An overdependence on primary commodity exports is one of the key risk factors limiting Africa’s global trading capacity, Jean-Louis Ekra, President of the African Export-Import Bank (Afreximbank), has said.
Addressing participants at the World Strategic Forum in Miami, United States, on 14 April, Mr. Ekra said that the bulk of the continent’s products were still being exported as raw materials with little or no value addition, leaving African economies to be insufficiently hedged against external shocks due to commodity price fluctuations and volatility in global demand.
Also affecting the continent’s global trading capacity was the slow pace of regional integration even though it was known that economic and trade integration could help foreign investors take advantage of economies of scale and reduce transaction costs, including those associated with regional infrastructure projects, he added.
The President noted that although considerable effort has been made to increase economic integration in Africa, especially in the SADC and EAC regions, the pace of such integration had remained very slow.
President Jean-Louis Ekra (3rd right) joined by other panelists: (L-R) Bill Johnson, Florida State Secretary of Commerce; Nicholas Remillard, President, International Economic Forum of the Americas; Andres Rozental, President, Rozental & Asociados, Mexico; Mohsin Khalid, Executive Director, Ittehad Steel Group, Pakistan; and Victor Villalobos, Director-General, Inter-American Institute for Cooperation on Agriculture.
The poor state of trade-related infrastructure was another major challenge as it hindered the realization of growth potentials of African economies, he continued. That situation, however, presented enormous investment and financing opportunities for investors interested in Africa.
On Afreximbank’s role in supporting African trade, Mr. Ekra announced that the Bank had put in place a number of instruments and tools to support and finance international trade and project ventures across the continent.
These included an Export Credit Agency (ECA) Loan Facilitation programme under which it partners non-African ECAs to facilitate the acquisition of industrial equipment for African businesses; a Country Risk Guarantee Facility under which it has created and deployed instruments that mitigate perceived risks associated with African entities; a Factoring programme that is aggressively promoting factoring as an instrument of choice in dealing with new markets and non-commodities trade; and Africorrbanking, which the Bank introduced to enable it share the credit risk of African banks opening letters of credit for confirmation by international banks.
Other Afreximbank programmes include the Construction/Tourism-Linked Relay Facility (CONTOUR) which is supporting African entrepreneurs to become major players in the hospitality industry; the Africa Cocoa Initiative (AFRICOIN), which is supporting agro-processing by contributing to the refurbishing, expansion and creation of African-owned cocoa processing plants in West and Central Africa, with the goal of achieving the diversification of African exports away from commodities; and a Syndications Programme which creates pools African and non-African banks to co-finance imports of essential goods into Africa. Since its launch in 2000, the Syndications programme has mobilized or co-mobilized a total of $30 billion in support of imports of investment goods into strategic sectors of the African economies.