Africa’s exports grew from 445-billion USD in 2011 to 500-billion USD in 2012, Gwen Mwaba, Standard Bank executive V-P for structured trade finance, revealed this week. “The scale of trade finance opportunity is substantial in Africa,” Mwaba said, adding that this is something of a phenomenon, given the general tightening of global credit that continues to curtail availability of commodity trade finance from the traditionally dominant players.
She was speaking on the sidelines of the 5th annual East Africa Trade and Commodity Conference held in Nairobi, Kenya, on 16-17 May 2013. It is believed that the continent’s volumes of exports have been given a lift by key East African countries, Kenya, Tanzania, Uganda, Rwanda and Burundi, whose soft commodities such as tea, coffee and grains, and natural resources such as oil and metals reached a record of 15-billion USD in 2012.
International commodity traders are turning to African banks to finance trade transactions as the global economic slowdown, Eurozone debt crisis, and tougher capital requirements force international banks to pull back their lending in Africa, Mwaba said. Therefore, many international banks have reviewed their risk appetite and have withdrawn from, or limited their exposure to trade finance in Africa, Zambia-born Mwaba said.
“A funding gap has consequently opened up, creating an opportunity for other players to fill that vacuum,” she said. “This has created great opportunities for African banks to be more active in trade finance because they have strong balance sheets, the necessary capital and liquidity, and risk appetite,” she explained.
“For domestic currency transactions they also have competitive funding costs compared to global counterparts.” Mwaba said as European and US demand has continued to decline, the liquidity from African banks has helped to deepen intra-African trade and increase trade flows between the continent and other emerging market regions.”
Standard Bank said it has used this ‘rare’ opportunity to strengthen its position in trade finance in the energy, natural resources and agricultural sectors. Johannesburg-based Standard Bank, which operates in 17 African countries, is the continent’s largest bank in terms of assets and market capitalisation.
The bank said it has provided Tanzania’s Export Trading Group (ETG) with 250 million USD in trade finance facilities. ETG is an integrated agricultural supply chain manager in East and Southern Africa.
In another transaction, Standard Bank said it has assisted the Ghana Cocoa Board to secure a 1.5 billion USD pre-export finance facility to purchase cocoa beans in the 2012-13 cocoa season.
The facility is currently said to be the largest non-oil deal in sub-Saharan Africa.