2023: The year of African trade?
To further accelerate the implementation of AfCFTA, the AU has adopted 2023 as the “Year of AfCFTA: Acceleration of the African Free Trade Area Implementation”.
In tandem with the implementation drive, opportunities exist for African DFIs to support the continent’s industrialization and borderless trade agenda without eliminating small and medium-sized enterprises (SMEs). SMEs often face financing challenges due to information asymmetries, lack of collateral security and perceived high risk.
SMEs can tap into the regional market opportunity to expand their target market and increase revenue generation. Both corporates and SMEs can tap into the available financing and guarantee products offered by the African Trade Insurance Agency (ATI) and other African DFIs to expand their operations and drive their trading activities on the continent.
Key African DFIs have taken steps to drive the implementation of AfCFTA. Afreximbank, with the goal of addressing food security on the continent, partnered with the AfCFTA secretariat and World Food Program.
This partnership will work on agricultural development, climate action, and trade in Africa, with the aim of disbursing $2 billion in farming loans and credit lines for agro-processors and commodity traders by 2025. This will be done through Afreximbank lending instruments and blended finance facilities.
The African Development Bank has entered into partnerships to bolster trade finance and improve custom services in some African countries. Similarly, ATI’s bespoke political and credit insurance solutions are available to investors, lenders and suppliers who are looking to mitigate credit risk in the African SME sector.
The lead role taken by African DFIs on the industrialisation drive provides a positive assurance that Africa is on the right path to weather the storms of these challenging economic times.
Moving forward, these multilateral institutions should look to continually create innovative solutions and partnerships to drive Africa’s transformation agenda. This will go a long way to alleviate investor fears of doing business on the continent.
In the same vein, increased commitment from African governments to seize opportunities presented by AfCFTA, through appropriate policy reforms and review of regulations remains the anchor of the accelerated implementation of the free trade area.