What to know about AfCFTA’ $10bn adjustment facility

Thank woman who is doing small business, that young entrepreneur who is looking to expand her business from Nigeria to Kenya will be able to achieve that with the launch of $10 billion African Continental Free Trade Area (AfCFTA) Adjustment Fund, Wamkele Mene, Secretary General of the AfCFTA Secretariat, explains.

On Thursday in Cairo, Egypt, the AfCFTA Secretariat and African Export-Import Bank (Afreximbank), signed an Agreement relating to the management of the Base Fund of the AfCFTA Adjustment Fund.

“We all have an obligation that this woman, a small medium enterprise owner from Malawi is able to expand her business into West Africa, north Africa and so on. That is why this partnership is so very important,” he said.

Small and Medium Enterprise (SME) accounts for 60 percent of the Gross Domestic Product (GDP) of African countries.

The fund will ensure that the SMEs are properly financed and young entrepreneurs have the opportunity to trade across borders of the continent.

It addresses the fundamental question of inclusiveness in relation to globalisation, trade agreement and economic development.

The AfCFTA adjustment facility is a fund that will enable countries to adjust in an orderly manner to sudden significant tariff revenue losses as a result of the implementation of the continental free trade agreement.

It ensures that the AfCFTA is implemented to the benefit of the African continent, to advance industrialisation and to make sure that the continent is integrated.

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Mene believes that the introduction of the new facility is a gradual move away from reliance on the World Bank Group and the International Monetary Fund (IMF) for financial support.
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.

“We are not going to succeed in the implementation of the AfCFTA without Afreximbank. We want to make sure the project benefits millions of SMEs, the private sector, and members of the African business council. The benefits are real,” Mene said.

The adjustment facility is estimated to reach $10 billion in the next 5-10 years. Afreximbank has already committed $1 billion towards the AfCFTA Adjustment Fund.

The base fund will benefit largely the government, those who are party to the AfCFTA that have signed and ratified the agreement, Benedict Oramah, president and chairman of the Board of Directors of Afreximbank, explained.

It will be targeted as a concession for revenue loss. For the general fund he said it will also benefit the government that are parties. It will benefit all aspects of businesses including companies, SMEs and so on.

He said it will be provided on concessional terms and will be used to implement the protocols under the agreement.

It will companies that need help in training and even those who want to do market access studies but it has to be done on concessional, technical assistance terms

The credit fund will be provided commercially, those implementing commercial projects and that will go to the government as well. “We expect that it will be companies, SMEs and financial institutions that are financing certain types of trade,” Oramah said.

They will use it largely to retool their factories. Some of the factories are import substitution, producing for home but now they have to produce for export.