Skip to main content

WELCOME TO UGANDA AFREXIM BANK



Last week Afrexim Bank opened its regional offices here in Kampala in an event that I think should have had much more play in the media.

The Afrexim Bank has as its stated mission the desire to stimulate trade, primarily within the continent but also improve Africa’s trade with the rest of the world. Worthy goals and we should sit up and take notice.

The bank’s coming to Uganda is not by chance. A lot of work was done and supported by President Yoweri Museveni to win it away from neighbouring Kenya. The Ugandan businessman is bound to benefit from the proximity to the bank if we get organized.

"Of course the bank will be dealing with big deals, but one can hope their expertise in trade financing and the other products they bring to the table, can trickle down through the financial sector and improve our dealings....

But just to give a perspective of what our businessmen suffer because of the gaps in trade facilitation in our economy.

Say I want to import shoes from abroad, a container load for instance. I often have to pay for the shoes cash up front and wait for them to arrive here, which can take anything from weeks to months to arrive. Depending on the volumes I require.

As you can see the problem with this is that, I will have capital locked up for a long period of time, money I may very well have borrowed and are already repaying, before a single shoe has landed on my shelves.

You can imagine that I will mark up the cost of my shoe to reflect all these costs. No wonder other better supported businesses are coming here and running rings around us.

In a more orderly economy we should have access to Letters of Credit. Which we do. But as it is, many of our banks are not recognized abroad so they have to also go through a third party, which is an added cost our businessmen can least afford.

Afrexim with their international reach may very well help us with this challenge.

That is just one aspect of what they do but which is urgently needed in our market.

I am also quite excited about the payment system they intend to introduce here, which they are already piloting in West Africa.

"In many instances our businessmen trading with other businessmen on the continent have to trade in currencies other than our own. So for instance I am trading with an Egyptian businessman I may have to deal in US dollars or British pounds, rather than directly in Egyptian pounds because of the intermediary banks we are transacting through.

With Afrexim’s payment system that may very well be a thing of the past. It is active in all African countries except Algeria, Somalia and Western Sahara.

It has other services of course – asset backed financing, note purchases and project financing, which with their pan African outlook may very well be better than what we are used to.

Of course to deal directly with the bank our businessmen would have to have developed a certain scale – annual revenues of at least $10m, but at least they are here within easy reach of us to begin with.

While that may look like an immediate disadvantage it has its long term benefits.

For one our businessmen will be forced to step up their game, structure their operations in such a way as to make them attractive to Afrexim bank and by extension all other financiers of that kind.

"The informality of our operations is holding us back in terms of size and in terms of the markets we can effectively compete in, here and abroad....

The bank promises to provide some hand holding for our businesses, something that is very badly needed and in very short supply.

One can read all the textbooks they want on business, but transitioning from one stage of business to the next requires help from people who have already been there and can help the process along.

At the Private Sector Foundation of Uganda we welcome the closer proximity of the bank to us. Our members look forward to a very fruitful relationship well into the future.

I urge all our businessmen to investigate the bank and see how they can best take advantage of this opportunity, if not now but in the future.

Otherwise welcome to Uganda Afrexim Bank.

Comments

Popular posts from this blog

NOT ONLY THE HARDWARE BUT THE SOFTWARE TOO

In the middle of September the United Nations released its annual Human Development Indicator (HDI). This index serves as an indicator of the quality of life of a country’s people by measuring the health, education, inequality, poverty and security standards. Aside from the statistical measures of development like GDP growth, this is obviously a better measure of how people are actually doing. In this year’s HDI report Uganda was ranked 162 out of 189 countries with a HDI score of 0.516. The index goes from zero to one, the nearer you are to one the better. Our score puts us in the low human development category. But as bad as that sounds we have been worse. In 1990, the earliest year that these figures were compiled our score was 0.311 even the UN recognises that we have improved 66 percent in the last three decades. According to the UN figures life expectancy has risen to 60.2 years   from 45.5 in 1990; expected years of schooling has doubled to 11.6 fr...

A STITCH IN TIME

Last week the Bank of Uganda raised its key Central Bank Rate (CBR) a percentage point to ten percent from nine percent. This was the first increase in more than a year, a move prompted by BOU’s projection that price increases coming around the corner. Increasing oil prices, a weaker shilling and new taxes on mobile money services were cited as reason for this anticipated increase. We know that in the last year or so there has been a cash squeeze, money has been hard to come by. While the economy has been growing this has not been spread around evenly. It was hoped that if the economy can keep growing we can all begin to feel the joy. The Bank of Uganda has helped on this front by lowering its CBR from a high of 21 percent about seven years ago when inflation hit record levels. This allowed more borrowing by the private sector which has helped keep our economy ticking. But just when the economy was beginning to gain traction BOU has slammed on the brakes. We may ...

FINANCING OUR ENTREPRENEURS, A CHALLENGE WE CANNOT IGNORE

In recent weeks the issues of financing for business has been in the news, in one form or the other. We have seen the challenge a past minister is facing with having to hang onto his home. The case is in court, so we can’t discuss its merits and demerits, just to say he may have fallen prey to some predatory practices, with the lender skirting dangerously on the edge of the law. Across the border in Kenya a cap on bank lending rates has been repealed. Three years ago Kenya’s parliament passed a law restricting lending rates to two percentage points above the rate at which the central bank lent money. In reaction banks pulled back their lending to businesses, depressing the economy and prompting the reversal. So now banks can “properly” price their loans, often to the discomfort of small and medium sized businesses. The two incidents are related and speak to the availability and cost of credit. In my business career I have benefitted immensely from credit. It is next...

OUR HISTORICAL SITES SHOULD NOT GO UNATTENDED TO

Recently I was at Makerere University to attend a wedding ceremony. I hadn’t been on the university’s grounds in a while. I was shocked at how run down Mary Stuart and Lumumba Halls were. They are in need of serious work. These thoughts were reawakened with the recent launch of the coffee table book “Beyond the Reeds and Bricks” promoted by the tourism ministry, the cross cultural foundation of Uganda and the European Union Delegation. The book which is aimed at the protection of historical sites and buildings in Kampala, Entebbe and Jinja, is a moving collection of pictures of buildings and sites we know, but probably take for granted when we pass them as we go about our business. "Entebe za Mugula in Entebbe, Mackay’s Cave, the post office in Entebbe, the Stanbic Bank Branch in Jinja, Hamu Mukasa’s house in Mengo, the main building at Makerere , the Bahai Temple, Kibuli mosque and many other sites have pride of place among the 60 pictures in this book, which is ...