and aligning national standards with AfCFTA requirements to maximize gains. This research contributes to the literature by applying GEPPML as an alternative to Computable General Equilibrium (CGE) models, offering nuanced insights into AfCFTA's country-specific effects. Limitations include data constraints, which restrict dynamic analysis, suggesting a need for future research on long-term impacts. The study underscores AfCFTA's potential to transform Ethiopia's trade landscape while emphasizing strategic policy interventions to mitigate challenges.
This study examines the impact of foreign intermediaries on Tanzanian domestic direct exporting firms’ ability to expand their export volume. Using panel gravity PPML model to firm-level agricultural exports dataset 2010-2020, we find that foreign intermediaries significantly promote domestic firms’ intensive margins of exports. The geographic clustering of foreign intermediaries exporting comparable goods to similar destination generates significant positive spillover effects on domestic firms based in the same region. This suggests, the companies with product-destination-market pairings have the greatest export spillover effects that are likely related to knowledge transfers generated foreign firms from their country of origin.
This study examines the role of foreign direct investment (FDI) in the relationship between intra-African trade and economic growth. Employing a sample of 54 African countries over the period 2004-2022 and a two-step System Generalized Methods of Moments, the study finds that FDI inflows have a positive effect on intra-African trade, which in turn positively affects economic growth; however, FDI has a negative independent effect on growth. The study further provides evidence to support the hypothesis that FDI magnifies the positive effect of intra-African trade on economic growth, by establishing that intra-African trade and FDI are complements in enhancing economic growth.
This research explores the impact of migration within Africa on youth unemployment. The study makes two sig nificant contributions to existing literature. First, it investigates how intra-African migration can potentially support intra-African trade to enhance productivity and reduce youth unemployment. Second, it estimates the effects of intra African migration on male and female youth unemployment. The research methodology comprises using a two-level estimation involving the Poisson Pseudo Maximum Likelihood (PPML) technique and a Two-Stage Least Squares approach addressing endogeneity bias. Furthermore, a Negative Binomial Maximum Likelihood estimator was utilized to test the model's robustness. The results indicate that higher per capita income in the destination country improved human development indicators, and a shared currency encouraged short-to-medium-term enhancements in intra-Africa migration. Moreover, political stability in the destination country, a common official language, and a combination of contingency and currency factors stimulate long-term increases in intra-Africa migration. In particular, the study re veals that intra-Africa migration contributes to reducing youth unemployment in Africa while also concurrently enhancing the ability of intra-African trade to reduce youth unemployment in the long run. These results are generally similar between males and females. The study recommends a broader implementation of the free visa policy for Africans under the African Continental Free Trade Area to mitigate the bourgeoning youth unemployment on the continent in the long term.
We examine the borrowings of Sub-Saharan African (SSA) economies on the international sovereign bond markets between 2006 and 2022 and found that African economies continue to pay a coupon rate about 1% higher than other economies with similar credit ratings, on average. Therefore, African countries will have paid at least $5 billion in additional interest that cannot be justified by their ratings when all current bond issues mature. We find that the premium did not disappear with the experience of African countries returning to the private bond markets, nor did it fall dramatically from the 2005-2014 period.
Using a structural gravity model, this paper assesses whether data-related regulations for 31 African countries have an impact on bilateral trade in digital services. Controlling for all possible directions of fixed effects, this paper finds that local storage requirements and regulations requiring partner countries to have similar privacy laws in place are associated with lower imports in digital services between Africa and partner countries. By contrast, this paper also finds that the requirement for similar privacy conditions by partner countries is associated with higher exports in digital services for African countries with trading partners. This export effect is driven by African countries that have developed and implemented a wider regulatory framework for data protection, most likely enabling them to abide by the privacy conditions their partner countries demand. These findings confirm the ambiguous role of regulatory models that condition the free flow of personal data on rules for data protection, which could play a positive role in enhancing digital services exports for Africa.
This study first examines the effect of regional trade integration on poverty reduction in Africa using a GMM approach and historical data covering forty-nine countries and the period 1995-2019. The results reveal that greater intra-regional trade would accelerate poverty reduction. Second, the paper investigates the role of complementary policies in shaping the poverty-reducing effect of regional trade integration. The findings suggest that without a minimum quality of institutions, business regulations, financial depth, and infrastructure development, greater intra-African trade would exacerbate poverty. Hence, by addressing institutional, financial, and infrastructural bottlenecks, countries would better leverage the growing intra-continental trade for poverty alleviation.
This paper presents estimates of customs revenue losses for 45 African countries associated with the phase-down of tariffs under the African Continental Free Trade Area (AfCFTA). Unlike previous studies, the trade and revenue estimates are based on the Provisional Schedules of Tariff Concessions offered by each African state or regional economic community (REC) and therefore map closely with the expected tariff reductions from the AfCFTA. The results show that the removal of tariff barriers under the AfCFTA will be effective in raising and diversifying intra-Africa imports. The customs revenue losses after the phase-down of tariffs are likely to be minor, making up less than 0.2 percent of total government revenue for most African countries. Moreover, many African countries have insulated themselves from tariff revenue losses by excluding revenue-sensitive products from the agreement (Schedule C) and by back-loading tariff reductions on revenue-sensitive products (Schedule B). Not all countries are affected equally. The Congo, D.R., Cameroon, Republic of Congo and Zimbabwe are found to be vulnerable to large decreases in the dollar value of customs revenue and declines in the share of customs revenue in total government revenue. While absolutely revenue losses are low for smaller countries, including Malawi, Liberia, Central African Republic and Sierra Leone, these decreases, nevertheless, constitute high shares of total government revenue. Overall, the results indicate that for most African countries, revenue losses should not be a major obstacle towards the commencement of trade under the AfCFTA. These findings also serve as an important input into the design of the proposed AfCFTA Adjustment Fund, which is intended to support those countries that are most vulnerable to revenue shocks.
One of the major development challenges facing Africa has been the small and fragmented economies with low incomes and low levels of intra-regional trade. To foster economic growth and promote intra-regional exports, Africa has witnessed renewed momentum for regional integration, in particular trade among COMESA countries. The present study employs fixed effects, random effects, and instrumental variables GMM regressions to estimate an augmented trade gravity model. We find that the formation of the COMESA trading bloc has promoted intra-regional exports. This finding suggests that to enhance export flows in the region, the process of economic integration should be deepened.
This study investigates the potential impacts of the COVID-19 pandemic and related containment measures on the trade system of Mauritius for the period January 2010 to June 2021. As the pandemic spread across the globe due to high interconnectedness across countries, authorities has also established stringent health containment measures in the form of restrictions on people and businesses to slow the propagation of the virus. Being a small island economy highly dependent on international trade, Mauritius also faced the brunt of the pandemic which disrupted its economic activities and trade flows with its main trading partners. COVID-19 incidence and lockdown measures have impacted both exports and imports in Mauritius. The analysis was conducted using monthly data and the Bayesian structural time-series framework for causal analysis, well known for its feature in exploring the impacts of any intervention variable on time-series data. Our findings reveal that overall; the trade values for each trading partner had significantly decreased. The results also suggest that the stricter the containment measures, the bigger the size of the negative impact of the pandemic on the trade values for both imports and exports. This study thus highlights the vulnerability of Mauritius as a small island economy to pandemics, emphasizing the need for tailored response strategies to mitigate the effects of the pandemic on trade.
The Economic Community of West African States (ECOWAS) Strict has adopted strict restrictions since the appearance of the new coronavirus disease in 2019 (Covid-19). This article seeks to assess the economic consequences of these measures on the activities of cross-border trade actors. To this end, data was collected from 144 traders, 8 customs services, 9 immigration services and 84 transporters using the quota method, distributed among 6 trade corridors (Ouagadougou-Téma, Dakar-Bamako, Ouagadougou-Abidjan, Lomé-Ouagadougou, Cotonou-Niamey and Lagos-Kano-Niamey). Empirical findings show that on all corridors, the health crisis has led to a decline in trade transactions and hence a decline in net gains for traders and transporters. Other actors were also affected due to the slowdown in their activities. Our findings suggest a reopening of land borders while scrupulously respecting the barrier measures and the implementation of a real support plan for cross-border trade actors.
This paper examines the influence of the COVID-19 pandemic on exports in Africa. Fractional integration methods were applied to monthly African exports from 26 African countries from January 2011 to December 2020. We observe that the order of integration is found to be statistically smaller than 1 in all except a single country, Angola. For the rest of the African countries, shocks are transitory, showing mean reversion though with a large degree of heterogeneity across the countries, ranging from low levels of persistence with short memory behaviour in Sao Tome and Principle, the Seychelles and Kenya to high levels of persistence in the Democratic Republic of Congo.
