The African consensus coming out of this year’s World Econom- ic Forum has been that with so much focus trained on the new administration in Washington and the uncertainty that presages for the global order, Africa’s issues ended up as some of the ‘attention casualties’ at this annual gathering.

Nevertheless, Denys Denya, Senior Executive Vice President at the African Export-Import Bank (Afreximbank) was not disappointed. “We are a partnership organisation,” he says, “so we are looking for partners who can enable us to achieve our objectives. We are talking to partici- pants from all over the world.”

Afreximbank’s delegation did score some success. “We had a meeting with the Swiss authorities to explore how they can support us, particularly in the health sector, as we are championing healthcare across the continent through initiatives such as establishing the African Medical Centre of Excellence (AMCE) facilities. We want to help Africa produce more medi- cines and vaccines locally and given Swit- zerland’s strong expertise in this area, we believe that through collaboration we can achieve this,” Denya explains. He stress- es that the annual WEF is an important place to take the global temperature, have frank conversations with global movers and shakers and make connections.

Those connections will become even more essential for Afreximbank as it seeks to diversify its sources of funding in order to build up its war chest for its ambitious agenda for Africa’s development.

A few days before my meeting with Denya, the Bank’s plans for diversifying its funding sources received a significant boost when the China Chengxin Interna- tional Credit Rating Company (CCXI) as- signed it an ‘AAA/Stable’ rating - the first African multilateral financial institution to be so rated. This had been allocated on the Bank’s very high strategic positioning, its robust risk management framework and its agility and adaptability in business genera- tion, as well as its strong profitability and prudent liquidity management. Denya says this rating will enable the Bank to tap into the capital markets in the world’s second largest economy. “We have investors in the USA, Europe and Japan. Now we are looking at the Chinese market for capital markets access.

“Currently, we have bilateral facilities out of the mainland of China,” he adds. (One of the Bank’s shareholders is China Exim.) The favourable rating is thus a wel- come boost to a programme that the SEVP says is already underway. “We are actually in the process of registering a programme under which we can go to market at any time and issue bonds of any tenor. We’ve already secured approval from the central bank and appointed advisors in the mar- ket,” he reveals.

This option means that the Bank can upscale the diversity of its sources of funding and the risks attached – a pru- dent move in the current climate. “We don’t want to be beholden to only one type of investor or counterparty. So, we are diversifying,” he explains.

It is also about the cost of capital itself. “When you look at the economics cur- rently, it is cheaper for us to raise money in China.” And with trade between Africa and China growing exponentially, raising funds in Chinese yuan will be important for the Bank and its clients around Africa. “Part of that [funds raised in China] we will convert because currently 85% of our balance sheet is in US dollars. But the future is about positioning ourselves to participate in the evolving dynamics of China-Africa trade,” he explains.

Samurai and Panda bonds

The foray into China follows a successful Samurai bond issued last year. The Bank needs all the capital it can get, Denya says, because capital is necessary for its growth and expansion plans. While it has grown its balance sheet rapidly over the past five years from under US$10bn to over $30bn today, Denya insists the Bank can grow even faster with more capital.

Currently, Afreximbank generates about $700m in profits annually, but it needs to grow its capital base more than just through retained earnings. While its shareholders have responded well to its capital calls ($2.1bn has been raised out of a request for $2.6bn in 2021), the Bank recognises that its shareholders (mainly African countries) have pressing fiscal pressures and can only do so much. That means considering alternatives such as the Panda and Samurai bonds, as well as listing depository receipts on the Mauritian Stock Exchange, as the Bank did in 2017. “Our ability to raise capital is the limit to our growth. So 30% [growth in our balance sheet] is good but we can grow much faster, maybe even 100%. There’s a gap of $80bn in trade finance alone,” he points out.

With so much needed and so little available, African development finance institutions have to be innovative and ag- ile. Denya agrees that DFIs must reform to fulfil their mandate as a shield for vulner- able countries. “If you look at the economic shocks that we have had recently – the end of the commodity super-cycle, Covid, the Ukraine crisis – you find that the continent actually needs DFIs because they can come up with unconventional ways of making things happen.”

One initiative that the Bank is solidly behind is the African Continental Free Trade Area (AfCFTA), which seeks to bring all African countries into a single market. However, Denya says while it’s proceed- ing faster than other similar agreements, the pace still feels insufficient. “We are impatient, and rightly so.”

While 48 countries have ratified the agreement and key protocols are in place, the on-ground reality reveals persistent hurdles. From inadequate road and rail infrastructure to cumbersome border pro- cesses, moving goods and people across borders remains a challenge. “Obviously there are still some issues around policy. I still need a visa to visit most of the Af- rican countries. We still don’t have free movement of people, which will help in increasing African trade. It needs to hap- pen,” he stresses.

Denya reiterates the Bank’s support for the agreement demonstrated through a number of initiatives. One is the Pan- African Payments and Settlement Sys- tem (PAPSS), which aims to bypass the reliance on third-party currencies that complicate trade. Afreximbank also or- ganises the biennial Intra-Africa Trade Fair (IATF) which helps showcase regional trade opportunities, with the third edition set for Algeria this year. Yet, more work is required, particularly in harmonising standards across countries to facilitate trade. “Egypt, for example, exports more to Europe than the rest of Africa because of aligned standards,” Denya notes.

Intra-African trade firewall

Increased intra-African trade will be one of the firewalls the continent will come to rely on in an era of protectionism and isolationism, which, ironically this year, hung over Davos, the ultimate global- ist Mecca. “The US is raising tariffs, and countries are likely to retaliate. That can never be good for global trade,” he notes.

Against this backdrop, Africa’s drive for regional trade becomes even more critical, with the potential to uplift living standards through localised and diversified economic activity. However, high interest rates, a strong dollar, and Africa’s enduring risk premium complicates access to afford- able resources, forcing the continent to seek alternative funding. “Afreximbank,” however, Denya is convinced, “is prepared. We’re diversifying sources – tapping into growing Middle East-Africa trade to reduce reliance on the dollar or euro,” he explains.

Another line of defence is the African diaspora and Denya says the Bank is using its annual retreat to court that audience. “One of the objectives we are pursuing here is the Global Africa agenda - connecting with Africans wherever they are.”

Professor Benedict Oramah, the Bank’s President and Chairman, has been on an almost evangelical mission to connected with entrepreneurs of African descent everywhere. “Global Africa is about en- abling Africans from across the globe to work closely together. We haven’t really been very successful pursuing individual agendas. But if we work together, I think we can do more,” Denya says. 

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