Small and medium size businesses are the “bedrock of African economies,” agreed representatives from multilateral financial institutions, pledging their commitment to developing the continent’s SMEs. The leading financiers were speaking at a panel discussion on their collaborative role in economic growth during the Intra African Trade Fair 2021 (IATF 2021) taking place in Durban, KwaZulu Natal, South Africa.
The discussion was launched by Mr Amr Kamel, Executive Vice President in charge of Business Development and Corporate Banking at Afreximbank, who acknowledged the importance of trade in Africa as one of the catalysts for economic development. SMEs account for 90% of African economies but are sometimes sidelined when funding and investment opportunities are being reviewed. “Trade is critical for economic development in Africa, and SMEs are the most significant economic drivers, but they get the least support,” he said.
A critical challenge to trade in Africa, particularly at an SME level is linked to currencies. The Arab Bank of Economic Development (BADEA)’s Director General, Dr. Sidi Ould Tah, expressed an interest in partnering with Afreximbank to develop an integrated payment system. He favours leveraging its current infrastructure with that of Afreximbank’s revolutionary Pan-African Payment and Settlement System (PAPSS) to further ease economic operations for SMEs. PAPSS is a revolutionary Financial Market Infrastructure that enables instant, cross-border payments in local currencies between African markets.
These MFIs are unique in their approach to Africa, because while they may be smaller than their global counterparts, their focus is aligned with their commitment to promoting trade as a vehicle for economic development. “We are interested in trade, production and diversification in Africa,” said Mr Admassu Tadesse, President and Chief Executive, Trade and Development Bank.
As with all sectors, the Coronavirus pandemic forced the MFIs to review their operations and innovate in their delivery of services to the African continent. Mr Solomon Quaynor, Vice President, Private Sector – Infrastructure Group and Industrialisation at the African Development Bank (AfDB) said that the AfDB elected to scale up its operations in an effort to compensate for the disruptions that the pandemic caused to all financial systems. The AfDB therefore created a US$3 billion COVID-19 social bond to help Africa address the realities of the pandemic disruptions.
Most governments in Africa are heavily indebted and have become reliant on aid from developed countries. “It is implied that the global north knows what it is doing and will face no crisis; but that the global south does not know what it is doing and will need to be bailed out,” said Sanjeev Gupta, Executive Director and Board Member, Africa Finance Corporation. However, COVID-19 caught both the global north and global south off-guard, and for the first time in decades, the global north diverted its aid channels inwardly and aid to the global south dried up. “In order to support Africa, we chose to re-evaluate our ability to support the continent and innovated our offerings to provide a US$2 billion fund to solve Africa’s immediate challenges, and this proves that if we focus on what we can control, money is available for what is required,” he added.
Engineer Hani Salem Sonbol, CEO of the International Islamic Trade Finance Corporation (ITFC) said they have a mandate to support member countries in good times and in bad, and that this business model has been sharpened with every global financial crisis allowed the ITFC to support African member countries during the pandemic in a tangible way. “We have a 3-R programme valued at US$2.3 billion which has allowed us to respond to Africa’s pressing health services, assist with recovery and re-start the longer-term packages of recovery,” he said.
Mr Serge Ekue, President of the West African Development Bank (BOAD) stressed the need for MFIs to focus on a holistic level of support for Africa. “We have to foster the development of infrastructure, energy, agriculture for food security and agribusiness, real estate for social housing and the health and education sectors,” he said. This approach of providing solutions that extend beyond business needs was reiterated by Dr Tah. “BADEA is currently funding a feasibility study for a One Africa internet connectivity project, which will go a long way in enhancing communication within the continent and thereby catalyse achievement of the intended objective,” he said.
Looking towards the future of Africa, Afreximbank unpacked how the Fund for Export Development in Africa (FEDA) could be accessed by African businesses to usher the continent through to its next trade milestone. Mr Emmanuel Assiak, Acting CEO, FEDA, said that the fund was about impact investment. “FEDA is one of our value-added initiatives to Africa. We have three objectives – to support businesses in the intra-African value chain, to support businesses in value added exports; and finally, to focus on industrialisation and bringing partners on board to support them from an equity perspective in the move from local business to exporting into the region.” This commitment to Africa from Afreximbank has translated into the creation of a fund of US$500 million which will be launched to target the sectors that were previously not serviced by the private funds.
For further information about IATF2021 please visit www.intrafricatradefair.com