New cross-border trade platform to boost integration

Africa’s trade insurance sector is poised for increased growth following the launch of a new platform offering a unified bond system for cross-border traders. The platform, dubbed the Trans-Africa Bond Alliance (TABA), is part of a joint initiative by the African Export-Import Bank (Afreximbank) and Zep Re (PTA Reinsurance company) to enhance the continent’s insurance capacity and enable more African businesses to participate in regional trade.

Africa has around 110 borders and 16 land-locked nations, making it necessary for traders to rely on multiple transit and customs bonds to securely move their goods across African borders. This fragmentation is blamed for avoidable delays in the transportation of goods, higher transaction costs, and reduced trade between African nations.

With TABA, traders can transport goods from Cape Town to Cairo using a single transit bond, effectively reducing delays and cutting costs linked to multiple bonds.

Speaking to African Business at the launch of TABA in Nairobi, Denys Denya, senior executive vice president of Afreximbank, said the platform leverages instruments such as transit bonds, performance bonds, and standby letters of credit to guarantee the secure movement of goods and ensure compliance with customs regulations.

Boosting insurance capacity

Denya expressed optimism that the platform would not only lower trade costs for local businesses, but also help retain more insurance premiums in Africa. This, he said, would help boost the capacity of African underwriters.

He explained that, over the long-term, the platform would help foster the growth of existing trade insurance providers on the continent.

“Through this collaboration, our goal is not to displace local operators but to boost the capacity and efficiency of interstate transit regimes, paving the way for a continental framework under the AfCFTA (African Continental Free Trade Area).”

He voiced concerns over Africa’s low share of global reinsurance premiums, noting that initiatives aimed at boosting the capacity of local underwriters would ultimately result in Africa having more of its own capital to deploy for its development.

“We need to retain more premiums in Africa. We’re at 2% of global premiums, while North America is at 44%, Asia 20% and Latin America 10%,” he said.

Welcoming Afreximbank’s collaboration, Hope Murera, managing director and CEO of Zep-Re said that TABA represents a bold “reimagining” of Africa’s trade ecosystem.

“We are ushering in a new era. One that reimagines how we facilitate trade, manage risk, and support cross-border movement across our continent,” Murera said.

She noted that TABA would positively impact AfCFTA, and that Zep-Re would deepen its partnerships with Afreximbank and other African financial institutions to boost intra-African trade and deepen economic integration under the trade agreement.

Economic co-operation

Denya emphasised that the joint venture between Afreximbank and Zep-Re – two founding members of the African Alliance of Multilateral Financial Institutions – sent an important signal to the world about where Africa stands with respect to cross border trade, economic co-operation and multilateralism.

“This (TABA) couldn’t have come at any other time than now, when the pillars of global cooperation and integration are being disintegrated, and fragmentation, isolationism and protectionism have taken hold in our world,” he pointed out.