Two funds, totalling 2.2 billion dollars, are being established by the African Continental Free Trade Area (AfCFTA) Secretariat as tools to help countries make the most of the AfCFTA agreement.
Both funded by the African Export-Import Bank (Afreximbank), one of the tools; the automobile Fund, worth 1.2 billion would assist countries interested in participating in the automobile value chain.
The AFCTA Adjustment Fund which has an initial amount of $1 billion, would, on the other hand, support countries that would in the short term experience revenue losses as a result of reducing or eliminating their tariffs.
The Secretary-General of AfCFTA Secretariat, WamkeleMene, made this known to journalists in Accra on Saturday at a briefing on the eighth AfCFTA Council of Ministers of Trade Council meeting held in Ghana on Friday and Saturday.
The meeting was to assess the status of negotiations on outstanding issues including the RoO and agree on the steps towards the start of commercially meaningful trading under the AfCFTA.
Shedding more light on the funds which were discussed at the meeting, MrMene said, AfCFTA Adjustment Fundwas to help prepare the continent for the system where tariffs or duties were used as tools for industrial development instead of revenue generation like currently happening.
He said studies had indicated about seven billion dollars would be needed to bridge the economic gap that would be created in revenue losses in the short term when agreed tariffs are implemented.
The fund, he said would be operational next month after the agreement between the Bank and Secretariat had been signed on February 8 to enable countries access the funds subject to certain criteria.
“With support from the bank we would embark on resource and financial mobilisation drive to ensure that the fund is properly financed over the next five to 10 years,” he said.
On the Automobile Fund, MrMene said countries could access it to either produce vehicle components or assemble cars, noting that the AfCFTA recognises the automotive sector as a very strong driver for African industrialisation as well as an opportunity for inclusivity.
“This is because all countries will have an opportunity to participate in the value chain, whether we are talking about copper, rubber and various minerals that are required to manufacture vehicles, most African countries have them and so we
want to make sure that there is a space for them in the broad-based inclusive value chain,” he said.
In the next 10 to 15 years, MrMene said Africa would need to manufacture between four and 4.5 million vehicles, and considering the population of India which produces five million units of vehicles per year, Africa was producing significantly lower numbers and needed to fill the deficit.
He said African Payment and Settlements System launched some weeks ago with support from the Afreximbank, would enable trading amongst African countries using the 42 currencies instead of incurring a cost of currency convertibility in excess of 5 billion dollars a year.
Original story on Ghanaian Times