The high rate of insecurity within the African continent, if left unchecked, could threaten the implementation of the African Continental Free Trade Agreement.
The President of AfDB, Dr Akinwumi Adesina said this in a speech delivered at the 59th Ordinary Session of the ECOWAS Authority of Heads of State and Government.
The AfCFTA which came into force on January 1 is expected to boost intra-African trade by between by $50bn to $70bn in monetary terms, with a 40 per cent to 50 per cent increase over the first 20 years of its implementation.
The AfCFTA will bring together all 55 member states of the African Union covering a market of more than 1.2 billion people, including a growing middle class, and a combined gross domestic product of more than $3.4trn.
In terms of numbers of participating countries, the AfCFTA will be the world’s largest free trade area since the formation of the World Trade Organization.
Estimates from the Economic Commission for Africa suggest that the AfCFTA has the potential both to boost intra-African trade by 52.3 percent by eliminating import duties, and to double this trade if non-tariff barriers are also reduced.
But Adesina, while speaking at the event, expressed fears that the level of insecurity may affect the implementation of the initiative.
He said that the level of insecurity in the continent is giving him sleepless nights and urged African leaders to rise up to the occasion to stem the tide of worsening insecurity.
Adesina said the investible space in Africa is rapidly shrinking due to insecurity, adding that the case of Mozambique where a $24bn deal structured by the AfDB to boost gas production is being threatened because of terrorism.
The AfDB Boss said, “Your Excellencies, when we resolve Africa’s debt challenges, I can rest, if just a little. But one thing will still keep me awake at night: Africa’s rising insecurity.
“As you well know, the situation is most precarious in the Sahel and the Lake Chad Basin. And I am sure it keeps you also awake at night. The trend is disturbing, as expenditures on defense are rising fast, displacing financing for development.
“The investible space in Africa is rapidly shrinking due to insecurity. Take the case of Mozambique, where the African Development Bank helped to structure a $24bn deal for its Liquefied Natural Gas project. This transaction won the Global Project Deal of the Year 2020 Award. This would have made Mozambique the 3rd largest producer of Liquefied Natural Gas in the world, with projected revenues of $66 billion.
“Alas! terrorists have now invaded the location. TOTAL, the major project sponsor has just declared force majeure and has pulled out. These insecurity situations and insurgencies now pose the biggest risks to Africa’s development.
“Yet, countries lack adequate resources to effectively tackle these challenges. If unaddressed quickly, insecurity will become a huge risk to our dream of an African Continental Free Trade Area.
“It is time to adapt our approach, we must now link security to investment, growth and development.”
He said the bank is working to assist in addressing the insecurity, noting that this was why it developed the Security-Indexed Investment Bonds.
Taking advantage of low long-term interest rates, Adesina said these security indexed investment bonds will allow Africa to leverage resources on the global capital markets to reinforce its security.
He added, “The revenue streams from the security-indexed investment bonds can be used to reinforce the security architecture of African countries and support dual-purpose infrastructure to enhance national and regional peacekeeping and security capabilities; rebuild destroyed or damaged infrastructure in conflict-affected areas, and finance new investment projects to relaunch economic activities and create jobs in areas prone to security challenges.”
He explained further that the revenue could also be used to build social infrastructure for the populations, especially water, sanitation, schools, health, roads, Information Communications Technology and agricultural infrastructure, to improve access to basic services to support community livelihoods in fragile environments; and protect strategic investments within countries or regions.
The AfDB President added, “The security indexed investment bonds can be delivered through Special Purpose Vehicles, established on behalf of a pool of regional member countries.
“The bonds can be credit-enhanced by the African Development Bank and other donors. The administration of the Bond proceeds can be managed under the auspices of the African Union’s Peace and Security Council and Regional Economic Communities.
“Then, Your Excellencies, we all can sleep, with our eyes closed, to wake up the next morning, ready, again, to work relentlessly for Africa’s assured destiny of prosperity.”
He expressed optimism that with the right collaboration, there would be economic growth and prosperity for the African region.