Opening up trade links vital to east African success

Greater integration and new trade links will be key to east African economic success – something that the banking sector recognises and is working towards, as David Kaye reports Regional integration offers an opportunity for African countries to promote trade among themselves, to realise the structural transformation that they seek and to better prepare themselves to step up to the global stage, by acceding to the multilateral trading system under the World Trade Organisation (WTO). This was the clear message coming out of east Africa as the African Development Bank (AfDB) emphasised the need to ensure coherence between east Africa’s regional integration agenda and the engagement of the Horn of Africa countries’ engagements at multilateral level. Its message came as the African Export-Import Bank (Afreximbank) presented its equity offering to Kenyan investors, aimed at raising between $100m and $300m. The bank is looking to support the light manufacturing sector as part of its diversification strategy. The AfDB director general for eastern Africa, Gabriel Negatu, made his call for coherence in development at the first Regional Dialogue on WTO accessions for the Greater Horn of Africa Region. Mr Negatu urged acceding countries to be wary of making concessions beyond what they have availed to their neighbours under regional trading arrangements such as the East Africa Community, Common Market for Eastern and Southern Africa and the tripartite arrangement. Movement of persons is a clear example of where African countries have historically discriminated against one another while offering more generous access to non-Africans, he noted. According to the 2016 Africa Visa Openness Index (published jointly by the Bank and the African Union Commission), on average, Africans need visas to travel to 55% of other African countries. It is easier for Americans and Europeans to travel within Africa than it is for Africans to do so. The dialogue was convened to reflect on ways in which membership of the WTO could foster regional integration and cooperation; to exchange experiences and lessons learned from the accession processes in the region; and to mobilise support for facilitating African accessions. Participants agreed on the urgent need to enhance trade policy knowledge, capacity and resources in the region for analysis, strategy development and negotiations. Five countries in the region − Ethiopia, Sudan, Comoros, Somalia and South Sudan− recently rekindled their interest to join the WTO. Mr Negatu acknowledged the positive impact that the WTO accession process could have on fostering regional integration and stressed how the accession process could be a driver for broad economic and trade policy reforms that countries may be otherwise reluctant to undertake. He said the accession process entails a comprehensive review and upgrading of a range of trade-related policies in line with international norms, which he listed to include policies on foreign exchange and payments; investment regime; state ownership, privatisation and state trading entities, industrial policy including subsidies, product standards and certification, free zones and special economic areas, agricultural policies, transit regimes and trade agreements with other parties. Such market-oriented reforms, he explained, could promote transparency, predictability, and help to improve regional member countries’ business environment. The AfDB DG underscored the importance of proper sequencing, noting that in many African countries (including those in the Horn of Africa), traders are characterised as poor, informal, and of the small and medium-sized enterprise category. They lack the expertise to export effectively to advanced country markets, where technical requirements (like sanitary and phytosanitary regulations) can be difficult to meet for new entrants. The original WTO members in the region, such as Kenya, and the countries seeking accession shared their experiences at the dialogue. Liberia and Seychelles, both of which recently concluded their accession process, also shared their experiences and lessons, focusing mainly on the need for thorough preparation. Kenyan boost for Afreximbank Meanwhile, Afreximbank has presented its equity offering to Kenyan investors, aimed at raising between $100m and $300m through the issuance of depositary receipts backed by its Class ‘D’ shares. The listing of the Depositary Receipts on the Stock Exchange of Mauritius was approved in August, opening Afreximbank’s shareholding to the investing public through an African stock exchange, marking a first for a supranational bank. The issuance of the depositary receipts is being handled by an advisory syndicate made up of SBM Group of Mauritius as lead arranger and Kenya-based CBA Capital and LionsHead Capital as co-advisers. The minimum investment amount is $30,000. Addressing guests at the meeting, Dr George Elombi, Afreximbank executive vice-president, said that the depositary receipts were aimed at enhancing the bank’s capitalisation to support the growth of its trade finance interventions across Africa and were being issued in the context of the bank’s five-year strategy, IMPACT 2021: Africa Transformed. That strategy focused mainly on boosting intra-African trade, accelerating the industrialisation and export development capacities of the continent and expanding the bank’s trade services to the African banking sector, he said. Under the strategy, Afreximbank was aiming to mobilise up to $1bn in equity from new and existing investors in the next five years through various financial instruments, he said, adding: “We are seeking to raise between $100m and $300m [of that amount] through the issuance of the Depositary Receipts.” Dr Elombi said: “We invite the Kenyan investment community to take advantage of the unique benefits the Depositary Receipts offer, including liquidity, attractive dividend yield, capital gains and a currency hedge, being a US dollar instrument. It is also an opportunity for investors from Africa and beyond to support the Bank’s efforts to contribute actively to the economic transformation of the continent.” Isaac Awuondo, managing director of CBA Group, said the listing of the Depositary Receipts on the Securities Exchange of Mauritius would enable local and foreign investors to benefit from a liquid and freely transferable instrument and would give them the opportunity to own a portion of one of the largest financial services multilateral institutions, which is leading the charge in facilitating trade finance activities between Africa and the rest of the world. Kee Chong Li Kwong Wing, chairman of SBM Group, announced that the government of Mauritius planned to grant permanent residency to individuals who invest up to $500,000 in the depositary receipts.

Opening up trade links vital to east African success

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