Exploring AfCFTA with cross-border expansions

The gains of cross-border transactions in Africa are fast rising. Still, the implementation of the African Continental Free Trade Agreement (AfCFTA) is expected to make such benefits more pronounced in the years ahead.

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For many stakeholders, the AFCFTA offers significant opportunities for the private sector, especially financial institutions to expand into new markets, and seek new business opportunities.

But the benefits from the AfCFTA deal to a financial institution or company depend largely on the level of preparedness undertaken by such institution in readiness for the trade pact full implementation.

The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, last week urged Nigerian businesses to seize the AfCFTA opportunity to ensure that Nigeria serves as a significant hub for international and domestic companies seeking to serve the West, Central and East African Markets.

Access Bank Plc expressed its commitment to be at the centre of the AfCFTA implementation process, providing banking services to the rising African population. The bank is expanding its operations across Africa to ensure that it is fully ready to meet the increasing banking needs of the over 1.3 billion Africans targeted in the AfCFTA deal.

Access Bank has also unfolded plans to expand to more African countries as part of a strategy to support trade and finance in the continent and take advantage of the AfCFTA.

For instance, Access Bank Plc recently entered into a definitive and binding agreement with ABC Holdings Limited to acquire 78.15 per cent shareholding in the African Banking Corporation of Botswana Limited (BancABC Botswana).

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The transaction, which is subject to regulatory approvals and customary conditions precedent, is expected to close before the end of this quarter. ABC Holdings is a subsidiary of the London Stock Exchange-listed group – Atlas Mara Limited.

Access Bank Company Secretary, Sunday Ekwochi, described Bostwana as renowned for its quality sovereign credit rating and stability with the bank’s market entry expected to further solidify its strategy as, “a strong banking partner in key verticals across retail and corporate banking, including especially supporting trade-in payments across southern Africa and Sub-Saharan Africa more broadly.”

Speaking on the deal, the Group Managing Director/Chief Executive Officer, Access Bank Plc, Herbert Wigwe, said: “We remain committed to a disciplined and thoughtful expansion strategy in Africa, which we believe will create strong, sustainable returns for our shareholders and stakeholders at large, over the medium and long-term.

“The establishment of Access Bank through this acquisition in the Republic of Botswana will position the bank to deliver a more complete set of banking solutions to its clients active in and across the SADC and COMESA regions.

According to him, the transaction complements our recent strategic growth acquisitions in South Africa, Zambia and Mozambique. “We are building a bank of the future that Africans across Africa and the world would be proud of and look forward to welcoming the employees, customers and other stakeholders of BancABC Botswana to Access Bank.”

BancABC Botswana is the fifth-largest bank in Botswana and is a very well-capitalised banking institution poised for growth and success in its local market. The bank has been perennially profitable, given an existing high-quality retail loan book with opportunities and scope for diversification and further expansion into corporate and SME lending.

Continuing, Wigwe explained that across Africa, there is an opportunity for the bank to expand to high-potential markets, leveraging the benefits of AfCFTA. He said AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for the continent.

He stated that the plan is for the bank to establish its presence in 22 African countries to diversify its earnings and take advantage of growth opportunities in Africa.

According to him, Africa has enormous potential and there are opportunities for an African bank that is well run, that understands compliance and can support trade and the right technology infrastructure to support payments and remittances, without taking incremental risks.

“We believe that we are best positioned to do all of that. Our focus is to become an aggregator in Africa and we are building a global payment gateway and providing trade finance support and correspondent banking across the continent. We are focusing on the key markets.

“The approach would always be that in the country we wish to go to, that we have the right skills. We would not just be a drop in the country in which we are present, we would make sure that we have an impactful presence in each of the major countries in which we are present.

“In doing this, we are also mindful of the country we are going to to make sure that it is of benefit to the bank. As we do this, we are working with our friends and partners.

“We are diversifying our earnings away from volatile markets as well and we are orchestrating our operations from the global payments gateway and ensuring that using Access Bank UK, providing corresponding services from digital platforms, the overall profitability of our franchise,” he explained.

Commenting further, on AfCFTA, he said the bank would use its digital framework to benefit from the continental agreement.

“Coming to Nigeria, we think we need to continue to entrench ourselves in the local market because there is still so much work to be done. So, we are doing everything possible to satisfy our customers and also to ensure that our channels are adequately secured. We are also ensuring that our staff are very efficient,” the CEO said.

According to Wigwe, Access Bank has invested around $60 million to acquire a stake in South Africa’s Grobank.

Access invested both equity and debt in the South African bank, part of a regional expansion to tap into correspondent and trade banking deals on the continent.

He said Access will expand trade finance capability within Grobank which is currently focusing on the agricultural sector in South Africa.


Tony Elumelu

Elumelu advocates strategic long-term investment to tackle poverty in Africa

Disturbed by the increasing rate of poverty in Africa, Tony Elumelu, founder of the Tony Elumelu Foundation (TEF), has called for a framework that will widen the circle of prosperity in the continent rather than littering it with lone star billionaires.

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Elumelu said Africa needs massive investments in infrastructure, electricity, digital technology and healthcare delivery to address the massive poverty in the continent, adding that future Bill Gates could come out of Africa if access to electricity is provided.

Speaking at the ‘World Government Summit Dialogue: Africa’s Future Post 2021’, Elumelu said the continent can see more billionaires spring up if only critical investments are made.

“The ones that are there are getting stronger climbing the league table while new ones are coming up. But we need to move the emphasis away from these so-called billionaires,” Elumelu said.

“We should be talking about how many young Africans will be impacted in the next five or 10 years’ time? Instead of us having a pyramid of few billionaires, I will prefer that we have a large base that has prosperity, happier people and people whose basic human needs are met. I think that is what will give us the sustainability and the lasting peace that we need in Africa,” he said.

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“That will also address the insecurity that we have in Africa and stop the migration of our younger people. That will stem extremism and all the kidnappings we hear every day all around us because of poverty and hopelessness as people do not see a better future. We need to reset our mind to think in a better way to improve society and mankind,” he further said.

Elumelu noted that poverty anywhere is a threat to mankind everywhere and called for support for the development of entrepreneurship and SMEs so that the continent could address the challenge of poverty in a significant way.

“Without access to electricity, we cannot digitalise our local economies and communities where most of our people live. Also, this is significant in terms of informal businesses that drive the African economy.

“If we must empower our people out of poverty we must invest in electricity. The pandemic presents an opportunity for us to reprioritise and make sure that we invest in electricity. We must set for ourselves a timeline and the way we declared war on COVID-19, on polio is the same manner we need to declare war on poor access to electricity in Africa. For me, it is at the centre of poverty alleviation,” he said.

He also said strategic long-term investments by his business group, which he said is at the centre of his Africapitalism, is one of the ways to deal with poverty in Africa.

“That is the only way we can deal with the issue of poverty alleviation and create massive employment for our people. And that is the only way we can empower the economy.

“For us, investment in en, and we are looking at an integrated energy strategy because power cannot be dealt with in isolation. For us, the $1.1 billion investment that we made in January is to further help to achieve our vision for a prosperous Africa built on solid access to electricity for everyone. Africa at a time like this needs proper investment in power and access to healthcare for us to correct the poverty level we see on the ground,” he added.

Elumelu noted that the most significant contribution of the TEF’s entrepreneurship programme was the training it provides to young entrepreneurs on how to run prosperous businesses in Africa.



How Africa’s free trade pact can boost regional economy

Again, the need for inter-African trade has been stressed by the World Bank as it says the African Continental Free Trade Area (AfCFTA) could boost regional income by 7 percent or $450 billion, speed up wage growth for women, and lift 30 million people out of extreme poverty by 2035, if implemented fully.

The World Bank said in a new report on Monday.

In addition, experts say the trade pact will position Nigeria’s firm to compete better in the continental and global markets.

AfCFTA represents a major opportunity for countries to boost growth, reduce poverty, and broaden economic inclusion.

The report suggests that achieving these gains will be particularly important given the economic damage caused by the COVID-19 (coronavirus) pandemic, which is expected to cause up to $79 billion in output losses in Africa in 2020. The pandemic has already caused major disruptions to trade across the continent, including in critical goods such as medical supplies and food.

Most of AfCFTA’s income gains are likely to come from measures that cut red tape and simplify customs procedures. Tariff liberalisation accompanied by a reduction in non-tariff barriers—such as quotas and rules of origin—would boost income by 2.4 percent, or about $153 billion.

The remainder—$292 billion—would come from trade-facilitation measures that reduce red tape, lower compliance costs for businesses engaged in trade, and make it easier for African businesses to integrate into global supply chains.

It could be recalled that initially, the Manufacturers Association of Nigeria (MAN) was the biggest opposition to the AfCFTA, arguing that ratifying the agreement could kill industries in Nigeria. MAN had said it was important for Nigeria to position local manufacturers for competitiveness first before ratifying the AfCFTA.

However, the association later made a U-turn, saying African nations needed to trade more with one another.

“MAN recognises the imperativeness of creating a beneficial free trade area for export of the products of members and has strongly worked assiduously to promote the articulation of evidence-based positions on AfCFTA,” Mansur Ahmed, president of MAN, said at a South-West sensitisation workshop in Lagos in February 2020.

The Lagos Chamber of Commerce and Industry (LCCI) is backing the trade deal, arguing that if smaller African countries are not afraid of it, Nigeria with 200 million people and humongous $430 billion GDP, must grab it with both hands.

Muda Yusuf, director-general, LCCI, told BusinessDay in 2019 that multinationals would be the biggest beneficiaries when the AfCFTA started.

“Mostly multinationals and large enterprises are in a better position to gain from AfCFTA because their economies of scale will improve. They have the big market and the capacity,” Yusuf had said.

“The continental trade is more about economies of scale and the amount of what you produce. The higher you produce, the lower the unit cost, which is why small companies will benefit but not as much as large firms,” he further said.

AfCFTA seeks to liberalise trade among African countries. It is targeted at a ‘borderless’ Africa, with an eye on a single market for goods and services on the continent. It was supposed to start in July 1, 2020, but has been postponed to January 2021 owing to COVID-19 pandemic.

Experts believe AfCFTA is easily the largest trade agreement since the World Trade Organisation (WTO) in 1994 and a flagship project of Africa’s Agenda 2063, targeted at creating a single market for 1.2 billion people and exposing each country to a $3.4 trillion market opportunity on the continent.

The AfCFTA is expected to raise Africa’s nominal GDP to $6.7 trillion by 2030 if all the countries sign up.

The treaty liberalises 90 percent of products manufactured in Africa, meaning that a country can only protect 10 percent of its local industries.

Bismark Rewane, CEO, Financial Derivatives, said the AfCFTA would favour Nigeria, Kenya, Egypt and Ghana, among others, but warned that any government that was not effective would fail within the AfCFTA environment.

“Nigeria will benefit. But it will forced to be effective because if not, people can easily go to Cotonou to set up plants,” he told Channels TV in 2019, adding that government failures would be glaring under the trade arrangement.

by Hope Ashike and Odinaka Anudu