Cross-border trade and gaining access to new markets can help transform local companies into international champions.
At the same time, it creates jobs, increases economic activity and stimulates growth at home. But in Africa, absent or dilapidated infrastructure can stifle these developments. Indeed, the lack of infrastructure is often cited as one of the main issues holding the continent back.
One statistic relating to infrastructure investment has become something of a mantra: as discovered in 2009, and rediscovered every year since then by multiple sources, Africa needs at least $90bn each year over the next decade to address the continent’s infrastructure deficit.
Yet despite the state of infrastructure development across the continent limiting intra-Africa trade, African trade with the rest of the globe isn’t doing too badly. According to a report published by the African Development Bank (AfDB) in 2014, since 2000, growth in African trade has outpaced the continent’s GDP growth at 8% per annum.
Growing trade routes between Africa and the rest of the world have been buoyed by the pervasiveness of trade finance – where banks and other institutions facilitate cross-border trade through various financial means. According to the same report from the AfDB, in 2014, the size of bank-intermediated trade finance in Africa ranged between $330bn and $350bn, and approximately 93% of banks in the region surveyed have trade finance assets.
“Physical barriers in Africa don’t directly impact our ability to offer financial support to companies and businesses in Africa with cross-border trade ambitions,” says Paul Hartwell, chief executive at the British Arab Commercial Bank (BACB). “There are of course logistical issues that can cause delays and this can impact letters of credit and payment, but in terms of originating business this is not a barrier to business.
“Trade finance is a growing business in Africa. And it is radically changing. Trade finance has traditionally been based on physical documents and letters of credit but with the introduction of cloud technology, blockchain and the like, trade finance in Africa could be completely overhauled. Business will be quicker and more secure. This benefits everyone.”
Based in London and regulated by British authorities, BACB has been growing its Africa footprint and has become a major player in African trade finance serving clients in North Africa, sub-Saharan Africa and the Middle East. The bank has roots in North Africa and the Middle East and its largest…