Donald Trump’s assist for fossil fuels and his choice to tug the plug on commerce incentives is benefiting Africa in unexpected methods, in response to the incoming president of the pan-African commerce financial institution, one of many greatest buyers within the continent.
“Trump is popping out properly for Africa, even when it’s unconscious,” stated George Elombi, a Cameroonian ex-lawyer who took over as president of Cairo-based Afreximbank final month.
The US president’s backing for fossil fuels has slowed the tempo of the worldwide power transition, inadvertently easing strain on African international locations whose economies are nonetheless reliant on earnings from oil manufacturing, he stated. Harder commerce circumstances have been forcing African companies and international locations to assume tougher about opening up different markets, together with on the continent.
“He’s making Africans look inwards, so that they should cope with their very own points,” stated Elombi.
Elombi stated that the rapid affect of the top of Agoa, the 25-year US-Africa commerce settlement that expired in September, would hit textile producers notably arduous. However he can be working with African governments to redirect a few of their exports into regional markets that beforehand loved preferential tariffs within the US.
He would additionally prioritise financing processing services for uncooked commodities, so African international locations retain extra worth — and jobs — from their assets whereas capitalising on renewed international curiosity within the continent’s mineral deposits. South Africa has a developed processing trade, however a lot of the remainder of the continent’s metals are processed overseas, particularly in China.
“Our steadiness sheet is large enough for us to rework sure sectors in a single day,” Elombi stated. “As quickly as we begin and it’s wanting promising, then you might have different buyers wishing to hitch us,” he stated.
Afreximbank, which was arrange by African states and personal sector buyers in 1993 to advertise intra-continental commerce, has grown its belongings and contingencies from $6bn to $44bn in a decade due to shareholder assist and capital technology.
Within the course of, it has assumed an more and more strategic function. It helped steer Africa via the pandemic, together with by underwriting the continent-wide distribution of Covid vaccines. It disbursed $5bn to counter the inflation and supply-chain disruption that adopted Russia’s invasion of Ukraine. Multilateral growth banks have been slower off the mark, in response to analysts.
However the financial institution has additionally attracted criticism for behaving like a growth financial institution whereas charging the charges of a business one. It additionally enjoys “most well-liked creditor therapy” underpinned by a founding treaty that was supposed to guard the financial institution’s lending particularly throughout monetary crises.
“It’s unfair on the likes of the African Improvement Financial institution if on high of the business margins they get pleasure from on their lending they’re additionally awarded most well-liked creditor standing,” stated Vivid Simons, vice-president on the IMANI think-tank in Ghana.
Elombi stated he would fend off what he portrayed as “co-ordinated assaults” in opposition to the financial institution’s “disruptive” mannequin and was decided that Afreximbank ought to proceed difficult growth finance orthodoxy.
Afreximbank lends in methods and at instances that others are unwilling to, he argued.
“While you take the processing we’re speaking about, it’s dangerous. You do huge investments. And also you construct the infrastructure, which permits others to really feel snug,” he stated, pointing to investments in timber worth chains in Gabon, and textiles in Benin, which have multiplied overseas change revenues for each international locations.
Afreximbank was this yr downgraded to a notch above junk by credit standing company Fitch after disagreements over the classification of non-performing loans and considerations over sovereign publicity to Ghana, South Sudan and Zambia. Different regional credit score businesses similar to Japan’s JCR maintained an A- investment-grade score.
Elombi characterised the Fitch downgrade as a part of a wider bid to strain the financial institution into “taking a haircut” in international locations strained by debt and claimed the credit standing company had disregarded info the financial institution had disclosed.
He stated the overwhelming majority of its loans have been collateralised and sovereign debt accounted for not more than 10 per cent of the financial institution’s portfolio.
A Fitch spokesperson stated that if the financial institution notified the company of “what they consider to be materials factual errors within the info we use” they might enchantment in opposition to the downgrade.
Nevertheless, Deepak Dave, a former chief danger officer at African Commerce and Funding Improvement Insurance coverage, stated Afreximbank, whereas turning into a catalyst for different business lending, had additionally taken “its standing with no consideration and will have been extra prudent on nation lending”.
Hitting again on the criticism, Elombi stated it ignored the hidden prices, by way of job losses, lack of sovereignty and erosion of state capability, which have traditionally include concessional loans from different growth lenders, particularly the Bretton Woods establishments.
“The conditionalities that push younger folks on to the streets, create the circumstances that result in civil unrest and traditionally have restricted public funding in industrialisation” had, he stated, “compounded Africa’s dependence on uncooked commodity exports”.
“We’ve been doing this for a very good 50 years. It has not labored. Shouldn’t we strive one thing else?” he stated.
