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Opinion| Afreximbank’s role in promoting Africa direct investments


About a year and a half ago, Afreximbank led the execution of the single largest intra-African investment financing project in Tanzania. 

The $2.9bn hydroelectric power project, expected to generate more than 2,000 MW of electricity, was financed solely by African financial institutions and is under implementation by Egyptian construction companies. 

This adds to almost $5bn worth of similar investment projects funded by the Afreximbank, and executed by African entities during the last four years.

Afreximbank has prioritised the promotion of these kinds of African Direct Investments (ADIs, investments by Africans in African countries other than theirs), because it is our considered view that “only Africans can lead Africa’s economic transformation”. 

Foreign direct investments (FDIs, investment from non-African sources) have mostly been concentrated in Africa’s extractive or resource-based industries, with a marginal impact on the real economy and job creation. 

In contrast, ADIs have focused on productive sectors, including construction, hotel and tourism, chemicals, manufacturing, financial services, infrastructure, and other services sectors. Increased intra-African investment is thus essential to accelerating economic growth and job creation. 

According to a 2020 study by the African Development Bank (AfDB), intra-Africa FDI between 2003 and 2017 amounted to $92.8bn. However, it represented a paltry share of investments flow into Africa. We must grow these numbers as ADI’s benefits can be self-reinforcing in a pan-African sense. 

The Bank’s efforts to expand these kinds of ADIs is rooted in its relatively larger economic impact than FDIs. It is through such investments that intra-regional trade can be accelerated in a dynamic sense. 

ADIs financed and executed wholly by African financial institutions and corporates dispel the erroneous impression about the continent’s lack of capacity to carry through large African projects. 

Another important outturn of these investments is the retention of sizeable proportions of value-added within Africa, which can be recycled into new development projects in the continent, thereby expanding Africa’s resources for Africa’s development. 

The direct and indirect job creation effects are equally evident. These projects, executed using African resources, have facilitated intra-African skills and technologies transfers, nurtured the growth of regional supply chains and integrated small- and medium-sized enterprises (SMEs) into continental projects. 

Further, by expanding operations across Africa, these entities are engaged in learning-by-doing, and realising significant efficiency gains from economies of scale and scope. At Afreximbank, these intra-African projects have accounted for a substantial share of total financing for African projects over the last few years. 

Scaling ADI has been particularly challenging, despite the notable progress made. The African Development Bank (AfDB)’s 2018 Africa-to-Africa Investment Report identified access to finance, availability and cost of electricity, political instability, and sizeable informal sector as overriding challenges to accelerating ADIs. 

Other challenges included corruption, taxes, customs, and trade regulations. Thankfully, regulatory and policy-related challenges are being addressed under the African Continental Free Trade Agreement (AfCFTA). 

On 1 January 2021, Africa commenced trading under the AfCFTA. That historic step marks the first phase of liberalisation of trade in goods and services through gradual tariff removal and elimination of quota restrictions.

It follows the adoption of the Protocol on Trade in Goods, a Protocol on Trade and Services, a Protocol on the Settlement of Disputes between Member States, and the Rules of Origin. 

Negotiations of the schedule of tariff concessions and schedules of…



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