The African Export-Import Bank (Afreximbank) is finalising a special guarantee facility in support of processing plants on the continent, said Jean-Louis Ekra, outgoing president of the bank at its AGM in Zambia this week.

Speaking at the conference, Ekra said that the “contract availability guarantee” facility will incentivise international banks to finance processing plants, and enable the plants in turn to secure long-term export contracts.

At a press conference on Saturday, newly-elected Afreximbank president Dr Benedict Oramah explained the structure of the facility to GTR: “If you are a bank in London trying to give a processor a loan for three years, you want to make sure that you have offtake contracts that cover at least those three years. So, for an international bank that wants to support such activities, we will be willing to provide contract availability guarantees so that if after one year the contract based on which the initial financing was done is not renewed, then we will cover the cashflow gap.”

He noted that the bank will begin offering such guarantees in the cocoa sector, and has already developed a relationship with “a major American buyer” to serve as a contingent offtaker.

In his presentation, Ekra added that in order to reduce the cost of compliance for banks financing African trade, Afreximbank had led the creation of a customer due diligence platform, the Afreximbank Customer Due Diligence Repository, which aimed to provide a single source of primary data for the conduct due diligence checks on bank counterparties in Africa.

The bank is aggressively promoting factoring as an instrument of choice in dealing with new markets and non-commodities trade as well as supporting indirect exporters in supply chains, continued Ekra. “Africorrbanking has been introduced to enable Afreximbank to share, partially or fully, the credit risk of African banks opening letters of credit to be confirmed by international banks.”

Ekra said that it was imperative for African governments to expand investments in the development of infrastructure that directly supported productive sectors, particularly utility, and the expansion of ports and harbours.