Abstract

The African Continental Free Trade Area (AfCFTA) has the potential to boost eco- nomic development and welfare. Just how this can manifest remains an empirical question. For example, will the AfCFTA impact negatively on tariffs and related existing trade revenues? What is the impact of the AfCFTA on GDP, welfare, effi- ciency, household consumption, investment and the associated spillovers? This paper provides answers to these questions to guide policy in crafting a continental trade agreement that would be both beneficial to all parties and long lasting. Using a Computable General Equilibrium (CGE) model, the results show continent-wide economic positive effects which consist of a welfare gain of US$ 17.95 billion, 3.15% growth in GDP, and 1.94% increase in household per capita. We show that alloca- tive efficiency, technological change, investment and savings effects all drive welfare gains. However, technological change is the largest driver of welfare gains. The distri- butional consequences across countries are, however, not shared evenly: for example whereas a substantial number of countries gain in terms of welfare, growth and household income, others suffer losses in all three indicators. Thus a policy design that caters for losses, account for an orderly adjustment and cushion technological development for net losers could be welfare enhancing.