Sunday, September 05, 2021 12:02 AM / by African
Union/ Header Image Credit: African Union
An Initiative By The African Private Sector - To Take Advantage of the AfCFTA to Help Transform Africa
The AfCFTA - which came into force in June 2019 - is not a "traditional" free trade agreement. Rather it is a key part of the African Union's transformational vision for Africa captioned Agenda 2063 which aims at a socio-economic transformation of the continent. To achieve this, it is necessary to use the private sector to stimulate transformational investment.
This Investment & Financing Framework is an initiative by the African private sector in partnership with the African Union, and led by AfroChampions, to create the first phase of an investment framework within which the private sector can take advantage of the AfCFTA to not only trade, but also invest in infrastructure, set up industries, add value to goods and services, increase intra-Africa trade and eventually transform the continent.
The timeframe for the first phase is the period 2020 â€“ 2030. The framework aims to stimulate One Trillion US Dollars ($US1 Trillion) or more AfCFTA investments by 2030. The outline of this framework was first presented to African Heads of State at the AU Extraordinary Summit of July 2019 in Niamey and this version 1 is designed to reinvigorate interest in Africa both from within and outside the continent and stimulate action on AfCFTA investment. It sets a framework for project developers, operators, investors, financiers, multinationals, SMEs and business associations as well as governments, the AU, regional bodies, DFIs, multilateral and bilateral agencies.
An Extraordinary Opportunity For The Private Sector
For AfCFTA to succeed, a set of preconditions must be created These include
Cross-border transportation networks for the movement of goods and people.
Regular and stable supply of power to industries at competitive tariff and the removal of non-tariff barriers to trade
Unlike other parts of the world, where free trade blocs were created at a time cross-border infrastructure and industries already existed, these basic requirements will now need to be created in Africa. The infrastructure shortfall alone is estimated by the AfDB at almost two trillion dollars ($2 trillion) over a ten-year period. The AfCFTA is therefore not just a trade treaty but a program that opens the door to one of the biggest opportunities for the private sector to transform the continent by investing in infrastructure and industries to increase intra-Africa trade and create wealth. AfCFTA holds the key to trigger an infrastructure and economic transformation of Africa.
The urgent need for Trans-African transportation networks triggers investments in extensive infrastructure
Rules of Origin triggers investments in agribusiness, value-addition for trade to the 1.3 billion people based on light and heavy industries
Investment in energy, special economic zones, smart cities, and agro-poles.
The opening up of cross-border trade creates investments in telecommunications, digitization, financial services, logistics and transportation services, professional services and tourism etc.
AfDB estimates of the continent's financing need for infrastructure alone is $170 billion per annum ($1.7 Trillion in 10 Years), whilst the already identified PIDA projects are estimated at $360 billion.
Objectives of the Framework
1 Enable the private sector to take maximum advantage of the AfCFTA to invest in the enablers and emerging commercial opportunities at the regional and continental levels.
2. Get governments to be focused on looking at Africa as one market and linking their various national investment programs within the larger context of the AfCFTA
3. Bring the private sector from the margins to the center of the panAfrican Investment agenda for infrastructure, industrialization and agribusiness and other areas that create jobs and wealth and raise living standards of Africans.
5. Implement investments in the core opportunity areas in a manner that create jobs & integrates African SMEs and microenterprises in the regional value chains and continental markets.
6. Identify and bring already developed bankable projects that meet the objectives of the Framework to the attention of potential investors, DFIs, lenders and the market.
7. Identify a pipeline of bankable new investment projects that will engender socio-economic transformation of the continent; and stimulate the implementation of these transformative projects within the context of the Framework
8. Create a unique certification system to rate projects and transactions for their potential to accelerate AfCFTA and economic transformation
9. Provide the criteria within which certified AfCFTA projects will receive support from the AU, governments and other relevant agencies where the context requires.
10. Provide an implementation monitoring and reporting mechanism for the implementation of the activities of ALL KEY STAKEHOLDERS (private sector, AU, governments, project developers, investors, lender community, DFIs, multilateral and bilateral agencies.) for the realization of Africa's transformation through a continental market.