The African Continental Free Trade Area (AfCFTA) Secretariat and African Export-Import Bank (Afreximbank) have signed an agreement for the management of the Base Fund of the AfCFTA Adjustment Fund, which will support African countries and the private sector to effectively participate in the new trading environment established under the AfCFTA.

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, says Afreximbank president and chairperson Professor Benedict Oramah.

“We 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 [of the AfCFTA Adjustment 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 says.

The Adjustment Fund is important as one of the instruments designed to support the implementation of the AfCFTA agreement and assist State parties to deal with short-term tariff revenue losses as they dismantle tariffs and implement the AfCFTA agreement, says AfCFTA Secretariat secretary-general Wamkele Mene.

The resources required for the Adjustment Fund over the next five to ten years are estimated at $10-billion. Afreximbank has already committed $1-billion towards the AfCFTA Adjustment Fund.

The Adjustment Fund comprises 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.

The AfCFTA Secretariat and Afreximbank were mandated by the African Union 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.

“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,” notes Mene.

"This Adjustment Fund comes on top of the Pan-African Payment and Settlement System 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, which are setting the conditions that will undoubtedly lead to a smooth implementation of the AfCFTA,” says Oramah.