The African Export-Import Bank (Afreximbank) is to implement a new strategy aimed at driving industrialization across Africa and increasing intra-African trade by at least 50 per cent in the next five years.
The Afreximbank Intra-African Trade Strategy, approved by the Board of Directors at its quarterly meeting in Johannesburg on 2 April 2016, will see the Bank work with partners to ramp up trade among African countries to $250 billion from its current level of about $170 billion by 2021.
The strategy will involve expanding existing trading activities within Africa’s regional economic communities, integrating informal trade into formal frameworks, reducing trade barriers and minimizing the foreign exchange costs of intra-African trade.
“Intra-regional trade will drive value addition in Africa and help reduce the continent’s dependence on commodities,” says Dr Benedict Oramah, Afreximbank President, following the approval of the strategy.
“It would also allow for the expansion of domestic trade value chains, thereby strengthening the capacity of African economies to resist economic shocks.”
“The fact that about 40 per cent of intra-African trade is done in the informal sector shows that there are institutional gaps,” continues Oramah.
“Afreximbank intends to play a significant role in reducing these barriers, by promoting the emergence of export trading companies and by helping to resolve regulatory and policy issues through a deepening of partnerships and bilateral trade arrangements.”
Information released by Afreximbank after the approval of the strategy showed that it will be centered on three core pillars, namely, Create, Connect and Deliver.
Under the create pillar, the Bank will support the expansion of the production, processing and export capabilities of African economies with trade finance instruments, for import of investment goods, project finance, lines of credit, export development finance and guarantees, and will provide project financing to construct infrastructure for the services sectors and for the development of industrial parks.
The connect pillar will consist of initiatives to provide a facilitative environment to increase the flow of goods and services, including facilitation of linkages with public and private entities, institutions, agents and entrepreneurs along the trade value chain. It will also involve support for export trading companies the launch of an Intra-African trade payment platform using a clearing arrangement operated by the Bank that will reduce foreign currency costs of the trade.
For the deliver pillar, Afreximbank will deepen access of traders to African markets by creating effective and cost-efficient distribution mechanisms through the financing of transport logistics and storage infrastructure.
To support the Intra-African Trade Strategy, the Board of Directors also approved a revised local currency programme that will allow the development of yield curves via African currencies, which will encourage greater use of local currencies, thereby further reducing the foreign exchange cost of intra-African trade transactions.
Afreximbank plans to hold a formal unveiling of the Intra-African Trade Strategy during an Intra-African Trade Forum scheduled to hold in Abidjan, Côte d’Ivoire in May 2016.