Andrew Mold POLICY SEMINAR Virtual Event - The African Continental Free Trade Area: How will economic distribution change? DEC 15, 2020 - 09:30 AM TO 10:45 AM EST

1. Creating a Unified Regional Market
Towards the Implementation of the AfCFTA in East Africa
IFPRI| 15 December 2020
Dr. Andrew Mold
Chief of Regional Integration and AfCFTA Cluster
UNECA Office for Eastern Africa

2. OUTLINE
Importance of the AfCFTA for
East Africa01
Untapped Potential of the
Regional Market02
Assessment of Impact for East Africa
03

3. Prior to Covid-19, regional growth was strong…
3.8
3.1
1.6
2.9 2.7
2.9
3.2
7.0 7.0
5.7
6.6 6.6
6.1
6.4
2.8 2.7
2.5
3.2 3.0
2.3 2.5
0%
1%
2%
3%
4%
5%
6%
7%
8%
2014 2015 2016 2017 2018 2019* 2020*
Eastern Africa-12
Africa
World
Source: National sources, UNDESA, ECA calculations
Note: Eastern Africa average excludes Somalia and South Sudan; *Estimate/forecast
Average Growth Rates (%), 2014 - 2020
In 2019, the fastest
growing economies were:

4. GLOBAL
FISCAL
ENVIRONMENTAL
STRUCTURAL EMPLOYMENT
Slow paced structural change
Weak Trade Performance
Lack of job opportunities
Demographic pressures
But suffered from severe vulnerabilities…

5. 4%
6%
8%
10%
12%
14%
16%
40% 42% 44% 46% 48% 50% 52% 54% 56% 58%
Shareofvalueadded(Manufacturing)
Share of value added (Services)
2005 to 2007
Average
2015 to 2017
Average
Inverse Structural Transformation occurring?
Source: UNdata 2019
% of value added of the manufacturing and services sectors, 2005 and 2017
Kenya
Tanzania
Rwanda
Burundi
Uganda

6. Source: UNdata & ILO
Working Age Population (millions)
Annual Increase between 2015 and 2030
2.1
1.8
1.2
1.0 1.0
0.5
0.3
0.2 0.2
0.1
Ethiopia D.R. Congo Tanzania Kenya Uganda Madagascar Somalia Burundi Rwanda South Sudan
Each year, these economies
need to create an aggregate
of
7 new jobsmillion
Demographic pressures are large…

7. Intra-regional trade trends have not gone in the desired direction
Intra-Regional Exports (USD m)
Source: ECA; UNCTADstat
EAC IGAD
0
500
1000
1500
2000
2500
3000
3500
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
0
500
1000
1500
2000
2500
3000
3500
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018

8. And intra-regional FDI has also been performing poorly
Source: WTO
Intra-Regional FDI in EAC
2011 to 2017
234.9
217.2
236.6
207.7
237.8
254.1
153.3
9.2
6.3 6.5
2.4
3.3 3.4
2.5
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
0
50
100
150
200
250
300
2011 2012 2013 2014 2015 2016 2017
ShareofTotalFDI
Intra-RegionalFDI(USDmillion)

9. OUTLINE
Importance of the AfCFTA for
East Africa01
Untapped Potential of the
Regional Market02
Assessment of Impact for East Africa
03

10. The Regional Market is larger than understood…
Source: UNdata
0
50
100
150
200
250
Current Price PPP
Regional economies measured at market prices and PPPs, 2018 (billions USD)
Regional market will surpass
US$ 1 trillion
by 2021
under current growth rates

11. Yet a significant share of consumption is met by imports
-40
-30
-20
-10
0
10
20
30
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Trade Balance Exports Imports
EAC Trade Performance (USD billion) 2000 - 2018
Source: UNCTADstat
-3.7 -3.6 -2.9 -3.1 -4.4 -5.7
-8.8
-11.7
-15.0 -13.3
-15.4
-21.3 -22.6
-24.7
-26.8
-21.9
-17.6
-20.6 -21.9
-40
-30
-20
-10
0
10
20
30
40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Trade Balance Exports Imports
AM9
RF7

12. Slide 11
AM9 The animations are in the wrong order - it needs to be first exports, then imports, then balance. Could I also
suggest that we do the figures for the EAC block, rather than the whole of the Eastern Africa region, for the
purposes of this presentation? The data is readily available from UNCTAD Stata and will be more pertinent for
this audience.
Andrew Mold, 2/27/2020
RF7 Corrected animation order and switched out data for EAC totals
Raquel Frederick, 2/27/2020

13. And is being driven by one sector…
Trade Balance as % of GDP, by Product Groups, 2017
Country
Burundi
Comoros
D.R. Congo
Djibouti
Eritrea
Ethiopia
Kenya
Madagascar
Rwanda
Seychelles
Somalia
Tanzania
Uganda
Source: UNCTADstat
Food items
-2%
-9%
-2%
-7%
-5%
1%
0%
0%
0%
15%
-8%
2%
2%
Agricultural
raw
materials
0%
-1%
0%
0%
1%
0%
1%
0%
0%
-1%
2%
0%
0%
Fuels
-3%
-1%
2%
-1%
-1%
-2%
-3%
-4%
0%
-4%
0%
-8%
-2%
Ores, metals,
precious stones
and non-
monetary gold
2%
0%
14%
0%
3%
0%
0%
6%
7%
0%
0%
6%
1%
Manufactured
goods
-13%
-21%
-8%
-32%
-11%
-15%
-12%
-17%
-14%
-42%
-2%
-22%
-6%

14. Greater intra-regional trade could help turn this around
Source: ECA; UNCTADstat
Distribution of Exports by Product Type
19%
48%
45%
40%
22%
7%9%
1%4% 4%
1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Exports to RoW Intra-EAC Exports
Others
Fuels
Agricultural Raw Materials
Ores and Metals
All Food Items
Manufactured goods

15. 12.7%
12.0%
10.1%
7.9%
5.7%
5.1% 5.0% 4.6%
2.4%
And spur greater intra-regional investment
Net profit margin of largest firms in East Africa
Source: Calculated from data from Jeune Afrique
Region accounts for
35% of Africa’s population
but only <5% of top 500 companies
Yet ICT, agribusiness and food
sectors are highly profitable

16. OUTLINE
Why the AfCFTA is Crucial for East
Africa01
The Untapped Potential of the
Regional Market02
Assessment of Impact for East Africa
03

17. AfCFTA estimated benefits to Eastern Africa
USD1.8 BILLION
Eastern Africa
welfare gains
USD1 BILLION+
new intra-regional
exports
OTHER BENEFITS
in services and labour-
intensive manufacturing
2 MILLION+
new jobs
Source: ECA, TMEA
ESTIMATES ARE CONSERVATIVE!
Benefits will be larger due to: Reduced NTBs
Trade Facilitation
Measures
Increased
Services Trade

18. AfCFTA will have a strong positive impact on manufacturing exports
Source: ECA, based on GTAP
5%
7%
21%
26%
28%
30%
Grains and crops
Livestock and meat
products
Heavy manufacturing
Light manufacturing
Textiles and clothing
Processed food
Change in Eastern Africa Exports to the Rest of the Continent

19. For a small price in terms of fiscal revenues…
Source: ECA calculations based on GTAP 10.0 database.
Estimated Tariff Revenue Losses (%)
As % of
total tariff revenue
As % of total
government revenue
Tanzania 6.2% 1.3%
Ethiopia 6.1% 0.7%
Uganda 8.4% 0.6%
Kenya 3.2% 0.6%
Rwanda 4.0% 0.3%

20. …here are examples of the type of gains
50,000 jobs
in Ethiopia, Kenya and Uganda
through air service liberalization
1.6 – 4.5 million new jobs
in an integrated
East African Digital Market
A continental labour market
will help meet
skilled labour shortages
: to the labour market

21. …here are examples of the type of gains
Regional power pools
e.g., through Ethiopian exports of
hydroelectric power
Lower fuel import bill
e.g., Ethiopia stands to save
15-20% of its annual US$3.4 bill
More intra-regional food trade
which has already helped Uganda
become the EAC’s leading trader
: on energy and food security

22. Benefits largely contingent on accompanying trade facilitation measures
Estimated Change in Welfare (%)
Source: World Development Report 2020
6.0 5.9
5.4
4.1
2.0
1.6 1.5
5.0
D.R. Congo Kenya Tanzania Ethiopia Uganda Rwanda Madagascar Rest of Eastern
Africa
Tariffs NTMs TFA
0.1% 0.2% 0.2% 0.1% <0.1% <0.1% <0.1% 0.1%
1.3%
1.5% 1.6%
1.1%
0.5%
0.8% 0.6%
1.8%

23. 3 Key
Takeaways
from Report
Source: ECA
First comprehensive assessment of
AfCFTA impact on Eastern Africa
01
02
03
East Africa needs deeper integration
Eastern Africa is not well-integrated
into the wider African economy
AfCFTA is a catalyst for change
It will reinvigorate existing processes of
regional integration and build on work
already undertaken
AfCFTA needs to be inclusive
Its effective implementation will need
to carry the general public with it.

24. UNECA Sub-Regional Office for Eastern Africa
Kigali, Rwanda
www.uneca.org
Andrew Mold
Chief, Regional Integration and AfCFTA Cluster