Rwandan women and youth traders should seize the various opportunities provided by the African Continental Free Trade Area (AfCFTA) 'Adjustment Fund', Denis Karera, a businessman and Vice Chairperson of East Africa Business Council (EABC), has said.
Headquartered in Kigali, the $10 billion fund is a crucial instrument in the realisation of the AfCFTA. It will assist countries in implementing agreed protocols and support African companies in retooling for effective participation in the new trading regime.
In March 2023, the AfCFTA Secretariat and African Export-Import Bank (Afreximbank), signed the Host Country Agreement for the AfCFTA Adjustment Fund with the Republic of Rwanda.
The Adjustment Fund will assist AfCFTA's State Parties in adapting smoothly to the new liberalised and integrated trading environment established under the agreement by reducing the potential negative effects of tariff revenue losses resulting from AfCFTA.
Additionally, the fund will assist in addressing the infrastructure deficits and supply chain bottlenecks related to the implementation of the African Continental Free Trade Agreement.
Established by the Afreximbank, AfCFTA Secretariat and the African Union Commission (AUC) following a mandate from the African Union (AU) Summit of Heads of State and Governments, the Adjustment Fund consists of three sub-funds, namely, Base Fund, General Fund, and the Credit Fund.
The Base Fund will use contributions from AfCFTA State Parties, as well as grants and technical assistance, to address tariff revenue losses caused by the AfCFTA. It will also provide support to countries in implementing the various protocols of the AfCFTA.
The General Fund will mobilise concessional finance to support the development of trade-enabling infrastructure and the execution of key industrialisation initiatives. Meanwhile, the Credit Fund will be utilised to mobilise commercial funding, aiding both the public and private sectors in adjusting and capitalising on the opportunities presented by the AfCFTA.
The Fund for Export Development in Africa (FEDA), which is the impact investment arm of Afreximbank and has its headquarters in Kigali, Rwanda, has been chosen as the Fund Manager for the AfCFTA Adjustment Fund.
"This is a fund that is going to be available for people who want to borrow the money at a modest interest rate to boost trade in Africa, be it in agriculture, industry, trading, and all sectors. The youth and women can now present their projects, visions so that they can start the process of borrowing money and understanding how the fund works," Karera said.
Currently, the East African Business Council (EABC) is sensitising SMEs, youth and women in business about the AfCFTA Protocols and their relevance to businesses in the EAC Region.
Karera stated that there is a need to improve the capacity of the private sector in the East African Community (EAC) to take advantage of the opportunities brought about by the liberalised trade in Africa through the AfCFTA arrangement.
He said Africa currently accounts for only about two per cent of global trade, with only 17 per cent of African exports being intra-African.
The AfCFTA presents an opportunity to enhance intra-African trade; however, member states still need to finalise different aspects of the agreement, such as tariff offers and rules of origin.
To ensure effective implementation, EABC is building the capacity of the private sector, preparing them to commence trading with their continental counterparts, as the AfCFTA has already been in effect since January 2023.
"We have intentionally chosen to prioritise Rwandan SMEs and women traders as beneficiaries who have started trading under the AfCFTA Guided Trade Initiative," Karera remarked.
Fred Mugabe, Director General of Entrepreneurship and Industry Promotion at the Ministry of Trade and Industry in Rwanda, emphasised that Small and Medium Enterprises (SMEs) significantly drive economic development, contributing to nearly 90 per cent of the GDP in the EAC.
Despite their crucial roles, many SMEs in Africa encounter numerous tariff and non-tariff barriers that impede cross-border trade.
"The AfCFTA is designed to address these challenges across all member states, with a focus on scaling up intra-Africa trade and investment, particularly for SMEs," he added.
After negotiating a 90 percent tariff liberalization, Rwanda has started to experience economic advantages from the AfCFTA market through its participation in the Guided Trade Initiative.
Beneficiaries' perspective
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Jeannette Umutoniwase, a businesswoman in the fashion industry who trades clothes, shoes, bags and earrings said, "I am keen on knowing the opportunities available for trade in the fashion industry and how we can access the funds. I need to export my products to more countries as I have been selling in some countries, but lack of enough capital is a big challenge to increase quality and quantity."
She also raised concerns over the cost of shipment.
"Shipping is costly. We worked with one company but exporting one kilogramme to the US market could cost $35. If we need to export 20 kilogrammes, it is a big challenge. Raw materials are also very expensive," she said.
She noted that due to such costs, Made in Rwanda products remain expensive on the market.
"This could derail our competitiveness on the AfCFTA market," she noted.
According to Regis Dushimiyimana who produces sports garments, there is a need for a platform where information about the AfCFTA market and fund can be shared with SMEs.
"We are targeting countries where RwandAir can fly to," he added.
