By MAIMBOLWA MULIKELELA –

ZAMBIA will be among African nations exposed to fiscal adjustment shocks and revenue losses arising from the implementation of the African Continental Free Trade Area (AfCFTA).
To mitigate the short-term revenue losses, the Government will be required to put in place policy frameworks that improve tax compliance and enforcement.
Countries that trade the most with other economies in the region like Zambia should strengthen its Value Added Tax (VAT) systems, streaming exemptions and expanding the coverage of income taxes.
In addition, Zambia needs to diversify its resource growth, broaden the tax base, and harness digital and mobile technologies to improve record-keeping, monitoring, and auditing.
It is clear that with the implementation of the AfCFTA, Zambia will have huge revenue losses following the elimination of tariffs.
However, these fiscal reforms are unlikely to fully pay for short-term adjustments cost associated with sudden huge revenue losses.
Having said this, the recently signed African Export-Import Bank (Afreximbank) US$1 billion AfCFTA Adjustments Facility will enable countries adjust in an orderly manner to sudden significant tariff revenue losses arising from the implementation of the agreement.
This AfCFTA Adjustment Facility will provide short-to medium term financing to vulnerable countries like Zambia, enabling them to adjust to sudden tariff revenue losses.
This is following the signing of the agreement between AfCFTA Secretariat and Afreximbank relating to the management of the base fund of the Adjustment Fund.
Furthermore, the Fund will support African countries and private sector to effectively participate in the new trading environment established under the AfCFTA.
According to AfCFTA secretary general Wamkele Mene, the Adjustment Facility is one of the instruments designed to assist state parties deal with short term tariff revenue losses and support its implementation.
Mr Mene says as they make significant progress in establishing schedules of tariffs concessions, the finalisation of the Adjustment Fund would enable AfCFTA to maintain and even accelerate the momentum.
“We now have an excellent tool to provide support to our state parties and their private sector through financing, technical assistance, grants and compensation funding.
“It will help them mitigate revenue losses and competitive pressures that may result from reduction in tariffs and liberalisation of markets in order to tap into the opportunities of the AfCFTA,” he says.
Mr Mene says this is another important step towards the successful implementation of the continental free trade agreement.
The resources required for the Adjustment Funds over the next five to 10 years are estimated at US$10 billion.
Afreximbank has already committed US$1 billion towards the AfCFTA Adjustment Fund.
Afreximbank president and Chairman Benedict Oramah says the fund will be used to support both the public and private to address short term disruptions.
This will enable the private sector to retool, deskills, and develop capabilities to produce value added goods and services that can be traded competitively within the continent and catalyse the emergence of AfCFTA-led regional value chains.
“This Adjustment Fund, which is taking shape, comes on top of the Pan African Payment and Settlement System (PAPSS), which was commercially launched on January 13, 2022 in Accra, and the resoundingly successful second edition of the Intra-African Trade Fair, which was held in November 2021 in Durban,” Prof Oramah says.
These are some of the initiatives that the bank is proud to implement in close collaboration with the AfCFTA Secretariat, setting the conditions that will undoubtedly lead to a smooth implementation of the AfCFTA.
He says the Base Fund of the Adjustment Fund would address urgent needs of state parties relating to tariff revenue losses and the transposition costs to enable them to implement the AfCFTA Agreement.
“We will be launching the General Fund and Credit Fund very soon to address the needs of the private sector including the small and medium enterprises, women and youth,” Prof. Oramah says.
The bank is looking forward to working with all development partners, development financial institutions, commercial banks, export credit agencies and other investors and strategic partners to mobilise resources for the Adjustment Fund to enable the continent to implement the AfCFTA.
The agreement was signed by Prof. Oramah, Mr Mene in the presence of Egyptian minister plenipotentiary (trade) Aly Basha, as well as the African bankers and captains of industry.
Commenting on the Adjustment Fund, Zambia’s Commerce, Trade and Industry minister Chipoka Mulenga says the signing of the facility between AfCFTA Secretariat and Afreximbank was a step in the right direction.
The Adjustment Fund will consist of a Base Fund, a General Fund and a Credit Fund.
Mr Mulenga says Zambia supports the AfCFTA agenda as the country will benefit from the huge markets arising from this.
He however indicates that the AfCFTA should not only benefit a certain group of countries based on their economic standing but should benefit everyone.“It should allow small economies like Zambia to grow to a certain level as much as others have grown; if it is going to build other economies at the expensive of small economies like we are not going to engage in it. Otherwise the AfCFTA is a good thing,” Mr Mulenga says.
Both AfCFTA Secretariat and Afreximbank were mandated by the African Union (AU) Summit of Heads of State and Government and the AfCFTA Council of Ministers responsible for trade to establish an Adjustment Fund.
This was meant to support state parties to adjust to the new liberalised and integrated trading environment established under the AfCFTA Agreement.
The Base Fund will consist of contributions from state parties, grants and technical assistance funds to address tariff revenue losses as tariffs are progressively eliminated.
It will also support countries to implement various provisions of the AfCFTA Agreement, its Protocols and Annexes.
The General Fund will mobilise concessional funding, while the Credit Fund will mobilise commercial funding to support both the public and private sectors, enabling them to adjust and take advantage of the opportunities created by the AfCFTA.
AfCFTA is a regional trading block aimed at removing trade barriers and allowing the free movement of goods, services, and people across Africa.