The African Continental Free Trade Area (AfCFTA) Secretariat and African Export-Import Bank (Afreximbank), today in Cairo 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 Professor Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank 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.
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 to 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, H.E Wamkele Mene, Secretary General of the AfCFTA Secretariat, 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. 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,” said Mr. Mene.
The resources required for the Adjustment Fund over the next 5-10 years are estimated at US$10 billion. Afreximbank has already committed $1 billion towards the AfCFTA Adjustment Fund.
In his remarks, Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, 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 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,” said Prof. Oramah.
“Today we have launched 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 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,” he concluded.