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Obasanjo, Elumelu, Oramah canvass entrepreneurship, intra-Africa trade

By Chijioke Nelson
27 July 2016   |   3:22 am
Entrepreneurship development and free flow of trade within the continent is the only way Africa can improve its economic fortunes and the dwindling transactions profile.
Elumelu

Elumelu

Entrepreneurship development and free flow of trade within the continent is the only way Africa can improve its economic fortunes and the dwindling transactions profile.

Also, the long sought enabling environment, which involves ease of doing business and a deliberate push for policies that would the use of the continent’s population and resources for its development, have been canvassed among African leaders and businessmen.

Former President Olusegun Obasanjo and frontline pan-African entrepreneur, Tony Elumelu, were in the vanguard of the campaign last weekend in Mahe Island, Seychelles, reiterating that the current trade relationship in the continent will rather sink the economies than grow them.

Obasanjo, who said that his efforts, which saw the coming of New Partnership for Africa’s Development, which ideals were to foster economic and cultural ties for trade integration, have not been followed by many countries, even after years of existence, leading to retarded progress.

He pledged to continue the push for economic emancipation of Africa, even as it emerged at the Africa Export Import Bank (AfreximBank) yearly meeting that Rwanda has followed Seychelles in implementing a Visa free policy.

“There is no way we can be against ourselves and succeed. The case of common passport is hindered by corruption. From Lagos to Cotounou, you have all manner of agencies. Each time they are moved away, before long they resurface. In these days of technology, whatever work they should be doing can be done easily by few and keep the unhindered by protocols,” he said.

For Elumelu, intra-Africa trade issues need to be tackled head on and now, because it has become a real challenge when governments in Africa are apprehensive or suspicious of private sector operators- a development that does not portend good for the economic development of the country.

According to him, there is need to have the governments realize the importance of working together for the development of the continent.

For example, he noted that government cannot employ everybody, but where there is successful private sector, they will create the employment the economy needs and the credit will now go to government. But that is not the true position now, because the current policies among the continent’s governments remain a challenge.

“We need to get governments see private sector as partners. We commend what President Obasanjo did in creating the enabling environment that supported the development of entrepreneurship during his administration. It is a lesson that should have deepened across the continent,” he said.

He averred that entrepreneurs need the support of government because even if entrepreneurs have the money, they still need right policies and enabling environment to do well, which are only provided by government.

“Some of us are helping to develop entrepreneurs in the continent. My Foundation has $100 million endowment for the development of entrepreneurs in Africa, because I see myself as one who benefitted from Africa and must in my own little way contribute to institutionalise opportunities for others. So, we have the little money and arrangement for them. If they succeed, we succeed and it shows off in the continent.

“Infrastructure is another key for the development of the continent- transportation and electricity. I am playing my little part in the development of electricity, because power generation is key too. Its access in the continent is important for growth.

“But what we needed to do if we have realised the importance of infrastructure is to put in place policies and incentives that will help us attract investment and capital needed to solve the challenges.

“Like I have said, you can only trade where there is article or product to trade. Why is the trade profile low? This is because we do not have the capability to process our raw materials to the level that individuals would want to buy them. And it takes two to trade too.

“For example, Nigeria produces crude oil, but cannot refine it. We sell it and import its bi-products. How can we trade with other African countries in this area? If we, at certain point in this discussion for intra-Africa trade mean to acquire capabilities to industrialise, process the raw material, produce and create jobs, then we are in for a good time in the continent. If we have the right infrastructure it will help to drive intra-trade. We have to promote that and there is no option.

“Financial institutions have a role to play, but local ones alone cannot do it. So, we need to strengthen them to attract investment and institutional funds that are looking for destinations from the United States and China. Regulatory authorizations, poor policies and lack of incentives have kept so many of these investments away,” Elumelu said.

He expressed optimism that if the continent’s leaders work to remove these obstacles, then local financial institutions will partner them to make the finances available, in efforts to jumpstart development.

“It is a challenge to all. Governments must embrace positive reforms because it’s certainly amazing what the outcome will be.

“What will an investor do with a country where it will take one month to get visa or process it, when there are others that will offer it in 24 hours. Why will anyone go there? These are little things causing challenges in intra-Africa development,” he said.

 President, AfreximBank, Dr. Benedict Oramah

President, AfreximBank, Dr. Benedict Oramah

The President, Africa Export-Import Bank (AfreximBank), Dr. Benedict Oramah, said the time has come for Africa to take its destiny by itself and assert itself in the rightful position given its numerous opportunities.

Recalling that many international banks in the late 1980s, cut credit lines to Africa, hurting trade, he noted that today, total African trade has fallen dramatically by as much as 30 per cent from $1.2 trillion in 2014 to an estimated $880 billion in 2015, because of assessed risks.

Consequently, in many countries, the promise of development for which many had made tremendous sacrifices, appeared under threat, increasingly looking like a mirage even to the wise and the prudent.

“For example, the ambitious plans to achieve energy sufficiency as a prerequisite for sustainable development hung on the balance; in yet another, the managing director of a respectable commercial bank looked at me helplessly as I asked why their correspondent bank was no longer able to offer Letter of Credit confirming lines to them.

“An African central bank Governor narrated to me his sleepless nights as he struggled night after night to find solutions to pressures on the local currency,” he said.

Noting that the solution lies in raining intra-Africa trade to a new high, the continent’s trade bank chief harped on the need for the leaders to rethink strategies that would lift the economy from the current economic doldrums, assuring that all is not doom.

“For instance, Dangote Industries are investing over $9 billion in Nigeria to create one of the largest petroleum refinery and petrochemical facilities in the world; Ethiopia has in recent years demonstrated that a resource poor African country can become an important centre for light manufacturing in the world, setting the pace which many African economies are gradually beginning to follow.

“So, while the economic shocks might have presented a nightmare to commercial bankers, AfreximBank saw it as a call to duty, a valid test of its raison d’être, a motivating force to galvanize every true African towards the realization of our shared goal of delinking from commodities and leveraging the continent’s innate strengths for growth and prosperity.

“We are doing something about these. AfreximBank is responding forcefully to create the momentum that we hope would turn despair and fear into courage; lethargy into action and problem into opportunity,” he said.

With regard to the short term interventions, the bank said it had in December 2015, approved a multi-billion dollar special facility dubbed the Countercyclical Trade Liquidity Facility (COTRALF), aimed at assisting AfreximBank member countries to adjust in an orderly manner to the commodity price and terrorism-induced shocks that were threatening to cause so much economic dislocation.

The facility is intended to improve access to trade finance and reduce the likelihood of African banks defaulting on their trade payment obligations.

“Without such a support, the adjustment process necessary to manage the excess demand in the different economies would be more difficult. Offered on the back of support of the central banks of beneficiary countries, the facility has been very successful, such that as at the end June, 2016, the bank had disbursed an  amount of about  $6.2 billion under the Programme, with another $3 billion of request in the pipeline.

“The consequence has been a rapid expansion of the bank’s balance sheet from $5.2 billion in December 2014, through $7.1 billion in December 2015, to $11.2 billion as at June 2016,” the bank chief said.

He noted that COTRALF intervention has therefore tremendously improved the perceived relevance of the Bank amongst its member states who have as a result rallied to the Bank’s appeal for a shared responsibility in addressing on-going challenges.

Accordingly, the bank has also seen a rapid increase in the participation of African central banks and other institutions in its Deposit Programme, from $75 million in 2014, to over $3.6 billion in June this year, accounting for about 40 percent of the bank’s total liabilities as at the end of June 2016.

“The second dimension of our intervention in the context of the current economic situation is a new focus on fostering economic transformation and intra African trade. We believe that the age of slogans about industrializing Africa is over and that the self-deceit in that approach is self-evident today.

“We hold firm our conviction that intra-African trade is the key to industrializing Africa, better management of commodity price shocks and promotion of regional peace and security,” he said.

Another strategy, he said, is the partnership with Export-Import Bank of China, which Memorandum of Understanding we have signed to drive the “Made in Africa” initiative, aimed at raising funding support to an amount of $1 billion.

Meanwhile, AfreximBank is supporting the development of a mobile payment platform for Intra African trade and payment, which would be launched before the year ends.

The platform would incorporate a clearing feature, making it possible to potentially reduce the foreign currency content of the trade conducted through it.

He noted that there are also plans to finance the development of logistic centres, border markets, intra-African shipping lines, airlines and similar activities as long as they would advance the course of its strategy.

“We must say no to a situation where Africa produces 80 percent of the world’s cocoa, but receives only 10 per cent of the $120 billion of the value of global cocoa market; where Africa controls over 10 per cent of global oil reserves, but only receives less than three per cent of the over $3 trillion global oil revenue; and where Africa accounts for about 50 per cent of the world’s gold production, but only receives about four percent of global gold earnings of over $300 billion,” he said.

To avert the ugly continuum, he called on the continent’s leaders to remove the barriers against trade among the member countries, while working hard to add value to our commodity offerings to attract right pricing.

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