The African Continental Free Trade Area (AfCFTA) is not merely about trade but rather putting in place industrial policies that facilitate the accelerated development of manufacturing industries, said Akinwumi Adesina, the President of the African Development Bank (AfDB).

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He was speaking during a media briefing, on May 27, at the start of the five-day AfDB Annual Meeting, in Nairobi, Kenya.

Themed ‘Africa’s Transformation, African Development Bank Group, and Reform of the Global Financial Architecture’, the meeting comprises the 59th Annual Assembly of the African Development Bank and the 50th meeting of the African Development Fund.

It brings together key officials of bilateral and multilateral development agencies, leading academics and representatives of non-governmental organizations, civil society, and the private sector to engage in high level discussions that seeks the socioeconomic transformation of the continent.

Adesina noted that Africa’s transformation will greatly depend on the realization of AfCFTA’s potential, precisely in developing industrial manufacturing that allows specialization in value chains of which the continent has a comparative advantage for national, regional, and global markets.

"Simply trading is not enough. We have been trading forever and our forefathers have been doing so. But if I trade maize, and you trade sorghum in a free trade zone, both of us are going to be competitively and efficiently poor,” he said.

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According to him, industrial manufacturing should be at the core of Africa’s transformation because it allows the continent to expand its exports around the world.

"So, when I talk about infrastructure, it’s not about connecting a village to a village but the introduction of corridors and strategic infrastructure platforms that allow Africa to stand strong and competitive.”

He mentioned the Lobito corridor that connects Angola to Zambia and DR Congo, the central corridor of railway that links Tanzania to Burundi, the Desert to Power initiative that seeks to make the Sahel the world's largest solar production zone with up to 10,000 MW of solar generation capacity.

Global financial architecture and Africa debts

In the past 10 years, 19 African countries issued more than $200 billion in Eurobonds taking advantage of the low interest rates. According to Adesine, with the current depreciation and contractionary monetary policy in the Eurozone and the US, the cost of debt service has gone over the roof.

"It’s not just about countries borrowing, they need more concessional financing which should be followed by efficient use of the borrowed money in public expenditures,” he said.

Additionally, he noted, the needed change in the global financial architecture is for Africa not to be penalized on the account of unfair risk assessment.

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According to UNDP, if African risks are appropriately and fairly estimated, African countries would save $75 billion per year in their debt service.

Africa’s external debt has almost doubled since 2010, from 21.2 percent to 38.6 percent of GDP in 2022, and debt service payment has increased from 3.5 percent to around 6 percent of GDP under the same period, absorbing about 11.3 percent of government revenue in Africa.

Changing of the financial architecture also looks at Africa’s Special Drawing Rights (SDR). Adesina announced that the board of the International Monetary Fund allowed $20 billion as a limit of SDRs to be rechanneled towards hybrid capital to be used by multilateral development institutions.

Domestic resource mobilization

Another important topic that will continually be discussed at the meeting is mobilizing domestic resources for Africa’s transformation, which is currently structurally insufficient.

This includes the instruments to attract private capital and how to efficiently manage it, prevent illicit capital flows, and more money lost in corruption.