Tanzania and some few other African countries would receive physical infrastructure assistance for the establishment of a continental free trade area by 2017, thanks to the initiatives by African Development Bank (AfDB).
According to AfDB president Dr Donald Kaberuka, he is confident that intra-African trade and African exports to the rest of the world could grow very fast if presnt efforts are scaled up to improve the continent’s physical infrastructure which continues to undermine competitiveness and trade growth.
Efforts to address physical infrastructure bottlenecks should also look at “soft infrastructure” constraints such as regulatory barriers, restrictive regulations on movement of goods and people, poor logistics services and of late, challenges in accessing trade finance, he said.
He said in Addis Ababa that soft infrastructure constraints can be as pervasive as tariffs at the border, and can easily nullify the competitiveness and efficiency gains derived from investments in physical infrastructure.
Recognizing that finance is the engine that drives trade, Dr Kaberuka decried the fact that with the advent of the financial crisis, businesses in at least a third of African countries were now paying a premium of about 10 percent on trade loans on top of cash collateral requirements.
“These developments threaten to undermine trade at a time when African exports are fueling growth across the continent,” he said.
He noted that the AfDB had responded to the trade finance crunch by establishing a USD1bn temporary Trade Finance Initiative (TFI) in 2009.
The TFI has thrown a lifeline to hundreds of businesses across Africa, saving thousands of jobs and generating millions of dollars in revenue for firms and their governments.
“The bank has gone a step further and is establishing a full-fledged in-house Trade Finance Programme, and is collaborating with other development partners on ways to counter the on-going turbulence in the financial markets, and to minimise damage to Africa’s trading capabilities,” Dr Kaberuka said.
He called for innovative ways to finance Africa’s growing infrastructure requirements. Citing the low returns of about 1.4 percent on instruments such as US Treasury bills, Dr Kaberuka was confident that investors and sovereign wealth funds would be looking for more appealing investments such as infrastructure in Africa, provided security and good returns are assured.
He noted that sovereign wealth funds are forecast to hold USD10trn by 2015 and could be a key source of investment to finance some of Africa’s infrastructure.