How the African Continental Free Trade Area (AfCFTA) promises to improve labor mobility and boost wealth creation in Africa (by Margaret Soi)

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By Margaret Soi, Head of Cross-Border Banking

The African Continental Free Trade Area (AfCFTA) was signed on 21st March 2018 in Kigali, Rwanda, by 44 of the 55 African countries, and negotiated by the African Union (AU). This agreement was born out of the realization that Africa’s total trade exports to the rest of the world are estimated at $760 billion; however, this is mostly in the form of raw materials and thus prevents Africa from deriving the true value from these exports. Considering that African exports to the world represent only 3% of the total value of world trade, there are many opportunities for improvement.

No wonder then, in a 2020 report, the World Bank estimated that by 2035 the real income gains from fully implementing the deal could be 7%, or nearly $450 billion. , while predicting that the deal could help raise an additional 30 million people. extreme poverty and 68 million people in moderate poverty. In this context, it is clear that the AfCFTA has the potential to have a significant impact on improving the livelihoods of Africans, by boosting intra-African trade and generating new employment opportunities in a market integrated African work.

In a follow-up report (https://bit.ly/3wZhqmM) published in June 2022, the World Bank listed other potential labor benefits of the AfCFTA, including better paid and better jobs, especially for women; as well as wage increases of 11.2% for women and 9.8% for men by 2035. Policymakers say the free movement of labor will be a key factor in the smooth running of of the free trade area and the realization of the above benefits for workers.

“Let us now explore in more detail why the labor mobility promised under the AfCFTA is important for Africa’s development and how it can be achieved to improve local livelihoods and ensure the creation of sustainable wealth in Africa,” says Margaret Soi, Head of Cross-Border Banking at Bank One. .

Why labor mobility should benefit Africa – in host and home countries

It is undeniable that labor migration is good for trade and economic development, especially in developing countries, as the free movement of people benefits both the host country and the country of origin. .

The benefits of the free movement of people in Africa can be grouped into the following five distinct categories:

  1. Boosting trade and tourism: The free movement of people can boost both trade and tourism. For example, Rwanda saw cross-border trade with Kenya and Uganda increase by 50% thanks to the relaxation of travel requirements to ID cards only for neighboring countries in 2013. Additionally, tourism in Seychelles increased by 7% per year between 2009 and 2014, when he abolished visas for African nationals.
  2. Address skills and labor gaps: There could be situations where some countries have particular skills in excess while others do not have the same set of skills. Allowing free movement of labor will allow host countries to find these scarce skills at potentially lower rates than attracting talent from developed countries, while alleviating demographic pressure in countries of origin . In addition, the productivity improvements that come from these skilled workers will boost economic growth and per capita income. For example, while immigrants represent only 10% of the population of Côte d’Ivoire, which hosts the second largest number of immigrants in Africa, they represent 19% of GDP.
  3. Stimulate local employment: Although this may seem counter-intuitive as migrant workers compete with nationals for jobs, their presence also boosts local employment. For example, in South Africa, recent migrants have been found to have a positive impact on employment rates and wages of natives, and their presence leads to lower unemployment. Taking a broader example, the creation of the EU and free movement within it have lowered the average unemployment rate in Europe by 6%.
  4. Increase government revenue: The employment of migrant workers in the formal economy of host countries can have a significant positive effect on public finances via taxes. For example, migrant workers pay on average three times more taxes than Rwandan citizens. In Ghana, local workers cover only 70-80% of the expenditure made on their behalf, while migrant workers pay up to 159% of government expenditure on their behalf.
  5. Increased remittances and knowledge transfer to countries of origin: Finally, labor mobility benefits the country of origin of the migrant worker through its impact on remittances and knowledge transfer. When migrant workers begin to work across borders, there is a corresponding increase in remittances to their country of origin; to illustrate, African migrant workers sent about $85 billion back to their families in 2019. Importantly, intra-African remittances tend to reduce poverty even more, as regional migrants tend to have poorer families than those who leave to work on other continents. To come full circle, when these migrant workers finally return home, they often use their deep skills and wealth creation to sustain their economies and boost employment by creating startups or investing in businesses – and engaging in a transfer of knowledge essential in the process.

Effects of intracontinental labor mobility on labor standards and wealth creation

“As a natural corollary of the beneficial effect of the AfCFTA on access to scarce skills in destination countries, the ease of movement of labor facilitated by the AfCFTA has also seen some countries hosts lose talent if their needs are not met. This will likely lead to higher labor standards in the region as countries compete to retain the most skilled workers,” says Margaret Soi.

Significantly, much-needed labor mobility in an African context has seen the growth of a new class of individuals eager to develop, maintain and preserve their wealth through sustainable investment solutions. , both locally and across borders. At a pan-African level, this has spurred increased demand for cross-border banking services through digital channels from these highly skilled professionals who now enjoy the added benefit of mobility to transform their livelihoods. Indeed, these professionals are well placed to join a growing class of affluent clients living and working in Africa – a segment that Bank One is uniquely placed to serve thanks to the combined footprint of our two shareholders, Mauritian conglomerate CIEL Ltd and I&M. based in Kenya. Group automaton.

Margaret adds “Financial institutions like Bank One can support the growth and needs of these skilled professionals by offering them the best cross-border banking solutions such as the recent innovative and award-winning Cross-Border Banking Value Proposition as part of our Offshore Banking Unit of At Bank One, we have a host of best-in-class banking solutions enabling us to deliver targeted services to these mass affluent customers across Sub-Saharan Africa, such as:

  1. Cross-border transactions: Secure offshore transactional capabilities for foreign currency banking in multiple currencies and geographies.
  2. Advisory: Trusted advice on structuring investments, wealth management and accessing secure funding facilities.
  3. Wealth management: Dedicated and experienced offshore banking relationship managers covering both French and English speaking clients.
  4. Digital bank: Efficient digital banking services for accounts and investments, including an award-winning custody platform and best-in-class foreign exchange services.

The future: Committing to labor mobility for a better future for all

Quite disappointingly despite the plethora of benefits that can be derived from intra-continental labor mobility, not all African countries are committed to the concept. Along with signing the AfCFTA agreement and supporting the Kigali Declaration, as 32 African countries had signed the Protocol on the Free Movement of Persons (which aims to establish a visa-free zone in the countries of the ‘AfCFTA) in January 2022, only four countries – Rwanda, Niger, Mali and São Tomé and Príncipe – have ratified it. More importantly, Nigeria and South Africa, Africa’s two largest economies, have neither signed nor ratified the agreement.

So, more than a year after the launch of the AfCFTA, it is becoming increasingly clear that its full potential will not be realized unless we improve the continent’s labor mobility to ensure that the right skills are available at the right place at the right time. Indeed, it is only by ensuring the free movement of people and labor across the continent that we can enhance economic growth, enable businesses to find much-needed skills more quickly. , boost productivity and enable wealth creation by allowing Africans to trade more with other Africans.

Distributed by APO Group on behalf of Bank One Limited.

This press release was issued by APO. Content is not vetted by the African Business editorial team and none of the content has been checked or validated by our editorial teams, proofreaders or fact checkers. The issuer is solely responsible for the content of this announcement.


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