Resources required for the AfCFTA Adjustment Fund over the next 5-10 years are estimated at US$10billion, of which the Africa Export-Import Bank, Afreximbank, has already committed US$1billion.
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 opportunities created by the AfCFTA.
These and more came up at the official signing ceremony and an agreement between the African Continental Free Trade Area (AfCFTA) Secretariat and African Export-Import Bank (Afreximbank) in Cairo yesterday, relating to management of the AfCFTA Adjustment Fund.
The agreement was signed by Professor Benedict Oramah, President and Chairman of the Afreximbank Board of Directors, and H.E. Wamkele Mene, Secretary General of the AfCFTA Secretariat, in the presence of Mr. Aly Basha, Minister Plenipotentiary (Trade) of the Arab Republic of Egypt, as well as African bankers and captains of industry.
Prof. Benedict Oramah in his remarks said 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 which can be traded competitively within the continent and catalyse the emergence of AfCFTA-led regional value chains.
According to him, the Adjustment Fund that is taking shape comes on top of the Pan African Payment and Settlement System (PAPSS), which was commercially launched recently in Accra, and the resoundingly successful second edition of the Intra-African Trade Fair held during November 2021 in Durban.
These, he said, are some of the initiatives his outfit is proud to implement in close collaboration with the AfCFTA secretariat – setting the conditions that will undoubtedly lead to a smooth implementation of the AfCFTA.
“He emphasised that the Base Fund of the Adjustment Fund to address urgent needs of state parties relating to tariff revenue losses and the transposition costs to enable them implement the AfCFTA Agreement has been launched.
He also hinted that the General Fund and Credit Fund will be launched very soon to address needs of the private sector; including 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 and enable the continent to implement the AfCFTA,” he concluded.
Speaking during the signing ceremony, H.E. Wamkele Mene, Secretary-General of the AfCFTA, stressed the Adjustment Fund’s importance as one of the instruments designed to support 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, finalising 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.”
This, according to Mr. Mene, will help them mitigate revenue losses and competitive pressures which may result from reductions in tariffs and liberalisation of markets in order to tap into opportunities of the AfCFTA – which is another important step toward a successful implementation of the continental free trade agreement
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.
