In this wide-ranging interview, Professor Benedict Oramah, the President of Afreximbank, shares his philosophical insights on Africa’s place in the world today and reminds us of our duty to hand over to the next generation the full potential of our capabilities.
New African: There are some similarities between the Latin American debt crisis of the 1980s and the current one in Africa. What can we learn from then that will be useful for the crisis we are now facing?
Benedict Oramah: The debt crisis only brought to the fore the symptoms of the problems that Africa already had, fundamental problems that one way or the other have to be addressed if Africa was, and still is to become a major actor in the global economy.
In the 1980s, Africa was heavily commodity dependent. For many countries, commodities accounted for more than 80% of total exports and more than 50% of fiscal revenues. In fact, for some countries, commodity prices defined the key macroeconomic variables – namely fiscal revenues, export earnings, reserves, and current account.
The second challenge was that of over-dependence on a few markets, with Europe accounting for more than 75% of total African trade. Such excess concentration exposed the continent to extreme shocks.
It was the Latin American debt crisis that revealed those weaknesses. The consequence of the crisis was a collapse in commodity prices and the withdrawal of international banks from African trade finance on account of perception of excessive country risk.
When the founding fathers decided to create Afreximbank, they envisaged an institution that would be well positioned to deal with challenges related to excessive dependence on primary commodities, a deficit of value addition, and market concentration.
They foresaw an institution that would draw on improved management of risks and global volatility to enhance Africa’s integration into the global economy.
The emphasis in the charter of the Bank on promoting intra-African trade and Africa-South trade reflects these considerations. The debt crisis brought these challenges to the fore and shaped the contours of the institution that emerged from it.
The world witnessed a major shift in the cartography of African trade over the last few years, with South-South trade becoming a major driver of African trade and growth.
Over time, Afreximbank has also become an important instrument for crisis response management by Africa, providing counter-cyclical support to help its member countries to better absorb numerous adverse economic shocks associated with recurrent cycles, working closely with the African private sector to expand economic opportunities during upturns and softening the blows during contractions.
The Bank disbursed over $10bn under its Countercyclical Trade Liquidity Facility to help the continent achieve an orderly adjustment to the commodity price shock of 2015/16. Through its Pandemic Trade Impact Mitigation Facility, the Bank is helping to contain the social and economic fallout from the Covid-19 pandemic in its member countries.
NA: What is the importance of the Babacar Ndiaye Lecture to the Bank’s institutional memory?
BO: The Babacar Ndiaye Lecture was established four years ago in honour of the late Dr Ndiaye – he was the President of the African Development Bank during 1985 to 1995 and one of the pillars of Afreximbank – to sustain his vision of using strong continental institutions as instruments for delivering Africa’s development and integration.
Afreximbank was birthed and inspired by his vision and the relevance of the institutions he helped create while he was at the helm of the African Development Bank as its fifth President.
His legacy is evident in the development impact those institutions have had over the years. Through this Lecture we hope that his memory will be kept alive and his exceptional contributions and commitment to Africa will inspire future generations of Africans.
So, history is indeed very important. We are always mindful that you can only meaningfully define your future if you know your history. We use the lessons of history to shape our vision for tomorrow.
If we do not have in place mechanisms that enable the current generation of Bank staff to systematically pass on information to those who will be running it tomorrow – about what led to the Bank’s creation – the institution will lose its soul.
It will lose direction and potentially become a visionless and purposeless institution. The basis for addressing the challenges the Bank must tackle with courage, will no longer be there.
NA: History tells us that it is easier to create institutions than to preserve and sustain their philosophical and ideological foundations. The world is changing; how do you make sure you remain relevant?
BO: The more successful you are, the more risks you face. The risks come from so many angles. As a bank, as you grow bigger, you need more capital. Because you want more capital, you look for more investors, public and private. When you bring in more investors, you bring different ideas and talents into the organisation.
Unless you are vigilant, the original philosophy that led to the creation of the institution becomes increasingly diluted over time. That is one of the major risks Afreximbank will face. Hence, just as we hold dear the things we believe in, every staff member, every participating state must remain true to the ideals of Afreximbank.
We are in an increasingly competitive world. The world may look normal to the ordinary mind, but I can tell you, it is a jungle out there. Africans must guard their own. It is a fool who sits on his or her palms and hope that a competitor will reveal him or her the secrets for success!
Afreximbank is an institution that will play an even more important and critical role in the process of economic development in Africa. Within the context of Covid-19, it participated in establishing the African Medical Supply Platform (AMSP) to enable pooled procurement of medical supplies by African countries, ensuring that smaller economies benefit from reduced prices arising from larger volumes.
Through its interventions in several areas and working closely with the African Union Commission (AUC), the Bank is actively supporting the implementation of the AfCFTA. We are doing that because we believe that it is the key to redeeming Africa’s pride. That is why Intra-African Trade Promotion is the arrow ahead of the Bank’s Strategy. We will throw in everything we have to make the AfCFTA a success. In a few weeks, the Pan-African Payment and Settlement System (PAPSS), which Afreximbank is championing under African Union auspices, will start operation and enable Africans to pay for intra-African trade in their local currencies. This will begin the process of bringing down the 84,000km of borders that divide us.
Through an African Collaborative Transit Guarantee Scheme being implemented with the African Union and Regional Economic Communities, the Bank will facilitate seamless flow of goods across transit corridors.
The AfCFTA Adjustment Facility, which the Bank is arranging, will enable countries to adjust in an orderly manner to sudden tariff revenue losses because of the implementation of the agreement.
And through its support to the private sector, the Bank will help lift the supply-side constraints which have undermined the diversification of sources of growth and expansion of intra-African trade.
The game of international trade is not a game of love. It is a game of survival of the fittest. We should never expect that any group of people will love us more than they love themselves. We must always strive to earn a seat at the table and not expect to beg to be invited to the table!
We should not expect anybody to treat us in a way that will make that person lose. We can only get what we fight for. That is why Afreximbank remains and will become an even more important tool for the continent in its quest for growth and increased competitiveness in the future.
Because it is going to be a critical instrument, it should also be ready to confront global challenges and risks. How these risks are managed depends on those who run the Bank, depends on those who own it, depends on the countries that call it their instrument.
NA: How big is the Bank today, and does it have the ammunition to be able to support African growth in what is going to be a challenging year?
BO: Afreximbank was created as a ‘market failure’ institution. Each time the continent experienced a crisis, the Bank expanded its operations to support its member countries.
Every African that spares a moment to look at the history of the Bank should be very hopeful about the future of our continent: it is a bank that was created at the height of Afro-pessimism; a bank that was created at the height of an unprecedented economic crisis; a bank that was created when many countries that were supposed to support it were struggling to survive. Despite the challenges the continent was facing at that time, they resolutely supported the Bank. History has shown that they put their money where their mouths were!
I think every African, every child born in Africa, should spend the time to look at and study the history of the African Export-Import Bank. A bank that had assets of just about $140m some 25 years ago, has assets and contingent liabilities of about $22bn today. A bank that was making gross revenues of about $12m in its first year of operation has hit gross revenues of more than $1bn.
But beyond creating value, we are talking about a bank that has been able to consistently deliver on its mandate and innovate to effectively help its member countries deal with global volatility and uncertainty.
The Counter-Cyclical Trade Liquidity Facility conceived by the Bank at the height of the 2015/2016 commodity crisis, helped its member countries deal with a crisis of even greater proportion than the crisis of the 1980s. Afreximbank intervened forcefully and disbursed about $10bn to key economies that prevented the real sector crisis from deepening and morphing into a financial crisis.
If not for Afreximbank, we would not be able today to say that Côte d’Ivoire is the economy with the largest cocoa-processing capacity in the world. We would not today talk of Africans implementing a project of great magnitude in Tanzania, a dam constructed by Egyptian companies amounting to $2.9bn financed by Africans.
Without the Bank being in existence, the challenges of implementing the AfCFTA would have been even greater. Africa would not be looking forward to a Pan-African Payment and Settlement System (PAPSS). The Bank was a child of necessity, but today it is the driver of economic transformation.
NA: We are told that you enjoy music and that Bob Marley and Fela Ransome-Kuti are amongst your favourite artists. What draws you to them?
BO: There is an American author and philosopher whom I like to read, Professor Frank Heywood Hodder. People say that it is revolution that brings change, but Hodder disagrees with that. He says that if nothing changed, there would be no revolution. In other words, it is change, drastic change that brings about revolution. Bob Marley and Fela Kuti did not arise by chance, they arose because of the drastic change they saw in the African continent.
A continent that was great, a continent that had Mansa Musa, that had great kingdoms, the Kingdoms of Mali, the Kingdom of Zimbabwe, the Kingdom of Dahomey.
A continent that had these great kingdoms and the great pharaohs was brought to its knees by colonialism, by slavery, and has, as a result, been reduced to the periphery of the global scheme of things.
Those destructions brought the drastic change. It is that drastic change that made Bob Marley and Fela Kuti revolutionaries, for those who want to call them ‘revolutionaries’.
But for some of us, these musicians were great and inspiring leaders. They remind us, through music, about who we are, remind us about our responsibilities to our continent, to our people!
They tell us the truth about what we must do. They make sure that those who listen to them leave with some knowledge of what identity means. The identity you own, not the identity you acquire by trying to belong. It is that knowledge that helps any human being of character determine the type of contributions that he or she will make in life. Because of that, those two men were great and inspiring leaders.
I listen to them because every piece of their music has a meaning and will teach you a big lesson on how to continue the struggle to make our continent better for those who are coming after us, because we cannot pretend that things are okay.
Those of us who are in a privileged position must use that position for the good of our people. We should not be blind to the difficulties many others are facing. It is the music of Fela Kuti and the music of Bob Marley that tell it to us in our bedrooms, in our sitting rooms and in our cars.
NA: What role does courage play in the process of economic development, and more generally, in your commitment, to use an aphorism, to making Africa great again?
BO: International trade is a game of harsh competition, in which courage is needed. That takes me back to the music of Fela Kuti. When you face a big challenge, there are two options: either you summon the courage to confront the challenge, or you look for excuses and abandon the problem.
But the problem will not go away. We think we have escaped it, but it will wait for us, and pose even greater difficulties in the future.
Regarding the game we are playing in international trade and development, we must consider, what are the obstacles? Unless we develop a strategy to overcome obstacles, we will remain underdeveloped.
Africa must have the courage to challenge the status quo and challenge the incumbents. Africa was disrupted and brought down to the lowest rungs of global development. To rise again it must find ways of economically disrupting today’s established order. That will require innovation, hard work and a strong sense of purpose as an important toolkit.
Challenging incumbents is not for the faint-hearted. We must have the courage to challenge them. Unless we do that, we will remain subservient.
It is only when we rise to the challenges before us that the world will treat us with respect. It is then that we can make a better world for ourselves and others. We can have a better world for everybody on earth.
NA: You have been working on creating platforms to unlock the constraints of trading in Africa. Can you update us on these projects?
BO: In today’s world, any institution that ignores technology does so at its own peril. This is a continent of 55 fragmented countries. This is a continent that is so huge that it could fit Europe, China, and the US and still have extra land. A continent that has a combined total of 84,000km of borders.
Technology is the only way to bring the continent together, and the only thing that can bring value to any institution in the next five to 10 years. We are investing heavily in technology because we believe that we need it for our own efficiency, and in fact survival!
Recently, we launched our customer due diligence repository platform, dubbed the MANSA Platform, which we hope will become a central repository for customer due diligence in Africa.
We are currently populating that platform. We are just about to start piloting the Pan-African Payment and Settlement System (PAPSS), a platform that will make it possible for intra-African trade to be settled in African local currencies, thereby reducing the foreign currency content of the trade. That platform will make it possible for Afreximbank to clear multiple currencies.
PAPSS will reduce transaction costs in intra-African trade and will return to the continent trade that is currently diverted out of Africa because of exchange and liquidity constraints.
We are also in the process of launching a Trade Information Portal that will be enabled by artificial intelligence. The portal will make it possible to predict regional supply chains and make market research much easier. These are just a few of the technology ecosystems we are building and which we have designated the African Trade Gateway.
NA: The Bank has been intimately involved in the AfCFTA as the African Union’s partner. What are the remaining key actions that should be undertaken to ensure the success of the AfCFTA, with a kick-off date of 1 January 2021?
BO: The launch of the AfCFTA is a political act. It creates a framework that will make other very critical things possible: realisation of the vision of integrating the continent through trade and investments. That is on the political side.
The business side is even more critical and for it to work, the negotiations on tariff concessions must be done in a way that would accelerate the transformation of African economies to diversify their sources of growth and boost both extra and intra-African trade.
The rules of origin currently under negotiation can provide a boost to private sector development and support broader buy-in, if done properly. At the same time, it is critical to directly mobilise the business community, which will drive the process of structural transformation. A rules-based system must be anchored on a sound Dispute Settlement Mechanism. This is also underway.
The countries must also realise that the benefits of the AfCFTA could come slowly and the ongoing process of deepening integration could be fraught with episodic difficulties. But countries and governments should not use these difficulties as an excuse to delay or slow the implementation of the AfCFTA.
Financing is also critical for the success of the AfCFTA, and Afreximbank is playing its part in the continental drive to deepen the process of economic integration. The Bank has already disbursed about $20bn in support of intra-African trade and expects to do much more as AfCFTA implementation proceeds.
Another critical factor in successful implementation is improving the quality and availability of trade information. Trade is triggered by information and cannot occur in a vacuum. Afreximbank is investing heavily in the development of a Trade Information and Regulation Portal to support the identification of regional supply chains. The African Union’s Trade Observatory will also be a major source of Trade Information.
Most importantly the Secretariat of the AfCFTA will be critical in ensuring success. As a new initiative, professionalism will be crucial. The Secretary General, His Excellency Wamkele Mene, comes fully equipped both intellectually and from the point of view of practical knowledge. He carries a heavy responsibility and will require the support of every African.
We cannot afford to hand over to the next generation a continent with potential that is never realised. The Africa generation to which I belong – born during the period of independence in the early 1960s – entered the world in a continent liberated by their fathers and grandfathers, who made tremendous sacrifices, including paying the ultimate price.
These fathers had great expectations for our generation and beyond. We are working hard to deliver on those expectations. But I am even happier that the dot.com generation is smarter and working even harder to make sure that the African continent operates at the same level as others.