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According to a report by Kenya’s Institute for Public Policy Research and Analysis, once the African Continental Free Trade Area (AfCFTA) takes effect, Kenya could lose some of its revenue.
While the initiative has immense potential for Kenya and Africa as a whole, it is not without its complications. Some measures however, could mitigate the loss.
The country’s exports are expected to expand within the region, particularly in countries where Kenya lacked functional trade agreements
The report titled “The Implications of the African Continental Free Trade Area (AfCFTA): Evidence from Partial Equilibrium Model on Kenya,” details the key benefits of the implementation of AfCFTA in Kenya.
However, it mentions a key set back for Kenya in the form of revenue loss.
“Tariff liberalisation leads to a substantial decline in tariff revenue for Kenya, with an average potential loss of Ksh 22,53 billion.
“Additionally, there is a marginal increase of around 0,1 per cent in imports from African nations in sectors such as manufacturing dairy products and growing crops.
“At the same time, exports will expand within the region, particularly in countries where Kenya lacked functional trade agreements,” the report reads.
The report also details that despite the potential loss, a few key measures could mitigate the loss, including placing a heavy focus on the country’s industries.
“Tailored interventions are needed to protect sensitive sectors. Strengthening domestic industries is vital for the country to fully realise the AfCFTA’s benefits. Ongoing monitoring of trade dynamics within AfCFTA is crucial for adapting to evolving conditions and optimising opportunities.,” the report reveals.
On March 21, 2018, African leaders signed the Africa Continental Free Trade Area (AfCFTA), an essential step toward continental integration. The pact, which covers 55 nations allows for the most extensive global trade liberalisation in commodities and services (World Bank, 2020). – Business Insider Africa
Peter Tanyanyiwa
Online Reporter