The African Union is convening a consultative forum to assess the implementation of the African Union Financial Institutions (AUFIs). The meeting scheduled for 13- 15 December 2023 in Lusaka, Zambia will gather participants from the Ministries of Finance, Central Banks, African Union Organs and Specialised Agencies, Regional Economic Communities, Association of African Central Banks, African Securities Exchanges Association, and development partners will look into the economic and political challenges impeding the Member States ability to sign and ratify legal instruments establishing the financial institutions, constraints that restrain the continent to collectively pool their sovereignty in order to mutualise their efforts and resources for the establishment the AUFIs.
The forum will also formulate a strategy to generate the much-needed consensus and enhanced political will on key issues, and galvanize the momentum towards the establishment of the AUFIs.
The dynamics in the global economic and financial structures continue to present challenges that threaten the macroeconomic stability, economic growth, and sustainable development in Africa. The continent has taken on various economic and political integration initiatives, such as trade promotion, acceleration of inclusive growth and sustainable development to minimize the impact of the resulting instability. While trade integration has received significant attention and made great strides over the years, financial integration has progressed slowly.
In 2009 and 2014, the legal instruments for the establishment of the African Investment Bank (AIB) and the African Monetary Fund (AMF) were adopted respectively. However, none of the financial institutions has reached the requisite number of ratifications to enter into force. The inadequate funding for establishing the African Union Financial Institutions has been detrimental to the operationalization of the African Monetary Institutes, which is the first step toward the establishment of the African Central Bank (ACB). The urgency to expedite the establishment of the African Union Financial Institutions has been underscored by the changing global economic landscape due to the COVID-19 pandemic, climate change and insecurity which also calls for the revision of the legal instruments establishing the AU Financial Institutions.
Although challenges exist, there has been notable progress in the establishment of the AU Financial Institutions. Below are some of the notable progress;
In February 2020, the African Union appointed Nana Addo Dankwa Akufo-Addo, President of the Republic of Ghana, as the Champion of the African Union Financial Institutions. The Champion provides political leadership and awareness to accelerate AU Financial Institutions.
In February 2022, the Assembly of Heads of State and Government adopted the macroeconomic convergence criteria of the African Monetary Cooperation Program and mandated the AU Commission and the Association of African Central Banks (AACB) to monitor the implementation of the macroeconomic convergence criteria and report annually. In August 2023, the Assembly of Governors requested the AU Commission and AACB Secretariat to activate the Peer Review Mechanism for monitoring the implementation of the macroeconomic convergence. As such, the Secretariat was formed in October 2023 to oversee this work.
The 6th Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration held in July 2023 recommended to the AU Commission to submit the revised statute of the African Monetary Institute to the AACB Assembly of Governors for consideration and endorsement. Following the Governor’s endorsement, the document has since been transmitted for the consideration and endorsement of the policy organs of the African Union.
Launch of the Africa Exchanges Linkage Project (AELP). The African Union Commission and the African Securities Exchanges Association (ASEA) signed the Memorandum of Understanding (MoU) in July 2022. The collaboration aims to scale up the AELP and transform it into a Pan African Stock Exchange (PASE). The AELP was launched in November 2022. So far, there are nine ( 9) participating Securities Exchanges: The African Union Commission will play an active and central role encouraging more countries to participate in the AELP, a path towards establishing PASE.
The progress made however remains insufficient to establish the AU Financial Institutions within the required timeframe. Member States are encouraged to take ownership and extend the political will to accelerate the implementation process. The establishment of African Union Financial Institutions can contribute significantly to the economic development, stability, and prosperity of the continent. The benefits include among others:
Economic Stability: The institutions can contribute to stabilizing the economic environment by providing mechanisms for fiscal and monetary coordination among Member States.
Increased Trade and Investment: By fostering financial integration, the institutions can facilitate cross-border trade and investment, which can lead to economic growth and sustainable development.
Reduced Dependency on External Sources: African Union Financial Institutions can reduce the continent’s reliance on external financial aid and loans, allowing for greater economic self-sufficiency.
Risk Mitigation: The institutions can help manage financial risks associated with currency fluctuations, inflation, and other economic challenges through mechanisms such as currency reserves and stability funds.
Infrastructure Development: The institutions will play a crucial role in financing large-scale infrastructure projects that benefit the entire continent, such as transportation networks, energy grids, and telecommunications.
Promoting Financial Inclusion: The institutions will ensure financial services are accessible to a larger portion of the population, promoting inclusive growth and sustainable development.
Crisis Response and Resolution: The institutions will serve as a platform for Member States to jointly respond to financial crises, providing a unified approach to problem-solving. The African Monetary Fund provides for the establishment of an African Financial Stability Mechanism that can cushion the continent in case of crises.
Capacity Building and Knowledge Sharing: The institutions will facilitate knowledge transfer and capacity building in areas of financial management and governance, benefiting Member States in the long term. Increased Influence on Global Financial Stage: A unified financial institution can give Africa a stronger voice in international financial organizations, allowing it to better shape global economic policies.
The meeting will be held at the Intercontinental Hotel, Lusaka, Zambia and will be broadcast live on AU digital platforms. Twitter. Facebook and Livestream. A recording will also be availed on AU YouTube channel.