African Integration Fund: Feasibility study
Despite numerous resolutions made by African leaders, the African integration process has been marked by slow progress due to differences in political commitment vis-à-vis the integration agenda, limited effectiveness of continental, regional and national bodies dealing with regional integration issues and limited expertise and financial capacity to implement the decisions arrived at.
In recent years the Continent has experienced improved growth performance but it still faces serious challenges of poverty level, economic diversification and international competitiveness. Numerous studies indicate that, if African countries were to increase their share in global trade by only 1 per cent, that would represent an additional annual income of over $200 billion which is approximately five times more than the amount the continent receives as Official Development Assistance (ODA). Yet despite this potentially massive economic return of international and regional trade to Africa, intra-African trade remains relatively small (at around 11-12% of global African Trade) due to numerous non-tariff barriers (NTBs), poor trade facilitation services and limited supporting infrastructure, including transport and logistics, as well as financial institutions and services.
This Feasibility Report on the creation of an African Integration Fund (AIF) has been prepared for the African Union Commission (AUC), under the technical and financial assistance of the UNDP and the supervisory role of the Department of Economic Affairs of the AUC. The AIF is meant to help finance the “Minimum Integration Programme” (MIP) adopted during the Fourth Conference of African Ministers in charge of Integration (COMAI IV) of May 7-8, 2009 in Yaoundé-Cameroon. The genesis for the proposed establishment of the AIF, one among many vehicles deployed by the AUC, was a response to the low level of funds flow to support the integration process towards achieving the objectives of the Abuja Treaty, and that the realization of the MIP is the minimum necessary to accelerate the integration process. The AIF will be a financial facility with two windows: a technical assistance and grant window and a commercial window.
The technical assistance and grant window will offer grant, technical assistance, advisory services and institutional support; while the commercial window would entail a commercial investment and financing fund, the provision of partial loan guarantees and matching grants which should enable the leveraging of additional resources from domestic, regional and international financial institutions. It is also worth stressing that the commercial window of the fund is expected to contribute to the replenishment of the AIF.
The possibility of structuring child trust funds or thematic funds, managed by the host institution or directly by stakeholders such as the AUC or RECs, will be left to the judgment of the AUC, the Steering Committee of the AIF and anchor development partners.
The feasibility study takes cognisance of the significant evolutions in the regional integration process and ambitions of the AU and the Regional Economic Communities (RECs) since the articulation, in 2009, of the MIP which the AIF is meant to support.
Firstly, the AU has expressed enhanced ambitions for its regional integration agenda and launched major continental initiatives (C-FTA, BIAT, CAADP/3ADI, PIDA, AIDA/RADS/ACPI/ATII, RADS/AMV, AGA, APSA, and EPYW).
Secondly, though the pace of regional integration has been relatively slow overall at the level of the RECs, some degree of realization has been achieved in many thematic areas of regional integration (Free Movement of People, Customs Union, TBs, NTBs, Transport Corridors, regional infrastructures, etc.) and some RECs have taken bold steps to speed-up the integration process, namely, with the advent of the Tripartite FTA COMESA-SADC-EAC announced by the three RECs in 2008.
Thus the AIF and the concept of MIP have been “re-contextualized” to account for these major developments in the African regional integration agenda. In other words, the AIF will support priority regional integration programs/projects as well as the re-actualized MIP programs and projects of slow-movers in the regional integration process of the continent.