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Afreximbank focuses its ambitions on North Africa
With the opening of a new regional office in Tunis, the African Export-Import Bank (Afreximbank) is looking to grow its business in North Africa. The bank is also broadening its current shareholder base which could extend banking activities to even more countries.
A small revolution is under way. Despite being based in Cairo and frequently investing in Egypt and Sudan, Afreximbank – the multilateral financial institution launched in 1993 – has mainly focused its attention elsewhere on the continent. That is changing.
The bank, whose shareholders are both private investors and African governments, is now seeing the importance of supporting trade flows between North Africa and sub-Saharan Africa.
Increase in commitments
“Why is trade between African countries worth only $170bn? In our opinion, the solution lies in sharing business information. The colonial history of Africa has balkanized the continent. A person in Egypt does not know that a person in Guinea needs the pharmaceutical products they manufacture,” according to Benedict Oramah, the bank’s president since September 2015.
The bank is increasingly financing projects that linkNorth Africa to the rest of the continent. North Africa currently accounts for 27.6% of the bank’s cumulative commitments, compared to only 5% in 2015. At 45% West Africa is the bank’s most active region, says Amr Kamel, Executive Vice President in charge of business development and services at the bank.
Between 2015 and the end of June 2019, Afreximbank’s disbursements across North Africa were $14 billion.
According to bank estimates, North Africa’s trade with the rest of the continent jumped from $4.8 billion in 2010 to $13 billion in 2018.
Lack of information
Afreximbank says these figures still remain well below the trade potential of the six economies in North Africa, which extends from Morocco to Sudan. According to Kamel, there are several constraints on the development of these trade flows, including poor transport infrastructure like insufficient maritime lines and a limited rail network.
He says another barrier to trade is the lack of information available to importers, due to prospecting and marketing deficiencies on the part of regional exporters.
The bank believes that, of all the regions of the continent, North Africa is the one where “trade between countries is the lowest”.
Egypt currently receives the lion’s share of the bank’s financing in North Africa. It ’s one of the 51 countries that either support, or own shares in Afreximbank, and sits on its Board of Directors.
The bank’s cumulative commitments in the ‘Land of the Pharaohs’ reached more than $5bn in September 2017. Among the largest loans in which the bank has participated in recent years is a short-term financing of $200m in two tranches to Telecom Egypt in 2018.
Credits and allocations
In Tunisia, Afreximbank only carried out its first financing transaction in 2017, when it granted a €50m loan to the private conglomerate, Loukil.
In June 2019, the institution also signed an agreement with the country’s central bank to deploy a $500m endowment aimed at “promoting and developing trade and investment between Tunisia and the rest of Africa”. A similar programme has been in place with Egypt since 2015.
A collaboration has also been established with the Maghreb Bank for Investment and Foreign Trade (BMICE) In 2017, Afreximbank estimated that Morocco’s trade with the rest of Africa was valued at $3.3bn. The bank also plans to support the continent’s largest phosphate producer, The OCP Group, to expand into Cote d’Ivoire and Nigeria.
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While the bank has never granted loans in Algeria or Libya, it may start financing projects in these two countries. The bank is in talks with their authorities with a view to making them members of the institution.
Libya could join the round table by the first quarter of 2020, as negotiations are already at an advanced stage, according to Kamel.
Algeria could become a member of the bank next year.
According to Kamel, the results of these new interventions by the bank across the Maghreb are largely positive.
“Very few companies in the region are struggling to meet their commitments,” he says.