A market of more than 100 million inhabitants, where only one-third of those over 25 have a bank or mobile finance account (compared to an average ... of 58.5% in sub-Saharan Africa and 79.5% in neighbouring Kenya). An economy where one public institution, Commercial Bank of Ethiopia (CBE), alone manages 55% of outstanding credit. A banking industry so inefficient that its costs absorb 56% of its revenues, but where the return on assets is four times higher than that of Moroccan banks…
The group is in “advanced” discussions with DFIs to raise finance for projects such as one-stop border posts, trade logistics parks and trade finance, Beer says. The aim, he says, is to attract finance that will improve trade infrastructure to the point where users will be prepared to pay for it.
Beer, based in Nairobi, took over from founding CEO Frank Matsaert on 1 September. He’s now developing a new 10-year strategy for TMEA which will include a focus on digitisation. TMEA has been a “victim of its own success” and now needs a “strategy 2.0”, he says.
The East African Community (EAC) has been expanding and deepening its market, with the (DRC) joining this year. In May, the community’s council of ministers adopted a maximum import duty rate of 35%. Research from Deloitte argues that the maximum rate will promote industrialization, while eliminating stays of tariff application which “have in the past distorted intra-EAC trade”.
Protectionist fears still need to be overcome if the region is to reach its full free-trade potential, Beer says. An obstacle to increased trade with the DRC, he says, is the difficulty of moving products from the eastern DRC to the coast. TMEA is in talks on ways to extend existing transport corridors into the eastern DRC, he says.
TMEA’s commercial venture Trade Catalyst Africa (TCA) aims to raise grant finance in the tens of millions of dollars. The goal, says Beer, is to use this to trigger investment from DFIs of between three and five times the amount of the grants.
- Project returns will be capped, with any excess returns being paid to governments or used to reduce user fees, Beer says.
- He aims to start making investments in 2023. “We see it proceeding very quickly.”
TMEA was created in 2010 as a non-profit organisation aiming to lower barriers to trade in the region. It is funded by development agencies in Europe and North America. Drought in east Africa and higher commodity prices triggered by the Russia-Ukraine war mean there is a need to focus on “humanitarian logistics”, Beer says.
He is working on such a project focused on the Horn of Africa which he aims to start in current months. East Africa can produce enough to feed itself, he says. “Trade can enhance food security.”
The group also has a Green Corridors programme, which aims to achieve climate-resilient infrastructure and transport. The programme is in discussions with partners on how to facilitate a shift from air to sea freight amid pressure to cut emissions, Beer says. The aim is to avoid “empty backhauls” in which vessels used to import goods return empty, he adds.
- Technological advance has made it possible for sea freight to be used for industries such as horticulture, he says.
- Priorities include the development of cold-chain storage, with the possibility of using solar power for the fridges.
- Port and rail infrastructure in the region needing to be improved to make its use commercially viable, Beer says.
- TMEA is also in talks on creating a set of standards for green regional transport.
TMEA aims to use grant funding to crowd in development finance and make east African trade self-sustaining.
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