Harare – Afreximbank said it will leverage $1 billion, which is a facility under Fund for Export Development, to catalyse four times in foreign direct investment over the next five years in a bid to improve FDIs flows into Africa’s trade and export sectors.
Zimbabwe is likely to benefit from the Bank’s initiative as Afreximbank has been the country’s biggest benefactor since the turn of the century.
This was at a time when most global lenders had stopped extending fresh lines of credit to the southern African nation, either at the behest of Western countries that were livid over the country’s land redistribution programme or over defaulting on earlier loans.
Speaking in Tunis during the opening of the Financing Investment and Trade in Africa conference organized by the Tunisia-Africa Business Council, Prof. Oramah said that Afreximbank’s vision was to leverage $1 billion in support of FEDA’s mission and to catalyze four times that amount in FDI in five years.
He explained that the kind of equity funding currently available in Africa was not appropriate for turning the continent into the trade hub which it needed to become in order to achieve desired growth, saying that FEDA would ensure that investors’ investments were protected under the immunities and privileges available to Afreximbank and that the investments enjoyed tax privileges and incentives.
Oramah described development finance institutions as market failure institutions that existed to complement what markets were unable to offer or that begin to create markets, explaining that, as a result, Afreximbank’s interventions were based on the philosophy of bringing additionality, rather than displacing commercial banks.
The Bank had just expanded its guarantee offering to make it more accessible to companies coming into Africa, including through its Intra-African Investment Guarantee Facility. It had also introduced Mansa, a customer due diligence platform, which will help to address the challenge of many African countries not being able to access trade finance due to high compliance cost.
On infrastructure, Oramah said that if the continent looked inward, it could find the funds to meet its infrastructure needs. According to him, with the about $700 billion under management by African pension funds and the reserves kept abroad by African central banks already adding up to about $1 trillion, the funds are already adequate to meet Africa’s need. However, because they are outside the continent, and those keeping them deem it too risky to invest in Africa, the funds are not being invested in Africa.
Oramah announced that Afreximbank was developing a platform that would make it possible for cross-border trade to occur in local currencies across Africa, adding that the Bank was discussing with the Association of Africa Stock Exchanges to use the platform to bring liquidity to the member exchanges.
He said that there was need for a change in mindset and for regulatory reform that would allow the creation of pan-African solutions in order for liquidity to come to some of the African exchanges to enable them can carry infrastructure funds.
Meanwhile, RBZ governor John Mangudya told a local paper that the continental bank availed US$255m letters of credit to Zimbabwe for fuel imports and the production of basic commodities in a bid to ensure adequate input supplies to the local market.
The letters of credit will work as revolving funds from the Afreximbank and will be recycled for three years for the importation of critical commodities such as fertilisers, pharmaceuticals, fuel, production of cooking oil, and other raw materials for industry.
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