Malawi and other countries in the African Continental Free Trade Area (AfCFTA) stand to benefit from the $40 billion (about K33 trillion) adjustment fund designed to lessen the economic impact of tariff reduction to support the implementation of the agreement.
The AfCFTA Secretariat said recently it had already made available $1.5 billion (about K1.2 trillion)for the fund and was mobilising resources to increase it to $40 billion.
Further to this, the secretariat is mulling on establishing a Pan- African payment platform which would offer businesses an opportunity to conveniently make payments without necessarily converting their currencies.
In an interview this week, Ministry of Trade spokesperson Mayeso Msokera described the AfCFTA Adjustment Facility as an important financing instrument that “will contribute significantly in complementing measures taken at national level to lessen the possible impact of trade liberalisation under the AfCFTA, such as the loss of tariff revenue”.
On the digital payment platform, he said the platform will offer the country’s merchants a convenient and affordable means of receiving and making payments for their transactions.
Said Msokera: “Currently, to make payments for goods and services bought within Africa, most business people have to first convert the funds from, say Malawi kwacha into dollars before it is transferred; and then the recipients will also have to convert the dollars into their local currencies [or vice versa].
“This increases the transaction costs in terms of money and time. This digital platform will, therefore, enhance cross border payments by eliminating the need to buy a third currency; hence, making it easier for our private sector to conduct business under this agreement.”
Addressing a summit on the progress of the AfCFTA in Accra recently, AfCFTA secretary general Mene Wamkele said countries that would be affected by tarrif loss would be able to access the fund for productive sector investment.
He, however, mentioned currency convertibility as among the key issues affecting trading within the continent, revealing that the cost of currency convertibility alone added about $5 billion (about K4.1 trilliion) to the cost of doing business in the continent.
To address this challenge, Wamkele said the secretariat was establishing a Pan-African payment platform which would offer businesses an opportunity to conveniently make payments without necessarily converting their currencies.
Through the AfCFTA, Malawi has potential to tap from a $943 million (K783 billion) export markets through the African Continental Free Trade Agreement (AfCFTA).
The Malawi AfCFTA National Strategy also shows that the continental trade agreement has the potential to expand its exports market outside the Common Market for Eastern and Central Africa and the Southern Africa Development Community.
Reads the strategy in part: “The overall AfCFTA opportunities and Malawi’s strengths are the growing African populations and cities, comparative advantage in agriculture, selected services, and low minimum wage.
Malawi participation in the AfCFTA risks are mainly short-term revenue losses and some dynamic impacts on the structure of the economy.”
The AfCFTA is set to create the biggest free trade area in the World with a market of more than 1.2 billion people and a combined GDP of more than $2.5 trillion.
Studies suggest that if successful, Africa’s manufacturing sector will double in size, with annual output increasing from $500 billion in 2015 to $1 trillion in 2025, and contributing additional 14 million stable, well-paying jobs.