The African Continental Free Trade Area (AfCFTA) Secretariat and African Export-Import Bank (Afreximbank), signed the $10bn AfCFTA Adjustment Fund on Wednesday in Cairo.
The two institutions signed an agreement relating to the management of the base fund of the AfCFTA Adjustment Fund.
The fund will support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA.
The agreement was signed by Benedict Oramah — the President and Chairman of the Board of Directors of Afreximbank — and Wamkele Mene — the Secretary-General of the AfCFTA Secretariat — in the presence of Aly Basha — the Minister Plenipotentiary (Trade) of the Arab Republic of Egypt — as well as African bankers and captains of industry.
The AfCFTA Secretariat and Afreximbank were mandated by the African Union (AU) Summit of Heads of State and Government and the AfCFTA Council of Ministers responsible for Trade to establish the AfCFTA Adjustment Fund to support AfCFTA State Parties adjust to the new liberalised and integrated trading environment established under the AfCFTA Agreement.
The Adjustment Fund consists of a Base Fund, a General Fund, and a Credit Fund. The Base Fund will consist of contributions from state parties, grants, and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated. It will also support countries to implement various provisions of the AfCFTA Agreement, its protocols, and annexes.
The General Fund will mobilise concessional funding, while 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.
Speaking during the signing ceremony, 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 state parties to deal with short term tariff revenue losses, as they dismantle tariffs and implement the agreement.
“As we make significant progress in establishing schedules of tariff concessions, the finalisation of the Adjustment Fund will enable us to maintain and even accelerate the momentum. We now have an excellent tool to provide support to our state parties and their private sector through financing, technical assistance, grants, and compensation funding,” said Mene.
“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.”
The resources required for the Adjustment Fund over the next 5-10 years are estimated at $10bn. Afreximbank has already committed $1bn towards the AfCFTA Adjustment Fund.
For his part, Oramah said that the funds will 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 can be traded competitively within the continent and catalyse the emergence of AfCFTA-led regional value chains.
“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 successful second edition of the Intra-African Trade Fair, which was 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,” said Oramah.
“Today we have launched the Base Fund of the Adjustment Fund to address the 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 small and medium enterprises, women, and youths. 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,” he concluded.