August 2021

AfCFTA is the newest pendulum of the global FTA network, considered to mould Africa’s economic potential. It intends to trigger GDP growth, raise employment, and stabilise economies across the African continent, creating a single African market for goods and services.

AfCFTA requires the member countries to exclude 90% of tariffs, granting free access to merchandise, goods and services. It also simplifies customs procedures and advances further by the movement of white-collar and blue-collar workers, healthy competition, intellectual property and investments. A recent publication from Baker Mckenzie stated that, as of April 2021, AfCFTA has 36 countries sanctioned with their agreement and 54 countries in Africa have signed the agreement, with Eritrea being the only nonsignatory party.

Trading under AfCFTA activated from 1 January 2021. It is acknowledged as a timely reinforcement to encourage intra-continental trade and enhance inter-continental collaboration in a period of increasing seclusion.

The agreement is already making headway and headlines. For example, South Africa is among the first to harvest the benefits by combining its solid manufacturing base and substantial networks across the continent with AfCFTA terms. Similarly, smaller countries such as Ghana and Côte d’Ivoire are seeing a rapid improvement in trade thanks to their open economies, favourable business environment and top-grade infrastructures.

AfCFTA recognises the lack of competent leadership and trade support as critical factors and aims to address them continuously. According to Ghanaian President Nana Akufo-Addo, the COVID-19 pandemic has amplified the significance of the AfCFTA’s success more than presumed.

Some of the significant challenges that AfCFTA faces are lacking proper infrastructure, inferior trade logistics, regulatory constraints, uncertainty in financial markets, regional warfare and intricate customs processes. These can affect trade development more than imposing tariffs. In the aftermath of COVID-19, these challenges can be subdued but only with more major trade and support.

If everything works smoothly and AfCFTA unlocks its truest potential, the proposed benefits would spread globally. For example, defeat poverty in Africa, improve the export portfolio, attract FDIs, expedite economic growth, enrich women’s lives, and promote the concept of “Trade Integrity” by ensuring authenticity and transparency of transactions. According to the World Economic Forum, AfCFTA is becoming the global vanguard that demonstrates what can be accomplished with robust decision
making and forward-thinking

Traditionally, trade finance for importers and exporters has been paper-based and fragmented, meaning that each service has been made available separately. However, in the aftermath of the global pandemic, and as technology has reached a state of maturity, the trade finance industry is looking at creating digital platforms to deliver holistic trade finance services to customers.

At Euro Exim Bank, we are heavily focused on digital service delivery and have empowered our customers to make international trade settlements through our blockchain powered, Exim Wave global settlement platform, with access to over 150 currencies. For us, this is only a first step as we look to create a seamless, comprehensive and automated digital trade finance services platform.

Already, we are able to provide most trade finance instruments such as letters of credit, bank guarantees and others digitally, where they are acceptable. However, our ultimate goal is to provide a fully-featured omnichannel digital trade finance platform.

Why it is Beneficial

1. It will allow importers and exporters to keep track of all their trade finance and international trade settlement transactions in one simple, easy to use, highly accessible interface.
2. Customers will be able to request for and manage paper-based and digital trade finance instruments with ease.
3. Global accessibility is a key concern at this juncture, and digital technology has the power to deliver. In trade finance, reliance on paper-based systems has become potentially the key limiting factor as the global recovery gets underway.
4. A transparent digital trade finance platform will allow for data collection and analytics, which will better enable trade finance service providers to understand their customers and effectively manage risk.
5. Digital platforms, particularly those powered by blockchain will open the doors for open collaboration and information sharing between trade finance service providers. This will make for easier and more effective due diligence and serve to effectively mitigate the risk of fraudulent activity.
6. Blockchain powered digital trade finance services platforms, through the use of smart contracts and end-to-end tracking, are making it possible for the whole process of trade finance and international trade settlement to be automated, reducing the need for human intervention.

Transforming Trade Finance

While the industry is still in the early stages of its digital journey, we at Euro Exim Bank are working hard to ensure better digital delivery and accessibility. The pandemic has encouraged countries around the world, including the G7, to change laws and transform paper-based systems into ones that can, at the very least, accommodate digital trade transactions. As a pioneer in the space of digital trade finance and building on our successful range digital trade finance and settlement products, we look forward to delivering to our customers a reliable, holistic and class-leading digital trade finance services platform in the near future.