The African Development Bank (AfDB) said it will support trade valued at $7 billion over the next five years in a bid to spur the growth of the African Continental Free Trade Area (AfCFTA).
The financier says it will guarantee loans given to companies to sell their products across the continent in a move that will facilitate the development of theAfCFTA that went into effect on 1st January 2021.
The Bank, owned by 81 countries including 27 non-regional members, said it’s targeting small and medium-sized companies, climate-friendly enterprises and women-owned businesses.
The Afreximbank also plans to make $40 billion in funding available over the next five years, while Africa Finance Corp. has also promised backing.
According to David Luke, coordinator of the African Trade Policy Centre at the United Nations Economic Commission for Africa, trade within the continent, which stands at more than $350 billion a year, is expected to grow by 52% in the next decade if adequate support is given to businesses.
The AfCFTA drastically relaxes rules of origin and non-tariff barriers, allowing traders of all sizes to explore the 1.3 billion people market across the continent. Henceforth, Africa can trade on over 81% of products on preferential terms, after 41 countries submitted their tariff offers. Further negotiations on terms and tariffs will close by July 2021.
The AfCFTA is expected to improve intra-African trade which currently stands at between 16% and 18%. Further, it is expected to champion value addition, reducing the continent’s exposure to volatility emanating from trading in raw materials, as well as cutting Africa’s overreliance in global supply chains proven unsustainable by the COVID-19 pandemic.
The AfCFTA is the World largest free trade area since the formation of the World Trade Organization.