AFCFTA launch will benefit trade finance space

The African Continental Free Trade Area (AfCFTA) finally came into play on 1 January 2021, with many companies positioning themselves to benefit from this agreement.

The trade agreement highlights that the majority of the trade finance gap lies with SMEs and Orbitt data supports this.

Despite the economic slowdown of 2020, real time data shows an 80% increase in the number of unique enquiries through the Orbitt platform for trade finance in 2020 compared with

2019, with the total value being requested in excess of $780m.

Almost 50% of all enquiries came from companies with a yearly revenue of less than $10m, with almost 40% of companies seeking a facility between $3m and $5m.

Most of these companies trade multiple commodities in, out and within Africa but the highest portion of requests were received from companies in agriculture (49%), oil and gas (14%) and the metals industry (13%).

Although these companies engaged in cross-border trade, over 55% of them had some operations in West Africa, with Nigeria and Ghana being the countries with the most trade flows recorded.

The Orbitt perspective

The growing activity in the trade finance space, with more companies branching out of their traditional funding sources and more lenders participating in these trades, coupled with the commencement of the AfCFTA, is a good indicator of efforts being made to address Africa’s trade finance gap in the year ahead.