**4. COVID-19 impacts**

Mold and Mveyange [25] found a large increment in the volume of Kenya's total export in the first quarter of 2020 (prior to the outbreak of the pandemic in Africa), attributed partly to intra-African trade that was beginning to intensify due to the enhanced effort under the AfCFTA framework. There is however now increasing fear and hesitation around the world due to the Covid-19 pandemic, which has led to a new set of behaviors [26]. For Africa, about 0.5 percent of the population is confirmed to have contracted COVID-19 COVID-19 [27]. The financial interdependency and multilateral regulations that globalization stressed some decades ago, are now facing daunting and unsettling threats. As the pandemic and its impacts continue to extend deep, with both health and economic consequences taking a toll on most developing countries, trade has not been spared. Thus, although the AfCFTA addresses several tariff and non-tariff barriers, the COVID-19 pandemic has the potential to erode the potential benefits of this agreement. We explore the effect of the pandemic on the AfCFTA agreement, consumption, production, and market-based labor activities, with implications for volumes of trade in the middle of a pandemic.

#### **4.1 Impact on the AfCFTA agreement**

The Covid-19 pandemic could erode the expected benefits of the AfCFTA agreement.2 The global spread of the pandemic has strong implications for trade and mobility [28]. This is the first direct effect the COVID-19 pandemic have had on the implementation of the AfCFTA agreement itself. The fulfillment of AfCFTA was deferred due to the pandemic, hence the AfCFTA agreement which was planned to start on 1st of July, 2020 was postponed to 1st January, 2021 [29].

<sup>2</sup> The Coronavirus Virus (COVID-19), first discovered in Wuhan City of China in December 2019. It has now spread over the globe.

COVID-19 management systems instituted by countries at a time the AfCFTA was in its critical phase of implementation have directly impacted intra-African trade. These measures have included travel bans, border closures, mandatory quarantine, partial lockdowns, and total local lockdowns. Negotiation of key aspects of the agreements such as Rule of Origin and Schedules of Tariff Concession stalled due to the outbreak of COVID-19, as some of these aspects of the agreement require physical contacts to achieve full operationalization of the agreement. In all, the pandemic caused a six-month delay of the AfCFTA agreement.

At the administrative level, the pandemic has affected the organization of the second biennial Intra African Trade Fair (IATF) which was slated for 2020 but delayed until somewhere in 2021. The fair was to provide a platform for stakeholders to share trade, investment, and market information aimed at supporting intra-African trade and African economic integration [29].

#### **4.2 Impact on consumption, production, and market-based labor activities**

The COVID-19 pandemic has led to instabilities in Africa's supply chains, notwithstanding tumbling oil costs and a lessened worldwide interest for African non-oil products. Thus, despite the fall in oil prices, weak African and global demand precipitated by the COVID-19 pandemic has affected production on the continent. A decrease in intra-African and global exports from Africa have affected revenues and growth across countries in Africa. It is projected that Africa may lose half of its GDP with growth falling from 3.2 percent to about 2 percent due to the disruption of global supply chains (Africa [30]). As observed by Sachs and Malaney [31] large-scale viral diseases can have a significant long-term impact on GDP and per-capita income.

The fall in oil price has also directly placed excessive economic and monetary risk on countries like Angola, the Democratic Republic of the Congo (DRC), Nigeria, and other importing African countries. In addition, China where the virus was first discovered, is the biggest trading investor of many countries in Africa prior to the spread of the virus [32]. The U.S Energy Information Administration also projects that the United States will likely take years to return to 2019 levels of energy consumption.3 All these developments will affect the GDP and employment in many of the oil-producing countries in Africa.

The United Nations Development Programme (UNDP) suggested that the COVID-19 crises could result in huge unemployment in Africa, where unemployment was already a major problem prior to the pandemic [33]. The pandemic also affected the nature of work, with many workers working fewer hours post lockdown, to minimize exposure to the virus. The closing down of mines and factories, changes in nature of work, and shortages of imported inputs due to the lockdown measures imposed by many African countries, have affected production, export, earnings, and wellbeing in Africa in the next couple of years.

Aside from production, at the micro-level, Durizzo et al. [34] have shown that the pandemic negatively affected household consumption and welfare in Ghana and South Africa. Similar evidence of reduced consumption is also found for many of the major countries that Africa trades with. For example, Chen et al. [35] have found long-term impacts of the COVID-19 pandemic on consumption using highfrequency transaction data.

Data from the European Union shows a 17.3% year-on-year decline in household final consumption expenditure.4 Lower levels of consumption within Africa on one hand, and in the other trading partners on the other have all affected demand

<sup>3</sup> https://www.eia.gov/todayinenergy/detail.php?id=46636

<sup>4</sup> https://ec.europa.eu/eurostat/web/products-eurostat-news/-/DDN-20201110-2

#### *The COVID-19 Pandemic and African Continental Free Trade Area (AfCFTA): Exploring… DOI: http://dx.doi.org/10.5772/intechopen.97394*

for African goods. All these changes in consumption have led to reduced demand for African products, and as such led to a significant reduction in production and employment. Data from the International Labour Organization (ILO) suggests that approximately 1.6 billion informal economy workers and 436 million enterprises were significantly impacted by the pandemic and the lockdown measures, with many of the affected being women-owned and managed firms, and firms managed by persons with disabilities (PWDs).5 It is therefore important to put in policies to limit income loss for both formal and informal sector employees, in order to minimize poverty and vulnerability on the African continent.

Industrial production in Africa is not spared. The pandemic has slowed demand for Africa's agricultural export products, and therefore putting the jobs and livelihoods of many households at risk. It has also disrupted the supply chain for agricultural inputs such as improved seeds, fertilizers, crop protection products, equipment, etc., from neighboring countries. Poor infrastructure and the high cost of doing business were already challenging intra-African trade prior to the pandemic. The pandemic has exacerbated the problem and has created challenges on both the supply and demand-side. Overall, industrial production in Africa is estimated to have decreased by 1.2% due to COVID-19 induced factory shutdowns. Similar reductions in production are recorded for Africa's trading partners. Production losses in Africa will continue to increase if infection rates continue to increase and factory shutdowns are reinstated to curb the spread of the pandemic.

Remittances, an important income source of household income for household production and consumption have been affected significantly by the pandemic. Thus, the pandemic has led to reduced mobility, increased restrictions, affecting FDI flows, tightening the domestic financial market, and leading to heightened unemployment.

In a nutshell, disruption in supply chains for production inputs, falling demand for Africa's production, near collapse of tourism and hospitality sectors, reduced remittances, high fiscal deficits, and the observed depreciation of local currencies have heightened existing household vulnerabilities. The region remains vulnerable to health shocks due to the undeveloped health systems in many African countries. Vaccine rollout as of February 2021 had been very slow across the continent, even though infection and death rates are rising. Failure to address these long and shortterm challenges can affect production and slow trade for many African countries.

### **4.3 COVID-19, gender and trade**

Examining the effect of the pandemic through a gender lens will help to tailor trade support for women involved in the intra-African trade. Experience from the Ebola virus showed that quarantines significantly reduce livelihood activities, and exacerbating poverty rates among women. Women are predominantly involved in the small cross-border trading in Africa. Many of the measures instituted by African countries to curb the spread of the pandemic, such as the mandatory quarantines at the borders, national-level lockdowns, and limitation on mobility have all impacted the trade activities of women involved in cross border trading. The COVID-19 impacts are felt especially by women who generally outnumber men in the informal trade sector, and across many countries are earning less. Thus, women traders, compared to men, who have low savings and capital will be disproportionately impacted by the pandemic and the associated mitigation measures.

<sup>5</sup> https://www.ilo.org/wcmsp5/groups/public/---dgreports/---dcomm/documents/briefingnote/ wcms\_743146.pdf

It is crucial for policymakers in Africa to consider cross-border traders as essential staff requiring priority in any pandemic vaccination rollout. Continued engagement with informal trade associations along the land borders of Africa is imperative to sustain intra-African trade in the middle of a pandemic. Training of women involved in cross-border trading on the digital tools needed for the key aspects of the agreements such as the rule of origin, schedules of tariff concession, and digital payments system are critical to limited exposure to the COVID-19 virus.

In a nutshell, females' involvement in intra-African trade is crucial for the overall AfCFTA agenda, and therefore there is the need for targeted support for women involved the cross-border trading with the African continents. Support can take the form of stimulus packages, early vaccination, free COVID-19 tests, and education on the virus to curb the spread of the virus among this group and at the same time sustain intra-African trade.

#### **4.4 Opportunities in the middle of a pandemic**

The pandemic does not only present negative effects but also provides the African continent and the AfCFTA agreement the chance to explore new ways of engagements, new markets, new products, and the opportunity and time to devise ways to mitigate the effect of the pandemic on trade and welfare. Thus, despite the short-term poor outlook, the pandemic has presented some opportunities that could translate into long-term increased opportunities for industry growth and employment.

The pandemic and the associated restriction on mobility has also presented an opportunity for African countries to reinforce local production and intensify import substitution of many products and the heightened need to the intra-African supply chains in order to better deal with any future pandemics. For example, in terms of pharmaceuticals, Africa spends quite a lot to import drugs from Europe and Asia, regions that have experienced huge disruptions in their supply chains. African countries with the capacity for the production of pharmaceuticals can be supported under the umbrella of AfCFTA to increase inter-regional trade of pharmaceuticals, for mutual intra-African economic benefits. With Africa plagued with many diseases, local production of all forms of pharmaceuticals will help to create sustainable long-term jobs and improve wellbeing.

Intra-African trade can be leveraged to deal with persistent and COVID-19 induced food insecurity. With a number of African countries being net exporters of food and with many others importing food from Europe and Asia, the pandemic provides the opportunity for strengthening food value chains and infrastructure under the AfCFTA. Thus, food can easily be moved from countries that have food surpluses to those that have food deficits if under AfCFTA transportation networks in Africa are improved.

In addition, despite the disruption of the international supply chain and delays in export/import channels, some companies particularly in the telecommunication sector have reported positive growth in revenues. AfCFTA can also leverage the improved internet connectivity on the African continent to enhance trade negotiation and driveup volumes of trade transactions within Africa. Thus, as the world struggles to deal with both the health and economic effects of the COVID-19 pandemic and forestall trade, it can be said that the AfCFTA agreement is coming in at the right time.

#### **5. Conclusion**

The COVID-19 pandemic has imposed nontrivial cost on all economic agents, with implications expected to last for a while. While the pandemic has had

*The COVID-19 Pandemic and African Continental Free Trade Area (AfCFTA): Exploring… DOI: http://dx.doi.org/10.5772/intechopen.97394*

consequences for trade and mobility, it has highlighted the need for strengthening value chains in general, and intra-African trade structures to be specific, in order to position Africa to better deal with any unforeseen future pandemic. This chapter explored the current and potential impacts of the COVID-19 pandemic on the African Continental Free Trade Area (AfCFTA) agreement, highlighting the effects on the trade agreement itself, trade volumes – driven by the pandemic induced-changes in consumption, production and labour markets –, and women on the intra-African trade corridors. The chapter also highlights the opportunities that African countries can take advantage of even in the middle of the pandemic. Thus, the chapter ends on the not that while Africa deals with the crisis, it must use the opportunity to strengthen African institutions, to improve trade far beyond the COVID-19 pandemic.
