Jean-Louis Ekra looks back at his ten-year tenure at Afreximbank and forward to its ongoing trade mission

Blog | 20 August 2015

Jean Louis Ekra.jpg

Ten years ago, I had the honour and privilege of leading this esteemed bank; it had just then completed its first ten years of operation under the stewardship of an indefatigable African, Christopher Edordu.

Africa was then beginning to show the “green shoots” of progress; but ten years earlier in 1993-94 when the bank was first established, it looked more like a basket case. That Mr Edordu could build a solid institution from the despair and uncertainties of the early 1990s gave me courage that we would overcome despite the crisis that raged as I took office.

As the curtains fall on my presidency, I feel fulfilled that with your support and confidence I lived up to my aspirations at this great bank. Although the early days were truly difficult, I took on the challenges of the new office mindful always of Madiba’s (late President Mandela’s) admonition that, “We must use time wisely and forever realise that the time is always ripe to do right”.

Cautious boldness

I saw my tenure as president as my TIME. The hunger to do the right thing for the continent was therefore unrelenting; the opportunities before us seemingly boundless, yet the uncertainties arising for these new opportunities presented inestimable risks.

It is in the context of the foregoing opportunities and risks that I set the agenda of my presidency. After a careful analysis, I concluded that the situation required “cautious boldness”. This  required setting ambitious goals within the boundaries of acceptable risk tolerances.

Our focus as I stepped in was therefore to begin the difficult task of transforming Africa’s trade sector, with emphasis on support for value-added exports. This was founded on my firm belief that unless we figured out how to manufacture for exports, Africa would, by only trading raw commodities, continue to export jobs elsewhere. In my opinion, this was an unacceptable proposition for a continent with very high unemployment rates. I also thought that we should give priority to improving access to trade finance and promoting intra-regional trade and integration, as these issues were also clear priorities of many of our member countries.

Considering the trade development priorities we set for ourselves, I was in no doubt that it was only a financially sound Afreximbank that could attempt to deliver on them. Accordingly, we also prioritised the delivery of a financially solid bank, with high quality assets; strong capitalisation; access to divergent sources of liquidity; solid earnings growth; and professional management.

Impact of shareholder support

On many occasions I have been asked:

  •  “What is the secret of our success in intervening under difficult conditions? “
  •   “How we run where angels fear to tread?”

My response has always been, “Because of shareholder support”.

It was on the basis of these support and assurance that the bank stood to be counted in Egypt, following the Arab Spring, when many international banks retreated; underpinned by this confidence, the bank stood shoulder-to-shoulder with Nigerian banks in support of the country’s power sector privatisation when other international banks balked; without the proven preferred creditor treatment the bank continued to receive in Zimbabwe, it would not have been possible for it to do the work it did there,

It has been putting food on the tables of the average family, making sure that some factories operated and generally facilitating access to trade finance, at the height of that country’s difficulties.

And in Sierra Leone, it was the assurance of preferred creditor treatment that made it possible for the bank to provide certain guarantees that attracted the largest foreign investment in the country’s tourism sector since it came out of war.  

Building the brand

We also spent a great deal of effort in building the bank’s brand. Brand equity is an intangible net asset that requires an integrated strategy in creating. With great effort, we did build a brand. And as your bank became better known through the very careful brand-building activity, the demand for its programmes and facilities soared across Africa. The global financial crisis of 2008-2010, further fuelled this trend, raising the bank’s annual deal pipeline from around US$1bn in 2005 to more than US$40bn last year. This accelerating demand made the strengthening of the bank’s capital base even more urgent.

Based on strong support from shareholders in the on-going capital increase exercise, the bank’s equity capital funds are today at a level slightly under US$ 1.3bn. Callable capital is as a result at a level of just under US$400m bringing total actual and contingent equity funds to just under US$2bn as at date. Based on written commitments received from shareholders, the bank expects to receive significant additional equity payments before year end.

It is pertinent at this point for me to thank all those who took shareholding in the bank during my tenure. It is by their support that we were able to increase the number of shareholders from 114 to 129 between 2004 and 2014, and the number of participating states to 37. I would like to take this opportunity to thank the Governments of Seychelles, DRC, Republic of Congo and Morocco for becoming participating states during my tenure of office while we look forward to welcoming the Republic of South Africa very soon.

Enabling trade

As we managed the bank, we always recognised that financial performance was an enabler for the attainment of the trade development goals that motivated the creation of the bank and not an end in itself.

We therefore always kept in focus, the development mandate of the bank. We made our choices carefully with focus on the issues that mattered the most. For instance, to give impetus to our goal of contributing to the transformation of Africa’s trade sector, we quickly staffed the bank’s projects and export development department and set for it challenging goals of driving the transformation agenda. Promoting export processing and service exports became major priorities across the various origination functions of the bank. Considering that Africa produced almost 80% of the world’s cocoa and processed less than a fifth of what it produced, we saw promotion of cocoa processing as a “low hanging fruit” in demonstrating what our commodity processing initiative can achieve.

We therefore launched the Africa Cocoa Initiative (Africoin) aimed at intervening all through Africa’s cocoa value chain, from productivity improvements upstream, through primary cocoa bean processing at midstream, to consumption promotion downstream.

Thanks to Africoin,  we are supporting the creation of about 200,000 tonnes of cocoa processing capacity in Africa; we have contributed in making Côte d’Ivoire the country with the largest processing capacity in the world at over 700,000 tonnes; we are bringing struggling cocoa processing plants back to life in Nigeria and Ghana creating jobs and  creating managerial capacities; we are working to create new processing capacities in Cameroon; and we have built strong partnerships with major global cocoa traders to improve management capabilities and ensure market access for African cocoa processors.

Upstream, your bank is working towards arranging cocoa bond issuances by African cocoa producing countries to finance productivity improvements at farm levels; and downstream, we are working with the International Cocoa Organization (ICCO) to promote cocoa consumption in Africa and Asia.

Enabling tourism

Tourism remains an important activity in many of the bank’s member counties, but its development has been hindered by lack of appropriate financing. To remove this constraint and enable the creation of first class tourism facilities, we introduced the Construction-Tourism-Linked Relay Facility (Contour) that distributes risks in the financing of such projects to parties best able to bear them.

As a result, your bank is today at the forefront of creating hotel and tourism facilities across Africa. In Cape Verde for example, we are creating more than 500-rooms in new capacity; in Sierra Leone, we are supporting the emergence of the first ultra-modern hotel in Freetown. Similar facilities are emerging in Tanzania, Zambia, Gabon, Mali, Nigeria, Côte d’Ivoire and elsewhere.

The Contour facility is making it possible for us to attract Egypt’s engineering services into other African countries thereby promoting intra-African trade in services. It is also making it possible for some of our member States to more easily deliver on their tourism strategies while creating jobs.

With about US$1bn of Contour Projects in the pipeline across Africa. It is doubtful that without this bank, such projects would have even have seen the light of day

Our raison d’être

Our work aimed at improving access to trade finance covered many areas. Of particular importance is that we never lost sight that the bank was created as an instrument to deal with market failure. In this regard, whereas the market operated reasonably well for short-term trade finance, we saw major gaps in financing the rapidly rising trade for import of investment goods into Africa, which rose from levels of about US$50bn two decades ago to almost US£300bn in 2013.

Our focus on this has made it possible for us to finance exports of capital goods from Egypt to carious African countries amounting to more than US$700m dollars in recent years. Support for the import of similar goods from China exceeded US$1bn in recent years.

God does not throw dice

The financial performance and a few of the development impact successes I have enumerated did not arise by chance. It was Einstein, in his criticism of Quantum Mechanics in the 1920s, who said that he was convinced that “God does not throw dice”.

I share that philosophy and as a result ensured that early in my tenure, we began to assemble people and build structures that would give us reasonable assurance that we would achieve the goals we set for ourselves. As a result, staff numbers expanded modestly but surely to ensure quality service delivery at the front office and risk control at the middle and back offices.

Training, the bedrock of renewals any dynamic organization should embrace, was emphasised, so that staff remained up to date with skills and know-how related to their functions. We made it an article of faith of ensuring that each and every staff attended one training programme every year. The result is that the bank is populated by highly skilled personnel critical in the dynamic and disruptive world we operate in.

Efficient risk management was also a priority given the expansion envisaged as well as the uncertainties in the environment. In fact, risk control was an underlining element of the “cautious boldness” approach we adopted right from the beginning. Accordingly, we put in place an enterprise risk management framework as the basis for risk management in the bank.

Key activities of the bank were also automated to reduce operational risk and improve efficiency. Accordingly, your bank underwent major modernisation during the period.

An important initiative of the bank aimed at facilitating access of Africans to international trade finance was the introduction of an African Customer Due Diligence Repository Platform (ACDIRP) which we launched in Dakar in 2014. This was intended to reduce the compliance cost faced by providers of trade finance to Africa as a way of increasing the supply of trade and project financing to the continent.

Branch expansion was also given impetus with Francophone West Africa and East Africa branches approved. With four branches covering west, east and southern Africa, and the headquarters in North Africa, we have built the beginnings of a bank that will more and more be relationship-driven and more responsive to clients’ needs.

Funding base

We also built a solid funding base for the bank. Today, the bank is well funded from various sources, including money market and bilateral lines of credit, syndicated loans, the bond market, term loans from export credit agencies and development finance institutions.

The markets that provided funding also expanded beyond Europe to include Africa, Asia, Middle East, the US and elsewhere. The bank can now easily issue benchmark bonds of US$500m or more thereby strengthening its capacity to deliver on its mandates.

The consequences of the progress enumerated have been profound: Today, the bank has a strong brand recognition in major financial markets and Africa; we have delivered a bank that opened the doors to peer African multilateral development banks, other than the African Development Bank (AfDB), to rating agencies.

This followed the bank’s investment grade ratings assigned by all three major global credit rating agencies at the height of the global financial crisis in 2009 and 2010 [see the 22 July 2015‘stable’ rating from Moodys here].

We blazed the trail for many African MDBs with regard to access to the global bond markets, following the bank’s very successful debut issuance in 2009.

Impacts and outcomes

On the development impact side, we are proud to have supported the financing of the privatised power assets in Nigeria when other international banks balked; we can beat our chests and say proudly that air travel is easier in West Africa today due to financings your bank provided to Air Ivoire and Arik Air in Nigeria. Kenya Airways can boast the most modern fleet in the world thanks to a US$2bn multi-sourced financing Afreximbank arranged; some Egyptian exporters to various African countries are able to do so with peace of mind due to risk cover provided by the bank; and in Zimbabwe, trade finance banks starved of hard currency liquidity can again support their customers through an innovative trade finance liquidity support facility arranged by the bank.

Thanks to Afreximank, some banks in Burkina Faso, Liberia, Sierra Leone and Guinea who could not easily access correspondent banking services were given access enabling them to compete effectively in business hitherto dominated by large foreign-owned banks. Factoring is beginning to take hold across Africa, giving a boost to SME financing in the continent; with country programmes in place or under development in Zimbabwe, Malawi, Côte d’Ivoire, Cameroon, Sierra Leone and elsewhere.

When the root is deep the fruit is sweet

 My advice to any new management coming after me is that it should not lose sight of the urgency to transform Africa’s export sector. The bank should not lose focus on this important area at this time; the journey is difficult but we must always remember that “when the root is deep, the fruit is sweet”.

We must continue to hold our destiny in our hands. We have demonstrated with ‘Africoin’ and ‘Contour’ that where there is the will there is a way – we can’t turn back now! My advice is that the Bank should draw from lessons learnt from its cocoa processing financing experience and extend its reach to other commodities based on the principle of partnership and shared responsibility.

Capital strength

I will also encourage the new management to keep a sharp focus on properly capitalising the Bank. As I look ahead and see forecasts of where African trade is headed, I see tremendous opportunities for your bank. The fuel to driving your institution to those opportunities is capital.

The short to medium term capital needs are being met by the enthusiastic response of shareholders to the ongoing capital Increase exercise. But in the long term, the board and management have to find a source of permanent capital, less reliant on the sort of capital Increase exercise currently under way. Class ‘D’ shares offer a window for this source of capital. There may be other alternatives but I must caution that the use of Class ‘D’ as the instrument must be carefully implemented to retain the trade development mandate of the Bank. However it is done, I think the bank should be capitalised at levels of US$3bn to US$4bn in the next five years for it to meaningfully play its role in the continent, under rising trade values.

Farewell

I cannot forget the contributions of a most resourceful group of people assembled as staff of this bank. They are truly the ones that deserve all the kudos for the achievements of the Bank during my tenure; and to my family – my wife, Edith and my five children, I say “you can have your dad again!”. There was no greater sacrifice than theirs in this whole journey and I thank them for being there for me all through the ups and downs of my presidency at the bank.

This blog is extracted from HE Jean-Louis Ekra's address to shareholders and guests at Afreximbank's annual general meeting on 13 June 2015. He is succeeded as president in September 2015 by Dr Benedict Okey Oramah.

 

References: 

See also Clarissa Dann's interview with Jean-Louis Ekra, New Trade World here where he talks further on themes of the bank's capitalisation and Africa's need to export more value-added goods

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