If we don’t control our capital, we don’t control our destiny

As Professor Benedict Okey Oramah, the President of African Export Import Bank (Afreximbank), and I prepare for this interview on his ninth floor office at the Bank’s headquarters in Cairo, Egypt, a young lady from the Caribbean Island of Barbados calls in to say goodbye and thanks to Oramah before she leaves for the airport to return home.

She is grateful for the opportunity to intern at the Bank’s headquarters, that also allowed her to visit the Bank’s regional offices in Nigeria and Zimbabwe, as part of an exchange programme that had been announced just in September 2021 on Oramah’s first visit to Barbados. 

This little, almost unremarkable interlude, actually speaks volumes about the Bank – and its leader’s – vision and culture. You ask yourself why a Bajan from thousands of miles across the Atlantic is doing an internship at a pan-African multilateral trade finance institution. What is the link? What is the relevance?

The presence of the young internee underscores the series of deals and agreements made by the Bank and members of the Caribbean Community (CARICOM), an intergovernmental organisation of member states throughout the Caribbean, last September when the first AfriCaribbean Trade and Investment Forum (ACTIF) was co-hosted by the government of Barbados and Afreximbank. This connection between the mother continent and the Caribbean islands was celebrated as re-joining ties severed by 500 years of the slave trade and colonisation.

While it was an emotional and historical reconnection, it was also pragmatic and practical. It was an opportunity to establish trade and finance links between the continent and the rapidly growing CARICOM.  

Less than six months later, the young Bajan was completing her internship, having gained an understanding of the workings of the Bank and experiencing first-hand the hustle and bustle of thriving African capitals, including Cairo in Egypt, Abuja in Nigeria and Harare in Zimbabwe.

Typically giving each initiative his full attention, Oramah had asked to read the young lady’s internship report before she left. Afreximbank has received interns from the Caribbean in a move to inject hearts and minds into the new Afro-Caribbean trade, investment and cultural integration the Bank is helping to champion.

Successful partnership 

The circumstances that lead to the ACTIF itself make interesting reading. The story goes back to the Covid-19 pandemic and the global scramble for vaccines.  

Excluded from access to vaccines, many Caribbean islands sent requests to the African Union (AU) to be included in the mass vaccine purchase programme that had been set up and coordinated by the African Vaccine Acquisition Task Team (AVATT) and financed by Afreximbank. The AU immediately accepted the request. As a result, the CARICOM countries could get their people vaccinated and also benefit from the discounted bulk price the AU and its partners had managed to negotiate. 

This successful partnership spurred leaders from the Caribbean and Africa, through the conduit of Afreximbank, to explore ways of greater cooperation which led to the first Afri-Caribbean Trade and Investment Forum and the establishment of a brand-new partnership that will advance the aspirations of the AU when it designated the African Diaspora as the sixth region of Africa. 

With his laser focus on growing Africa’s prosperity through trade still as sharp as when he took over the running of the Bank in September 2015, Oramah’s instincts, honed over three decades in development and finance, told him this new partnership could be something special.

Already, nine of the 15 CARICOM economies are signatories to the Partnership Agreement between Afreximbank and each of them. The Partnership Agreement mimics the Afreximbank Establishment Agreement, effectively making the signatories Participating States of Afreximbank, enabling Afreximbank to finance trade and investment in those markets. In December last year, Afreximbank Board approved a limit of $1.5bn for the signatory Participating States. 

He took a delegation of important private sector business leaders with him to Barbados and then to other CARICOM countries, including Guyana, a country of 800,000 inhabitants north of Brazil, and then to the Bahamas. Another delegation visited the Organisation of Eastern Caribbean States (OECS). 

As a result, a number of groups, including a consortium made up of three Egyptian behemoths – Orascom, El Sewedy and the Hassan Allam Group are finalising major contracts to build roads, ports and logistic facilities across the Caribbean states, part of these funded by Afreximbank. 

But there is more. Following the US-Africa Leaders Summit in December, he says that Afreximbank has gone into discussions with the umbrella organisation of African-American mayors. These mayors are running some of the largest cities in the US. “The four largest of these have a combined GDP of over $5 trillion,” he points out. “We are discussing greater collaboration in broad areas, especially regarding how their companies can invest in and do more business with Africa.”

Getting things done

Africa, like most of the rest of the world, is in the throes of the current cost and supply-chain crisis and battling to increase the volume and velocity of its trade. Establishing new trading partners and consolidating and expanding older ties is the only way out. This puts Afreximbank right in the centre of the continent’s development crosshairs. 

I wanted to find out just how robust the institution is successfully carrying out its increasingly important functions. I asked about the ethos of the bank. “We do what we say we will do, and we are clear by saying what it is we want to do. That helps to get things done,” Oramah says, “and people know what they are getting.

 “We have earned the trust of our member countries. We have also demonstrated that Africa is not as risky as many paint it out to be. We’ve done things that moved the dial in so-called difficult countries, and we haven’t lost our shirt. Every day we go to the office, we know why we are there, and we give it our all.”

The Nigerian banker has been at Afreximbank since its commencement of operation in 1993. “When I joined the Bank,” he says, “I didn’t just take a leave of absence from my previous job. I had resigned to take up a new position and the objective was to make a success of it. I crossed the river and burned my boat – no way back! The Bank had all the ingredients to make a change from day one. There was no way this experiment would not be successful.” 

It may seem so with hindsight, but the Bank’s remit has grown beyond recognition. The Charter, he explains, is broad enough to allow the Bank to be bold. 

As far back as 1963, he recounts, plans were mooted, and documented in the volume of decisions made, during the inaugural meeting of heads of state as they launched the Organisation of African Unity, to set up a pan-African payment and settlement union and a transit scheme. The OAU also wanted to boost intra-African trade through fairs. Those plans would remain on the shelf until 1993 when Afreximbank was finally founded. 

Two factors characterised African trade then, and which is still largely the case today – dependency on raw material exports and very low levels of intra-African trade. “If you produce raw materials and export it to someone who will add value and then sell the finished products back to you, the terms of exchange will always be against you. The only reason you may not realise it is the timing of receipts,” he explains. 

He cites Nigeria as an example, which sells its crude and buys refined petroleum products. While the state’s coffers are filled by the sale of raw crude, the demand for foreign currency to procure finished products eventually hits the central bank disrupts the economies when commodity prices crush. He calls this a state of “dynamic deficit” which can quickly come to a head when there is the slightest shock.

Without being able to control one’s capital, he argues, one cannot control one’s destiny. The bank today, he says has a pipeline of $40bn properly vetted and evaluated transactions. Their total assets and guarantees has grown from $5bn in September 2015 to about $30 bn, as per an investor note released at the end of September 2022. 

The Bank is currently on a capital raising exercise having raised two thirds of their target, which is $2.6bn of paid-in capital, or $6.5bn (including callable capital of $3.9bn). “Most shareholders have given their support. Some countries have even paid more than what they had been allotted.”

But Oramah rejects any notion that the Bank is growing too quickly. He says that compared to its peers in other continents, “we are playing catch-up. For a continent with a GDP of $2.5-3.5 trillion (depending on how GDP is measured and reported), the combined total assets of key development institutions on the continent are in the range of $80-100bn, which is small once you compare us to our peers such as the BDNES [the Brazilian Development Bank which at December 2021 had assets of $141bn], let alone the China Development Bank or the China Exim Bank that was established at the same time as Afreximbank.” 

He recalls that during a presentation of the Bank’s five-year strategy some years ago, a board member from China looked at the growth projections they had planned and said that they were too timid. “‘You talk about the opportunities on this continent, and this is the growth that you are aiming at?’ That was the only comment he made, but to me, as Executive Vice President – at that time – it was instructive.”

Capital is king

Africa’s growth remains stunted and more susceptible to external shocks as it still depends largely on exporting raw commodities rather than producing its own industrial goods. For example, it imports $50bn worth of light manufactures annually, he explains.

Greater intra-African trade would boost local manufacturing, reduce external deficits with countries outside the continent, not to mention job creation and a dynamic circular economy. While the Bank has improved intra-African trade, he admits that “we are not near the destination, but we are certainly along the right path now.”

But first, the bank itself must be strengthened and capitalised to achieve its mandate. “If you do not control the capital, you are limited. Opportunities on the continent are well known. Those who take advantage of these opportunities are often not African. That’s because they control the capital and can take advantage of the opportunity.” Being in control of one’s capital appears to be a central tenet of his thesis to drive economic independence.

He praises the decisions made by the Central Bank of Nigeria nearly two decades ago to grow a strong banking sector. Nigerian businesses, including giants such as Dangote would not have been able to grow without a strong banking sector, he argues.

He sees the retreat and divestments of foreign banks from the continent as an opportunity. It’s key to have local ownership of banks because no African investment decision should be made in London, New York, Beijing, Mumbai or Zurich. “No one understands your market better than you do,” he points out.

This is why the capital raise is critical to helping the institution grow and deliver on its mandate. “With more capital we can double the balance sheet of the Bank. If you can only do two things and you have 20 transactions that you cherry-pick. We feel we are not doing enough.”

Is he happy with the recent upgrade from the rating agencies? The credit rating is an enabler, he calls it. It needs to be high enough to enable them to tap money markets but not restrictive. Oramah explains that he’s happy with the current rating (Fitch upgraded the Bank’s credit rating to bbb) as it allows the Bank to take on risk and allows it to put its capital to good use. But he is not seeking to go much higher. 

“If our rating is too high, it means we cannot operate the way we would like to and support our clients and Africa’s development the way they need us to and we have made our business case clear to the ratings agencies. Every 5-year planning period, we all agree the optimal credit ratings levels to target, and we are guided by it”.

Plethora of initiatives

The Bank has developed numerous products and initiatives. Following the success of the vaccine acquisition programme, the Bank collaborated with the African Union, the UN Economic Commission for Africa and the AfCFTA Secretariat to also support access to grains and fertilisers following the conflict in Ukraine. In response, it launched the African Trade Exchange Platform (ATEX) to encourage the purchase of grains and fertilisers from Africa but also to aggregate the procurement of critical commodities to help optimise price and logistics.  

In response to the withdrawal of international banks from the continent it implemented AfPay, an intervention system designed to facilitate the settlement of international trade in those markets that had been cut off.

The Bank also created the Fund for Export Development in Africa (FEDA), an equity investment subsidiary of the Bank. FEDA for example is a shareholder in the African Medical Centre for Excellence, medical facilities being developed across Africa in partnership with Kings College Hospital, London, with an inaugural project ongoing in Nigeria. It is through FEDA that the Bank is investing in the African Quality Assurance Centres for testing and certification and through which took equity in the industrial parks and logistics group, Arise Integrated Industrial Platform (ARISE IIP) that is building industrial zones across the continent. 

Another subsidiary recently launched is AfrexInsure, and insurance manager that is working with Africa Re to improve insurance services and ensure that some of the insurance premiums originating from Africa remain in Africa. 

The Bank, alongside the African Petroleum Producers’ Organization (APPO), is establishing a new African Energy Transition Bank to help ensure an orderly and fair transition to clean energy for the continent of Africa. 

Discussing the drive to end fossil fuels, he says that Africa still has a massive energy deficit and that some countries are reliant of revenues from their fossil fuels. Citing a recent article by the Nigerian President, Muhammadu Buhari, he points out that using all of Africa’s gas reserves will only add 0.5% to the continent’s greenhouse emissions, and these currently sit at around 3% of global emissions, he says: “You cannot decarbonise from the grave. If you really want to decarbonise, you have to work out a phased approach that protects living standards so that you can pursue the goals of clean energy in the future.” 

While fully committed to the goal of energy transition – the Bank is financing Electric Vehicle battery precursor projects in Zambia and the DRC – Oramah believes that the continent’s unique circumstances require it to utilise gas as a transition fuel. The Energy Bank will therefore enable Afreximbank to support African petroleum producers through a dedicated vehicle, while Afreximbank focuses on cleaner energy and the opportunities they offer to Africa.

The Afrizeal of Afreximbank

For many, the Bank’s relentless charge has now become a movement. He credits his predecessors at the Bank for the sound foundation that has enabled him to build towards the vision put forward by Africa’s first generation of leaders and which drove the original founders of the Bank. He is the Bank’s third president, having taken over from the Ivorian Jean Louis Ekra in September 2015. 

The Bank, he feels, is able to do so much because of a culture of ownership that has been fostered among employees. The staff contribute to the strategy and as a result, own it. Everyone has a role and realises that their performance is towards the realisation of a grand mission that is bigger than them or even the Bank itself. We work very hard to discourage non-believers and weak-minded people from joining the Bank.   

Africa must also work to undo the fragmentation of the continent, resulting from the colonial legacy, which he says is still detrimental to growth. “I don’t know who thought through the system, but if it was structured to hold us back, they did an unbelievable job. It is the product of a genius,” he says half-jokingly. “About 60 years since political independence, we are still struggling to free our minds!”

Prof. Oramah combines the hard-nosed practicality of an experienced banker with the missionary zeal of a dedicated pan-Africanist. He has been accused of pushing his staff hard, but he does see the quest for economic independence is as important as any battles that had been fought by the forefathers of African political independence. 

If he had one piece of advice for the continent’s political leaders, it is time, he says, to insert regional integration into African curricula, ensuring that the next generation are under no illusions about the task they face and so that they view their fellow Africans as partners who they can transact with and not rivals or even criminals. We have to do it now, he insists, or the atomised path we are on will leave Africa behind for another thousand years.