Interview with Africa Import-Export Bank President, Jean-Louis Ekra
Listen to the interview [French]
“Africa which is the most reliable partner in global trade could be strengthened during this period of crisis in a way that we can continuer to promote trade on the continent,” the African Import-Export Bank President, Jean-Louis Ekra, said on the sidelines of the IFC-AfDB conference in Tunis on April 14, 2009.
Question: You are the Afreximbank President and, in this context, your institution is an integral part of the AfDB trade finance initiative. Could you explain to us how trade could help mitigate adverse consequences of the crisis on African economies?
Jean-Louis Ekra: First, everybody is aware that henceforth, trade is a very important vector for development and growth. Asian countries have sufficiently proven that. By increasing business activities in Asian countries, they have been able to develop their continent. That’s why Africa, which is the most reliable partner in global trade, could be strengthened during this period of crisis in a way that we can continuer to promote trade on the continent. This will surely require an honest diagnosis of what is going on right now without being ashamed.
The prices of most raw materials that we export have begun dropping. Faced with such a situation, what could be done for our countries to continue trading? We think that financing is important in this regard. We will focus on this a lot more. It is within this framework that this meeting becomes very important.
Question: You have just underscored that the volume of trade within the continent is low. In which way can the trade facility contribute towards efforts at boosting trade?
Jean-Louis Ekra: The volume of intra-African trade is very low for various reasons. One of the main reasons is, in my view, simply historic. You quite remember that during the pre-colonial and colonial epochs, Africa was essentially a reservoir of raw materials and all the products were processed and sold in Africa. In order for African countries to trade together, it is necessary to have a degree of integration of products made on the continent and that Africa should stop to export only raw materials. That’s the first point.
The second reason is infrastructure-related. When you know that exporting a product from the interior part of the continent is more expensive than importing the product from abroad. This is due, mainly, to the lack of proper and state-of-the-art infrastructure. Be it port or road infrastructure, the infrastructure that we have is not adequate and up to required standards. In my view, this is an important point, especially during these times. Africa’s traditional market is the West, but the West is also dealing with a crisis. In our view, this is the time the continent must look for other markets. The African market itself and even the so-called South-South markets – Chinese or Indians – could in our view be of interest to African countries given the current context.
Question : The AfDB board of directors has announced a US$ 1 billion financing for the trade finance initiative in Africa. A first tranche of US$ 500 million has been disbursed. What are you thinking of doing about the second tranche?
Jean-Louis Ekra: Allow me to commend the AfDB board and Mr. Donald Kaberuka for this initiative. The AfDB has not been interested in trade. And it has immediately recognized that there is a need for financing to boost trade. That explains why we have welcomed this initiative. I must let you know that there must be financing for trade to continue. That’s why we are happy about the initiative. Speaking about the second tranche, I think it is only at the end of the meeting that I will be able to tell you what we will do. I would however let you know that banks such as Afreximbank, Africa Credit, and PTA Bank, are institutions that are already on the market and which will easily manage these amounts of money whenever they will be available. Regarding Afreximbank, we are mainly thinking of enabling African exporters to continue to diversity their exports by diversifying not only the content of their products, but the markets they are seeking.
Question: You have mentioned the possibility of diversifying products and markets. What is happening to integration which is expected to translate into free movement of persons?
Jean-Louis Ekra : You are talking about an important problem which is known by all our leaders. That’s why for years, the idea of having an African Union, an African community is making some progress. For West Africa there is ECOWAS; for Central Africa there is CEMAC, in Southern Africa there is SADC, etc. The objective of all these bodies is to organize and facilitate sub-regional integration before proceeding to continental integration. In my view, it is a long haul. Do not be allowed to be distracted by temporary crisis that are affecting the world. In our view, it is necessary to continue with economic integration efforts on the continent because without economies of scale, our markets will remain very small. It is important to continue with that. We will go through crises – There have been crises before and the one we are going through right now will one day be something of the past. We should be preparing for the post-crisis period. Preparing for the post-crisis period implies working on the fundamentals themselves whether there are crises or not. Our economies are still making progress.
Question: The continent went through a debt crisis in the 1980s. This situation had pushed African finance ministers at the time to create Afreximbank. The AfDB is a major partner. What is your assessment in this regard?
Jean-Louis Ekra : The idea to create an institution for trade finance on the continent came about in 1980s, if you remember. The world was going through what was called at the time a “debt crisis”. Another crisis! With this crisis, a number of commercial banks using risks-related issues as an excuse – given that they did not consider debt as an important risk – started leaving the continent. It was necessary to ensure that our banks continued to have access to trade financing, given that trade is a vector of development on the continent. That’s how the idea of creating Afreximbank was born in a context where the continent was still reeling from a crisis. The debt crisis is not yet over.
Our bank, which was in a special partnership with the private and public sectors, started activities by dealing mainly with raw materials known as “soft commodities”, such as coffee and tea. Africa, as you know, exports lots of drinks. Afreximbank gradually got involved in the financing of what was expected to add more value – oil, mines, etc. I consider it as a special partnership because relatively to other multilateral institutions, Afreximbank has three types of stakeholders: African governments, private African investors and non African private investors. I insist on the private sector. That changes the paradigm because we have to take into account the interest of states, therefore that of the private sectors which have an interest in developing their countries as well as the private interests of institutions that are stakeholders which want the bank to pay dividends and, through a partnership, access African markets. We humbly think that after fifteen years of operations, the bank is playing its role.
Question : In hindsight, what do you think Afreximbank could have done, since its creation, and which it has not done, which could have consolidated its assets?
Jean-Louis Ekra : The road is always long and tortuous and we want to humbly acknowledge that there is a lot to be done. I would like to share an idea with you. The continent’s import-export trade in 2008 stood at about US$ 900 billion, with imports and exports estimated between US$400 and US$440 billion each. Afreximbank’s assessment stands at US$1billion. This implies that from our perspective, we still have a long way to go with regards to reaching our set objectives. Afreximbank has to play a great role in trade finance and this requires resources. Given the current context, we can only obtain resources by developing relations with institutions such as the AfDB, the IFC, China Eximbank, JBIC, and the India Eximbank. These are institutions that are ready to provide resources to our institution.