The African Continental Free Trade Area (AfCFTA) Secretariat and African Export-Import Bank (Afreximbank), signed an agreement on the management of the Base Fund of the AfCFTA Adjustment Fund.
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 Egypt on Wednesday, February 9, 2021.
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.
What they are saying about the agreement
The AfCFTA secretariat revealed that the Fund will support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA. It added that the resources required for the Adjustment Fund over the next 5-10 years are estimated at US$10 billion, as Afreximbank already committed $1 billion towards the AfCFTA Adjustment Fund.
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.
H.E Wamkele Mene, Secretary-General of the AfCFTA Secretariat, stated the Adjustment Fund is one of the tools designed to support the implementation of the AfCFTA Agreement and assist AfCFTA State Parties to deal with short term tariff revenue losses
“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,” he said.
He added the AfCFTA 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.”
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.
Prof. Benedict Oramah, President and Chairman of the Board of Directors of Afreximbank, 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.”
He added that setting the conditions will undoubtedly lead to a smooth implementation of the AfCFTA. He stated that the Base Fund of the Adjustment Fund will 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 said
What you should know
Nairametrics reported last month that Managing Director/Regional Executive of Ecobank Nigeria, Mr Patrick Akinwuntan said that with the introduction of the Pan-African Payment and Settlement System (PAPSS), Nigerians will no longer need dollars for intra-African trade, adding that intra-Africa trade could reach $300 billion by 2025.
He added that PAPSS will also eliminate payment delays, third party currencies as well as benefit households, small businesses, and financial institutions.
