The Sunday Mail
Kudzanai Sharara in Bridgetown Barbados
THE products that Afreximbank has been putting into the African market have helped in addressing market failures, as depicted by shifty regulations and the withdrawal of correspondent banking services by international banks, delegates at the ongoing AfriCaribbean Trade and Investment Forum heard on Thursday.
Making contributions during a panel session focused on “Identifying financing gaps and products to facilitate trade and de-risking investment opportunities between Africa and the Caribbean”, panellists said restrictions of correspondent banking relationships and business services by major global banks in certain jurisdictions is impeding trade and investment.
Several African countries, Zimbabwe included, have faced restrictions and withdrawal of correspondent banking relationships by global banks.
The Reserve Bank of Zimbabwe (RBZ) estimates that at least 102 correspondent banking relationships were lost over the last decade, because of the country’s perceived high risk due to sanctions.
Correspondent banking services are key to facilitating foreign currency exchange and payments across the world, and losing such services is a major blow to any country’s ability to transact and trade.
It has been the same in the Caribbean region where Canadian banks have started closing shop.
Afreximbank has, however, stepped in to address “the market failure”, and provide finance and developmental support to African countries and businesses.
Mrs Kanayo Awani, executive vice president of the Intra-African Trade Bank (INAT) described Afreximbank as a model developmental financial institution (DFI) in terms of high intervention, in terms of resolving market failures, and in terms of resolving market crisis.
She said Afreximbank has put together funds to support trade and investment finance across sectors, including providing guarantees for investments that are considered risky.
Mrs Awani said as a DFI, Afreximbank has disbursed US$20 billion under Intra-Africa-Trade alone.
The bank has other programmes that support development of industrial zones, special economic zones, and infrastructure.
During the Covid-19 pandemic, a global crisis, Afreximbank also played a key role, and provided a US$2 billion guarantee for vaccine procurement, according to Mrs Awani.
Simon Tiemtore, group chairman of Vista Bank Group also described the Afreximbank as the model development financial institution (DFI) addressing market failure.
Mr Tiemore said Vista Bank is working with Afreximbank to promote trade, to promote Intra-Africa trade, to promote financial inclusion, finance SMEs and provide some of the innovative and critical instruments that are needed to lift Africa.
“So, we learn from what we have benefited from the instruments that Afreximbank has put together to address those market failures as related to correspondent banking,” said Tiemtore.
He gave an example of the Afreximbank Trade Facilitation Programme (AFTRAF), which has helped enhance the confidence of counterparties in the settlement of international trade transactions, while at the same time improving correspondent banking relationships.
AFTRAF reportedly supports critical imports into Africa, boosts intra-African trade and facilitates the purchase of equipment to produce export goods.
“Afreximbank has a model that works very well today from which we (Vista Bank) were benefiting and doing all our trade financing for either SMEs or any enterprise in Africa that is our client today.
“The model can be replicated here in the Caribbean, as I do see also a shift in the market with the issue of corresponding banks that is preventing Caribbean banks to do trade, promote trade,” according to Mr Tiemtore.
He said the same model can also be used to promote Africa and Caribbean trade.
“In that sense we will be controlling our own vehicle, our own instrument to enable us to trade,” he said.
Afreximbank has, as part addressing market failure and corresponding bank issues, established ‘MANSA’, a pan-African customer due diligence repository for financial institutions, corporate entities, and SMEs.
MANSA was reportedly developed to address the perceived risk of doing business in Africa and with Africans.
The platform could be used by Caribbean banking institutions as well as Afreximbank plans to set base in the region.
Mrs Awani highlighted the African Trade Gateway as another platform that literally addresses market failure.
The African Trade Gateway digital platform provides market and due diligence information about counterparts, including the rules of origin, customs procedures, as well as payments transfers platform.
She also spoke about the Pan-African Payment and Settlement System – a cross-border financial market infrastructure enabling payment transactions across Africa.
While Afreximbank has largely operated in the African region, it now plans to spread its tentacles to the Caribbean region.
Giving remarks during the Forum’s opening ceremony, Afreximbank president and chairman of Board of Directors, Professor Benedict Oramah revealed that the bank envisages committing an investment of US$700 million for the Caribbean region.
He said this is building on the US$250 million already made available to support Africa- Caribbean trade and investment.
Professor Oramah said ACTIF2022 is the first step to “establish strong commercial and investment channels linked by banking and other financial services” in the Caribbean region.
“We want to leave here clear in our minds regarding ways to catalyse manufacturing investments in Caribbean to take advantage of the US$27 trillion North and Latin American markets.”
Afreximbank will work with CARICOM (Caribbean Community) states to set up a Caribbean Exim bank as an Afreximbank subsidiary or affiliate.
ACTIF2022 is being held under the theme ‘One People, One Destiny: Uniting and Reimagining Our Future’.
Its presentations and panel sessions are addressing key topics around deepening the trade and investment linkages between Africa and the Caribbean.
