Friday,22 February, 2019
Current issue | Issue 1346, (25 - 31 May 2017)
Friday,22 February, 2019
Issue 1346, (25 - 31 May 2017)

Ahram Weekly

Prioritising economic cooperation

Al-Ahram Weekly talks to Benedict Okey Oramah, chairman of the board of the African Export-Import Bank about how Africa could take advantage of its economic opportunities and assesses what Egypt must do to ensure that its economic ties live up to its political and historical ties

Prioritising economic cooperation
Prioritising economic cooperation

Despite improvements in inter-African trade, it remains below its potential, Benedict Okey Oramah, chairman of the board of directors of the African Export-Import Bank (Afreximbank), told Al-Ahram Weekly that a different approach was needed by governments and businesses alike.

Headquartered in Cairo, the bank is an international multilateral organisation with offices in Harare, Abuja, Abidjan and Nairobi.

The African continent, covering some 30 million square km, is the second-largest continent in the world and approximately three times the size of the United States, write Mwangi Kimenyi, Zenia Lewis and Brandon Routman of the Brookings Africa Growth Initiative, a US institution.

Viewed from the perspective of its economy, however, Africa is quite small. In 2017, Africa’s gross domestic product (GDP) was approximately $3.3 trillion, compared to around $18 trillion for the US. “Given these small economic dimensions, the commercial engagement between African countries will be crucial for generating economic growth and raising the standards of living for many on the continent,” the authors say.

While in the mid-1990s inter-African trade was around $20 billion, today it has reached $170 billion, Oramah said, pointing out that these figures do not take into account the informal trade that is taking place.

The latter could be worth an additional $40 to $60 billion, he said, meaning that inter-African trade has grown more significantly. “But compared to Africa’s total trade with the world, it still lags behind what we want,” he said, saying that inter-African trade currently stands at close to 15 to 17 per cent of its total trade, estimated at $1.1 trillion, but that this pales in comparison to inter-European trade, which reaches 70 per cent of Europe’s total trade.

According to Oramah, although many people say that infrastructure is a major challenge for the growth of trade and investment in Africa, this is not the main reason. “The existing infrastructure in Africa is able to carry $1.1 trillion in total trade, so why is inter-African trade only $170 billion,” he questioned.

To him, the real constraint is the lack of market knowledge among African countries. “People are not aware of what is happening around them in Africa, what their neighbouring countries need in terms of goods, nor what these countries can offer them,” he stressed. The first thing that crosses the minds of African business people is the European or US market and whether to import or to export, he said, and they rarely think of trade with neighbouring countries.

He said the bank had recently taken some Egyptian pharmaceutical companies to an exhibition in Nigeria where people were amazed to learn that Egypt had a strong pharmaceutical industry.

To overcome such a lack of awareness, Oramah said the bank, together with the International Trade Centre, a World Trade Organisation and United Nations agency that supports the internationalisation of small and medium-sized enterprises, was creating a strong trade information service so that anyone could access information about African markets.

The service will be called the Africa Trade Centre and will include an online platform with a market place where suppliers from any country in Africa can be found and where buyers will be able to pay in local currency.

This service will deal a lot with business-to-consumer relations because that is a way to grow, but the bank is also creating export trading companies because the reason the size of informal trade was so huge in Africa was because there were so few institutions, Oramah said.

Small and medium-sized enterprises should not be expected to start looking for markets, he pointed out. “We are creating the regulatory framework for countries that are interested, and we are ready to invest in equity,” he added. Another effort to boost awareness will be an inter-African trade fair where all African countries can exhibit their goods. The location and date of this have yet to be set.

Oramah is optimistic about attempts to create a Continental Free-Trade Area (CFTA) that aims to create a single continental market for goods and services. “There is a political will there,” he said, adding that even though a deadline for the creation of the CFTA for 2017 was ambitious, it could still materialise.

“If you do not try, you will not get there. I believe it will be successful, as people are beginning to see that we share a common destiny in the continent,” he said. He pointed out that the markets where Africans have used to go are unlikely to help in the future as they are growing slowly and Africa is one of the only truly dynamic economies in the world today.

In many countries, the population is ageing. But Africa has a rapidly growing youthful population, along with increasing rates of urbanisation and a growing middle class, all drivers of demand. Moreover, Africa has resources, and 60 per cent of the world’s arable land is in Africa. It also has water and minerals.

“Africa is the next frontier. Many companies and politicians are beginning to see that. Otherwise, you would not see so many countries trying to make alliances with Africa. It would be a pity if Africa missed this opportunity itself,” Oramah said.

He said that African countries should make inter-regional cooperation their priority, though this did not mean that African countries should not take advantage of opportunities outside Africa where markets are larger and could provide other opportunities. However, “if we take advantage of our own internal capacities, we stand a good chance of realising more dynamic sustainable growth going forward, instead of adjusting to what we have today.”

What that does for Africa, he explained, is that it makes African countries focus on producing goods that have a higher technological content. If they continue traditional trade arrangements under which they mainly sell commodities, nothing will improve for Africa.

He praised the fact that Egyptian companies are beginning to go into Africa, but “they have to do more,” he said. They must begin to embed an exporting culture, he pointed out, and they must make sure that employees in charge of exports have proper training and export selling skills.

They need to know that an African businessman can buy what he needs from anywhere in the world, so if that person is not treated as if Egyptian exporters truly value his business, he will take that business elsewhere. Oramah gave an example of an African businessman who wanted to import tanks, but because he felt he was not taken seriously in Egypt, he found what he needed in China.

Oramah called on African governments to enable more freedom of movement. If it is easier to move to Europe than to another African country, then why would businesses wait, he asked. Some countries are beginning to do just that. Rwanda and Senegal have removed the need for visas, and they have not been overrun. “Unless we are bold, we are not going to move,” he said.

Afreximbank supports inter-regional investment and has created a facility called the Inter-African Investment Finance Facility that makes it possible to finance a company in one country before going to invest in another. The reason the bank was doing this, he said, was that when investment happens, trade in goods and services follows.

The bank also has an Inter-African Investment Guarantee Facility to make sure that companies that want to invest in Africa are protected from the risks that investors are often concerned about, he said.

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