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November 28, 2010

Afreximbank increases lending to African firms involved in agriculture

by Shaimaa Fayed

Egypt-based African Export Import Bank (Afreximbank) aims to boost its assets by 10 percent in 2010 to $1.6 billion with increased lending to African firms involved in agriculture, the bank's president said.

Jean-Louis Ekra said agriculture in Africa was being given a boost because of global concerns about food security that was pushing investment into the sector, and cited opportunities in countries such as Malawi. He also said business risks in Africa were often overstated by investors, and said he expected sturdy growth given the continent's 1 billion people, foreign exchange reserves in excess of $450 billion and agricultural potential.

"Historical data will show that less than 1 percent of the money that they (banks) lent in Africa was lost," he said. "More than 60 percent of the arable land of the world is here on our continent. The biggest challenge of the future ... is food, access to water. This continent has it. What is left for us is to turn this potential into reality," he said. "We've been doing more for certain countries like Malawi and doing more in certain items like fertilizers ... because the food crisis has made many more countries more interested in developing the agricultural sector," Ekra said in an interview.

Other sectors being eyed by the bank, which finances and promotes trade within and beyond Africa, include oil and telecoms, he said.

Trade finance experts have said the difficulty some poor African nations have in obtaining funding for their exports threatens their economic development.

"We still are not fully out of the so called financial crisis. It's very difficult for companies and for even banks to have access to the amount of funding that they want," he said, adding that his bank was seeking to help fill the gap.

Africa's trade in 2009 was around $900 billion, divided almost equally between imports and exports, Ekra said, adding that growth in trade was stalled by the private sector's lag in pushing for greater involvement in trade agreements.

"The private sector should as a bloc say 'look, we are not prepared to accept that (governments) go and sign an agreement that is not beneficial for us,'" he said, adding African trade delegations were often dominated by politicians not executives.

Reflecting growing appetite for African investments, he pointed to Afreximbank's $300 million five-year bond launched in Nov 2009 at a 9.125 percent yield, which was over five times oversubscribed.

Afreximbank, established in 1993, has authorized capital of $750 million. The bank's non-performing loan ratio averaged about 1 percent between 2004 and 2009, a statement from the bank said.

Its shareholders include African governments and private investors, and non-African financial institutions and its Egyptian clients include El Sewedy Cables, the largest Arab cable maker by market value, which supplies cables to various African countries.

Ekra said the biggest challenge facing African trade was the need to diversify exports beyond raw commodities such as cocoa to offset demand and price fluctuations on the global market.


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