Heads of States and government pose for a photo session at the end of
the closing ceremony of the African Union summit at the Palais des
Congres in Niamey, on July 8, 2019. PHOTO | ISSOUF SANOGO | AFP
Countries moving to ratify the African Continental Free Trade
Area, that was launched last week will be insured from revenue losses
under a $1 billion adjustment facility.
The funding
from the African Export-Import Bank (Afreximbank) hopes to smoothen the
phasedown of tariffs from next year once an African Union taskforce
completes pending work on rules of origin, a regular deal-breaker in
free trade.
“This facility will help countries to
accelerate the ratification of the AfCFTA. This movement is now
unstoppable,” Afreximbank President Benedict Oramah told the Africa
business symposium on the sidelines of the AfCFTA launch in Niamey,
Niger.
Working with the African Union, the trade
enabler said it would also establish a digital platform — the Pan
African Payment and Settlement System through which transactions between
countries would be settled in local currencies, reducing dependence on
hard currencies.
“Making cross-border payments easier,
cheaper and safer is an obvious critical step in creating an Africa we
want. Our goal is to reduce, significantly, the foreign currency content
of intra-African trade payments,” Mr Oramah said.
Mr
Oramah said the platform would domesticate, intra-regional payments and
save the continent more than $5 billion in payment transaction costs per
annum.
“It is a system that will formalise a significant proportion of
the estimated $50 billion of informal intra-African trade, and above
all, contribute in boosting intra-African trade,” Mr Oramah added.
The agreement has already been ratified by 27 of Africa’s 55 countries, with Eritrea the only one yet to sign.
The
AfCFTA was launched during the 12 Extra-ordinary summit of African
Union Heads of State at the Mahatma Gandhi Conventional Centre in
Niamey, together with a dashboard for monitoring of elimination of
non-tariff barriers.
The agreement seeks to remove tariffs on more than 90 per cent of goods traded within the continent by 2025.
However, adoption will be staggered to cushion countries whose industries are at risk of being overwhelmed by duty-free imports.
A
market of 1.2 billion people will be created with a GDP of $3 trillion.
Its target is to raise the level of intra-Africa trade from 16 per cent
to 52 per cent over time compared with 69 per cent in Europe and 59 per
cent in Asia.
Early adopters will operationalise the
free trade deal in July next year but the vulnerable countries will have
up to 2035 to do so. It is expected that removing tariffs will bolster
net income by $2.8 billion per annum.
Countries
on a United Nations list of “Least Developed Countries” will have 10
years to cut tariffs, while a group of six countries — including Niger
and Malawi — will have at least 15 years, according to Malawi’s Director
of Trade Christina Chatima.
In the first basket are
expected to be Africa’s wealthiest countries by GDP including Nigeria,
South Africa, Egypt, Angola, Algeria, Morocco, Sudan, Ethiopia, Kenya
and Tanzania. These are ranked as low or upper middle income by the
World Bank but some could opt to join at different stages out of
national considerations.
Among the pending issues are
an agreement on a common criteria for rules of origin for some sectors
such as textiles and automotive sectors for which the AU is supposed to
draw up proposals for discussion.
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