How trade can facilitate Africa’s post-COVID-19 recovery

As the COVID-19 vaccination exercise continues in Africa, the continent's leaders are focused on improving growth prospects. The African Development Bank has forecasted a growth rate of 3.4%, but the question remains: can trade facilitate Africa's post-pandemic recovery? Jesuseun Fatoyinbo, Head of Trade at Stanbic IBTC Bank, sheds light on the challenges and opportunities in trade financing on the continent. In a recent interview with CNBC Africa, Fatoyinbo discussed the Trade Finance Gap in Africa, which stood at $81 billion in 2019. Only 40% of Africa's trade has been intermediated, a significantly lower share than the global average of 80%. Fatoyinbo highlighted the top three challenges contributing to these low numbers.In the midst of these challenges, there is hope for economic recovery fueled by trade. With projections indicating growth rates of 5.5% for Dubai, 3.5% for Africa, and varying rates for Nigeria, trade is poised to play a vital role. Trade not only facilitates the exchange of goods and services but also supports economic growth by connecting economies. The continent's economic recovery is expected to be primarily driven by vaccinations, with trade playing a crucial role in the distribution of vaccines and the necessary infrastructure to support it.As economies gradually reopen, the demand for goods and services is expected to increase, leading to a boost in economic growth. The African Continental Free Trade Agreement, which came into effect in January, presents an opportunity for intra-African trade to flourish. By promoting local industries and creating a supportive ecosystem for trade, the agreement aims to drive prosperity within the continent.Regulatory bottlenecks and stringent regulations are one of the challenges hampering trade finance in Africa. While regulations are essential for conducting business, they can sometimes hinder growth. However, Fatoyinbo emphasized the importance of engaging stakeholders and finding innovative ways to navigate regulatory challenges. Development finance institutions have played a significant role in closing the trade finance gap on the continent. By providing credit, liquidity, and support to banks and corporate entities, these institutions have helped bridge the financing gap. Collaboration between development finance banks and commercial banks is essential in ensuring that funding and liquidity are available for trade finance activities.Overall, the key message is that funding is not the primary challenge in trade finance. There is ample liquidity in the market, and the focus should be on building solid banking propositions and adopting best practices to attract funding. By aligning with industry standards and demonstrating sound financial management, corporates and SMEs can enhance their access to credit and achieve sustainable growth.