AfCFTA Secretariat, Afreximbank Seal Deal on $10bn Fund to Boost African Economies

The African Continental Free Trade Area (AfCFTA) Secretariat and the African Export-Import Bank (Afreximbank), on Wednesday in Cairo, signed an agreement on the management of the AfCFTA Adjustment Fund (ADF) that would require $10 billion over the next five to 10 years.

The base fund is a facility that would support African countries to cope with the loss of revenues from import tariffs and the private sector to effectively participate in the new trading environment established under the AfCFTA.

Already, Afreximbank has committed $1 billion towards the ADF, which is made up of a base fund, a general fund and a credit fund.

The AfCFTA Secretariat and the Afreximbank stated that base fund would consist of contributions from state parties (which is AfCFTA member countries), grants and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated.

The base fund, according to the two continental institutions, would also support countries to implement various provisions of the AfCFTA agreement, its protocols and annexes while the general fund would mobilise concessional funding.

They added that the credit fund, “will mobilise commercial funding to support both the public and private sectors, enabling them to adjust and take advantage of the opportunities created by the AfCFTA.”

The agreement was signed yesterday by President/Chairman of the Afreximbank, Prof. Benedict Oramah, and the Secretary General of the AfCFTA Secretariat, Wamkele Mene, in the presence of Minister Plenipotentiary (Trade) of the Arab Republic of Egypt, Mr. Aly Basha, as well as some leading African bankers and captains of industry.

The two continental institutions said the general fund and credit fund would be launched very soon to address the needs of the private sector including the small and medium enterprises, women and youth.

The signing of the agreement was in furtherance of the mandate given to the AfCFTA’s Secretariat and the Afreximbank by the African Union Summit of Heads of State and Government and the AfCFTA Council of Ministers responsible for Trade to establish the ADF, “to support AfCFTA state parties to adjust to the new liberalised and integrated trading environment established under the AfCFTA Agreement.”

Mene stressed the importance of the Adjustment Fund as one of the instruments designed to support the implementation of the AfCFTA agreement and assist AfCFTA member countries to deal with short term tariff revenue losses as they dismantle tariffs and implement the Agreement.

He said: “As we make significant progress in establishing schedules of tariff concessions, the finalisation of the adjustment Ffund will enable us to maintain and even accelerate the momentum. We now have an excellent tool to provide support to our state parties (member countries) and their private sector through financing, technical assistance, grants and compensation funding.

“It will help them mitigate revenue losses and competitive pressures that may result from reduction in tariffs and liberalisation of markets in order to tap into the opportunities of the AfCFTA. This is another important step towards the successful implementation of the continental free trade agreement.”

Oramah, in his remarks said that the funds would be used to support both the public and private sectors to address short term disruptions, while enabling the private sector to retool, reskill, and develop capabilities to produce value added goods and services that could be traded competitively within the continent and catalyse the emergence of AfCFTA-led regional value chains.

He said: “This Adjustment Fund, which is taking shape, comes on top of the Pan African Payment and Settlement System (PAPSS), which was commercially launched on 13 January 2022 in Accra, and the resoundingly successuful second edition of the Intra-African Trade Fair, which held in November 2021 in Durban.

“These are some of the initiatives that we are proud to implement in close collaboration with the AfCFTA Secretariat, setting the conditions that will undoubtedly lead to a smooth implementation of the AfCFTA.

“Today we have launched the base fund of the ADF to address urgent needs of State Parties relating to tariff revenue losses and the transposition costs to enable them to implement the AfCFTA agreement. We will be launching the general fund and credit fund very soon to address the needs of the private sector including the small and medium enterprises, women and youth.

“We look forward to working with all development partners, development financial institutions, commercial banks, export credit agencies and other investors and strategic partners to mobilise resources for the Adjustment Fund to enable the continent to implement the AfCFTA.”

 Dike Onwuamaeze

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