In this interview he granted on the sidelines of the 25th Annual Meetings of Afreximbank in Abuja, Oramah speaks about the bank and its plans for Africa.
Uche Usim, Abuja
How to leapfrog Africa out of its slow and fragile economic growth to a blossoming super power is the strategic graph Dr. Benedict Okey Oramah plots daily, as he pilots the affairs of the African Export-Import Bank (Afreximbank) in his capacity as the President and Chairman of Board.
Seeing the huge untapped economic resources buried in the bowels of Africa and a corresponding manpower to match, Oramah insists the days of operating as fragmented national economies were over for Africa which needs to come out as a bloc to amplify its voice on the global business arena.
However, Afreximbank is supporting a lot of economic initiatives aimed at cementing intra-African ties and giving the continent greater opportunity to grow exponentially. Part of such initiatives is the $25 billion loan earmarked for the African Trade Strategy (ATS) that would be disbursed on a revolving basis between 2017 and 2021.
Oramah assumed the position of President and Chairman of the Board of Directors of Afreximbank on September 21, 2015. He was previously the Executive Vice President in charge of Business Development and Corporate Banking from October 2008. He joined Afreximbank as Chief Analyst in 1994 and was promoted to the position of Senior Director, Planning and Business Development in 2007.
Prior to joining Afreximbank, he was an Assistant Research Manager at the Nigerian Export Import Bank (NEXIM Bank) from 1992 and holds M.Sc. and Ph.D. degrees in Agricultural Economics, obtained in 1987 and 1991 respectively, from Obafemi Awolowo University, Ile-Ife, Nigeria.
In this interview he granted on the sidelines of the recent 25th Annual Meetings of Afreximbank in Abuja, Oramah speaks more about the bank and its plans for Africa.
Significance of AGM
Twenty-five years of Afreximbank is a remarkable development. That child was born right here in this conference centre and I was there myself as a delegate representing NEXIM Bank. The genesis of the bank goes back to 1980s when Africa suffered an unprecedented economic difficulty.
The economic difficulty was worsened by the global debt crisis that originated from Latin America and so Afreximbank was a response to that crisis. Because when that economic difficulty struck in the 1980s, Africa went into a steep decline.
It was during that time actually that Asia overtook Africa in terms of world development indices. Poverty, wars, coups and counter coups and, at a point in 1980, there were three to four coups in a year, about 14 active wars across Africa and the continent was badly hit.
Nobody believed that Africa could do anything meaningful as a continent. It was in that spirit that the African Development Bank (AfDB) championed the establishment of Afreximbank.
At inception, there was hope and apprehension; people did not know that all the expectations would be met. Twenty-five years have passed and we have a bank that has more than exceeded expectations. We have a bank that has done more than $50 billion in reimbursement; we have a bank that has made much difference; we have a bank that made it important for Africa not to go back to the 1980s.
When a similar kind of economic difficulty struck about three years ago, Afreximbank stood and disbursed $9 billion across Africa to make sure that African economies adjusted to the crisis in an orderly manner and we are pleased that the emergency two-year facility that our board approved
to enable our member countries manage that crisis achieved its objectives such that by December 2017, all but $1.5 billion have been repaid.
African Trade Strategy (ATS)
We have an intra-African Trade Strategy (ATS), which is hinged on three key pillars: Create, Connect and Deliver. The Create pillar deals with intervention we are making to ensure that we produce the goods and services that will fit into intra-African trading efficiently. The Connect pillar deals with all our interventions that are in place to link the producers to the buyers across Africa, while the Deliver pillar is the interventions that make it possible for that connection to be done efficiently because essentially, the logistics are related to infrastructure.
Under that ATS which would elapse by 2021, full implementation was in January 2017, just a few months earlier it was launched. We planned that by the end of five years, we would have disbursed $25 billion on revolving basis.
In the first year, we did $8 billion. We are well ahead of our projections. The disbursements are going to support credit and trade financing that facilitates trade between African countries. We have supported the export of investment goods from Egypt, Tunisia and Nigeria to many other African countries. We’re also supporting trade in food, oil and so on across Africa.
As we speak today, we are supporting the export of industrial parts in Côte d’Ivoire and plans are underway to support same in Nigeria, Togo, Malawi and Rwanda. We are developing a test part certification here in Nigeria to make sure that quality issues will not be a constraint.
Clearing house/African single currency plan
We are finalising the African payment settlement system to provide a clearing platform for payment. All the African countries signed a treaty for us to do this.
As we do this across the 55 countries in Africa, we will create a notional currency, which would be in Africa proper. From a multilateral angle, the use of foreign currency will trend towards zero and if this works right, it will create a platform for single currency.
Agreement with AfDB on $500,000 for factoring companies
SMEs (Small and Medium Enterprises) in Africa have long faced real difficulties accessing external finance for their business activities and this has impeded their growth and prevented them from pursuing commercial opportunities. Afreximbank sees factoring as a solution to bridge the funding gap facing SMEs, and the agreement will support our strategy to grow intra-African trade and facilitate greater SME contribution to regional and global supply chains. We are championing the development of factoring in Africa, and our support focusses on the provision of credit lines to factors, capacity-building workshops, policy and regulatory inputs, advisory services and technical assistance to promote best practices. This agreement with AfDB, and the grant from FAPA, will reinforce and grow the availability of effective factoring across the continent and increase awareness of its availability.
The grant will finance capacity building tailored to address needs, including on-site training, provision of back-office support systems and customised manuals for marketing, credit and risk policy, finance and operations, addition to advisory services to established factoring companies and a platform to enable African factoring companies to network, exchange ideas and share best practices.
It would ensure the development of a sustainable knowledge and learning platform, including e-learning, workshops and the Certificate of Finance in International Trade, which provides four weeks’ formal training in factoring under a programme developed by the University of Malta; and provision of project management coordination to ensure timely project implementation.
The African Continental Free Trade Agreement (AfCFTA) is a very important initiative. You see, intra-African trade is only 15 per cent of Africa’s total trade, compared to Europe’s 67 per cent and we need a sustained strategic shift to industrialisation, increased intra-African trade, and de-commoditisation through increased value addition and export diversification. The AfCFTA and Afreximbank’s 5th strategic plan both emphasise the need for this structural transformation of African economies.
Afreximbank is committed to weaning the continent from over-dependence on commodities and our programmes, notably the African Commodities Initiative, contribute to higher value addition by supporting processing and industrial capacities in various commodity sectors.
We provided $150 million for the banks, which is a revolving trade financing facility for Letter of Credit (LC) to enable them import essential goods. That has also been approved. Our advisory team is engaging the government not only in terms of advising privatisation but other advisory work we are doing including making sure companies are supported to retool their equipment as quickly as possible to be able to expand promotion and increase employment. You may also have heard that we are working the government of what we call Zero Open and the initiative is a guarantee programme we are putting in place to protect FDI (Foreign Direct Investments) that come into Zimbabwe.
We believe that will make it easier for investors to come especially immediately after election so that we do not have a long time lack between elections. We are working with the government to ensure that dollar liquidity is improved. We think that with collaboration between us and the Bank of Zimbabwe, we should be able to improve the situation with regards to external dollars liquidity, which is a priority of the government.
Also, the export trading company has challenges. The biggest challenge is the fact that Africa is the only continent that still has abundant resources and I am talking about arable land. These are becoming scarce in many parts of the world. 60 per cent of the world’s arable land is in Africa. No country is an island. If we promote intra-African trade and it grows, it will also grow trade between Africa and the world. Africa requires an enormous supply of investment goods that will help create equipment that will be used to manufacture goods, build infrastructure. In addition, we are encouraging people around the world who are manufacturers and who want to trade to come to Africa and do joint ventures so that the joint ventures can become engine block to the African trade. That is why in the intra-Africa trade we are organising; we have created pavilions for non-African trade entities. And those pavilions will bring companies that will supply equipment that build ship and so on.
State of operations
At the end of the meeting today, the shareholders have approved the financial statement for the year ended 2017. The shareholders also received the report of liquidity mobilisation, as well as information of managing the new fund the bank has launched, being the Fund for African Export Development (Fundfeed).
The difference between Africa and Southern Asia in terms of export manufacturing is that Southern Asia receives large inflow of direct investment, which Africa does not. In 2016, FDI loan to Asia was $270 billion while FDI to Africa was $59 billion.