Afreximbank gives fresh impetus to intra-African trade

BUSINESS REPORTER

The African Export-Import Bank (Afreximbank) says the share of intra-African trade in the bank’s portfolio has jumped on the back of a US$20bn disbursements meant to drive trade within the continent.

The Cairo-headquartered bank is on drive to boost intra-African trade, which at 18% in 2021 is low below Europe (68%) and Asia at 59%, according to latest data.

Afreximbank president Benedict Oramah said the pan African bank has made intra-African trade finance the cornerstone of its interventions and have shown that it is not as “risky as historically portrayed”.

“Share of intra-Africa trade in the Bank’s portfolio rose from 3% in 2016 to almost 30% by 2021, on the back of a US$20bn aggregate disbursement for that purpose during the period. We expect to double the disbursement to US$40bn in the 5 years from 2022 to 2026,” Oramah said at the AfCFTA Business Forum on Sunday.

He said the bank has created the African Trade Facilitation Programme through which it is forging strong partnerships with African commercial banks to help them finance intra-African trade.

Afreximbank has established partnerships with around 500 of Africa’s 600 regulated commercial banks and will grant about US$8bn in Letters of Credit confirmation lines to these banks, Oramah said.

“We are making sure that in every African country, there is a bank that can open LCs and make or receive payments with respect to intra-African trade,” he said.

Africa is tipping the African Continental Free Trade Area (AfCFTA) to drive intra-African trade.

The AfCFTA, which came into force in January 2021, is touted as Africa’s Marshall Plan with a potential to lift 100m Africans out of poverty and contribute US$450bn to Africa’s GDP by 2035, according to a report by the World Bank.

It is the world’s largest free trade area bringing together the 55 countries of the African Union and eight regional economic communities.

Of the countries, 54, inclusive of Zimbabwe, have signed the agreement while 47 have deposit instruments of ratification. The AfCFTA will create a market with a population of about 1.3bn and a combined GDP of over US$3 trillion.

AfCFTA Secretariat secretary general Wamkele Mene said the private sector has to play a critical role implementation of the AfCFTA.

Africa’s private sector is estimated to account for about 80% of total production, 67% of the investment and employs 90% of the working-age population, he said.

“As I have noted before, governments do no trade, the AfCFTA Secretariat does not trade, it is the private sector that drives trade,” Mene said.