By Shaimaa Elise and Raghda Helal
Daily News Egypt interviewed Okey Oramah, the new president of the Africa Import Export Bank (Afreximbank) to discuss the bank’s strategy in next period.
What are you priorities for the next stage, as president of Afreximbank?
My priorities are to turn the African economy into a true broad economy. My approach is to focus on the promotion of intra-African trade. This is my yearly strategy, with the goal of transforming the export sector in Africa. It is linked to the direction of trade. Africa is largely dependent on consumer commodities from the US and Europe. Commodities are exported to the US and Europe, where they are manufactured and sent back to Africa at much higher prices, which constitutes an unfair exchange.
In terms of trade based on commodities, this is against Africa. However, if we continue with intra-African trade, almost 50% of the formal intra-African market and 70% of the informal market is manufactured goods.
If we support intra-African trade, we support the acquisition of capacity for manufacturing goods. When there is intra-trading, Africa will have cooperative advantage, and can compete with other countries like China.
We have to encourage manufacturers to exports goods in order to have a competitive advantage and avoid unfair exchange with Europe.
What about African trade agreements?
This is a good step, because it will begin to reduce trade barriers. By creating such agreements, we are getting closer to a Continental Free Trade Area (FTA) and one of the most important agreements is the Tripartite Agreement for a FTA between the three main economic blocs in Africa (COMESA, EAC and SADC) and if the Economic Community of West African States joins the agreement, it will include the whole continent.
What is your strategy to promote intra-African trade?
We support the shifting of resources from financing the inputs of consumer goods to financing investment or capital goods. We support opening more credit lines for three or four years to buy equipments which will increase manufacturing capacity. For example, we will finance equipment rather than wine production, which is a consumer good. In addition, international banks did not finance investment goods because these are medium term projects. The demand for investment goods increased from $50bn in 2000 to more than $300bn in 2014.we do not have a limit for this view, we have our money and we will use guarantees to place them in the market. We are thinking of using crowd-funding to create products, as our vision is to expand the sources of financing.
What is the total capital of the bank now? Is there any intention to increase it soon?
It is about $1.2bn and we intend to increase it to $2bn soon.
What are the total assets of the bank now?
It is $6.3bn, and we expected to increase assets by end of next year to reach $7bn.
What are the bank’s other targets in the upcoming period?
We are also currently working to launch a mobile platform to encourage intra-African payments to decrease the payments problems faced by African countries because of regulatory constraints. Through this platform, we will bring most of the $90bn in informal intra- African trade into the formal trade. The problem is that more people trade by small amount and do most of the informal trade sector, and the governments will encourage intra-African trade by looking to the big companies. We are currently developing this platform, and we aim to launch it next year. We participated with telephone companies and banks in Egypt and Sudan to facilitate the payments rather than transferring foreign currencies or forcing buyers to travel. The buyer can go to the telephone company or the bank we participate with and deposits the money as these companies/banks are on our system, and at the end of the period, we clear the transaction. The aim of this platform is to decrease the cost of trade and foreign exchange.
Are there any plans to priorities exporting and importing products from small- and medium-sized enterprises (SMEs)?
Yes, we have an SMEs programme for factoring facilities in trade and the supply chain, and we financially support any qualified company.
What is the amount of credit allocated for Egypt?
We have limit for each country, and Egypt has a sizable amount, and it is large. We have an Egypt-African trade promotion programme, with $500m in funding, which we launched a few months ago. Half of this amount has been used and we expect the remaining half will be used by December of this year, and we will increase it to reach $1bn by early next year.
How could you view trade financing in Africa?
Trade financing is dominated by short-term businesses, as international banks only finance short-term business for exports, and there is no financing for imports or financing goods. The cost of trade financing is also high. Another problem is the regulatory complaints, which lead international banks to cut their credit lines to Africa.
Afeximbank finances the Preferential Trade Area Bank to support exports. Meanwhile, we received loans and funds from the African Development Bank (AfDB), and the last combined loan from the AfDB to support trade amounted to $280m.
What is the amount of funding allocated for Egyptian companies in the trade sector?
Support for companies in Egypt to cover the risks for buyers is approximately $1bn.
What are the national projects the bank is committed to in Egypt?
Currently, we are conducting a number of infrastructure projects, such as electricity projects, petrochemicals, manufacturing projects and SMEs.