Tuesday,17 July, 2018
Current issue | Issue 1292, (21 - 27 April 2016)
Tuesday,17 July, 2018
Issue 1292, (21 - 27 April 2016)

Ahram Weekly

Strengthening African economies

New tools to boost intra-African trade and the continent’s level of industrialisation are now available, reports Niveen Wahish

Al-Ahram Weekly

The African Export-Import Bank (Afreximbank) last week launched a new Intra-African Trade Strategy to boost economic integration among African countries. It aims to strengthen the production and export capacities of African countries and raise intra-African trade by 50 per cent, from the current level of $170 billion to $250 billion by 2021.

Boosting intra-regional trade will help reduce the continent’s dependence on commodities, according to Benedict Oramah, president of Afreximbank. Established in 1993, the bank is a Pan-African multilateral financial institution that finances and promotes intra- and extra-African trade.

Speaking to Al-Ahram Weekly, Oramah clarified the role of the bank in reinforcing regional trade arrangements like the Common Market for Eastern and Southern Africa (COMESA), the Southern African Development Community (SADC) and the Tripartite Free Trade Area (TFTA), a proposed African free trade agreement between COMESA, SADC and the East African Community (EAC).

Within the framework of these agreements, Oramah said, are efforts at the governmental and business levels. “But if we do not have the finance to make sure that the trade takes place, those activities will not happen,” he said.

The role of Afreximbank is “to make sure that those initiatives work, since without finance and risk management products the initiatives will not achieve their full objective,” he added.

Three core pillars of “create,” “connect” and “deliver” characterise the new strategy. As part of the bank’s “create” pillar, it will provide trade finance instruments for the import of investment goods, project finance, lines of credit, export development finance and guarantees, and project financing to construct infrastructure for the services sectors and for the development of industrial parks.

The “connect” pillar will consist of initiatives to facilitate linkages with public and private entities, institutions, agents and entrepreneurs along the trade value chain. It will also involve the launching of an intra-African trade payment platform using a clearing arrangement operated by the bank that will reduce the foreign currency costs of trade.

As part of the “deliver” pillar, Afreximbank will work to create effective and cost-efficient distribution mechanisms by the financing of transport logistics and storage infrastructure.

Oramah added that by supporting intra-African trade the bank is indirectly boosting Africa’s exports to the world.

“If we achieve what we are trying to do in intra-African trade, we will confer on our member countries the dynamic comparative advantage that they need to compete effectively globally. Then we can hope that Africa will be more integrated into the global economy,” Oramah said.

He acknowledged that other issues, including poor infrastructure, hamper intra-African trade. While planning to address these through the new strategy, he said that the bank cannot do things alone.

Afreximbank is working closely with the African Development Bank, he said, to make sure that the needed infrastructure is built. He added that individual governments are also making efforts in that regard, giving the example of Egypt, which is building a road to Addis Ababa as part of a greater plan to build a trans-African highway to link Egypt to South Africa.

Beyond infrastructure, Oramah said there is also the issue of standards. He said the bank is working with the African Organisation of Standardisation to deal better with the issue of the multiplicity of standards, reducing these because they are a non-tariff barrier to intra-regional trade.

Afreximbank has also announced increased cooperation with Egypt. The bank’s current portfolio in Egypt has around $3.5 billion of exposure in exports, imports and project finance.

It is currently implementing the Egypt-Africa Trade Promotion Programme (EATPP), to which the bank has allocated $500 million to facilitate the expansion of Egypt’s trade with the rest of Africa. A total of $300 million has already been disbursed.

Another $500 million has been earmarked for Egypt in cooperation with the Central Bank of Egypt to encourage commercial banks to help manufacturers obtain the raw materials they need for exports, Omarah said.

The plan aims to alleviate temporary foreign currency availability constraints in the importation of strategic and key industrial products.

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