AfCFTA & Afreximbank seal deal on adjustment facility

The African Continental Free Trade Area (AfCFTA) Secretariat and the African Export-Import Bank have recently signed an agreement on the management of the base fund of the AfCFTA Adjustment Fund. This move signals a significant step towards enhancing trade facilitation and economic growth across the African continent. To shed light on this development, Export Consultant Bamidele Ayemibo joined CNBC Africa for an insightful discussion. The adjustment fund is designed to help African countries mitigate the impact of revenue shortfalls that may arise as a result of the implementation of the AfCFTA. As trade barriers are removed and tariffs are eliminated, there is a need to provide support to countries to bridge any financial gaps that may emerge during the initial phases of the agreement. Ayemibo explained that the fund consists of the base fund, which is initially capitalized at around $1 billion, and will provide grants and loans to countries to help them overcome short-term funding challenges. The fund aims to support countries as they adjust to the new trading environment created by the AfCFTA. In addition to the base fund, there will also be a general fund that is expected to offer concessional financing at low interest rates, likely around 1-3%, with some moratorium period similar to loans from international financial institutions like the IMF and World Bank. This concessional funding is crucial in ensuring that countries can access affordable financing to facilitate trade under the AfCFTA. The AfCFTA is set to revolutionize trade in Africa by creating a single market for goods and services, facilitating intra-African trade, and boosting economic growth across the continent. Earlier this year, the launch of the Pan-African payment settlement system (PAPSS) aimed to streamline payment processes and save companies billions of dollars annually in transaction costs. The AfCFTA aims to address challenges such as border delays and non-tariff barriers that hinder smooth trade flows within Africa. By offering financial support through the adjustment fund, countries will be better equipped to navigate the early stages of the agreement and ensure its successful implementation. Ayemibo highlighted the progress made in negotiating the rules of origin under the AfCFTA, with 88% of the rules already negotiated. This development paves the way for increased regional trade and market access, as businesses will have clarity on which products can be traded across borders. The significant progress in finalizing the rules of origin has instilled confidence in the potential success of the AfCFTA and demonstrated the commitment of African countries to advancing economic integration and trade cooperation. With 54 countries signing the agreement and nearly 40 countries ratifying it, there is a clear momentum towards realizing the goals of the AfCFTA. The recent agreement on the adjustment fund further solidifies the collaborative efforts towards enhancing trade facilitation and economic development in Africa. As countries continue to work towards implementing the AfCFTA, the adjustment fund will serve as a vital tool in supporting countries through the transition period and ensuring a smooth and successful integration into the single market. The partnership between the AfCFTA Secretariat and Afreximbank sets a positive precedent for future cooperation and economic growth on the continent, paving the way for a new era of trade and prosperity in Africa.