Appointed Senior Executive Vice President (Finance, Administration, and Banking Services) of Afreximbank in December 2023, Denys Denya has a clear view on the evolution of the bank’s operations, the treasury situation, market exposure, and, among other things, outstanding credit. Having been with Afreximbank for ten years, the finance executive has played a role in increasing and diversifying the bank’s funding sources, seeking liquidity, and growing the balance sheet, asset quality, and financial reporting fidelity. Financial Afrik interviewed him on the sidelines of the latest Afreximbank assemblies held in the Bahamas from June 12 to 15, 2024.
Afreximbank announced a disbursement of $18.10 billion in 2023 for the benefit of African economies. Which sectors were involved?
This amount concerns the energy sectors, trade finance, and infrastructure financing. Some of the funding went to support countries and entities in developing industrial parks from Gabon to Togo through Malawi, Zambia, and the Democratic Republic of the Congo (DRC).
How does Afreximbank manage to support such a significant disbursement effort? Where are we with the capital increase?
Our ability to maintain the trend depends on our capital, the quality of investments, and our fundraising power. We have the full support of our shareholders. In 2021, they approved a capital increase with a paid-in capital of $2.6 billion. The total operation amounts to just over $6 billion. The operation should be completed by 2026. To date, we have already mobilized $2.1 billion. The management appreciates the renewed support of shareholders, especially in such a difficult context. Sovereign shareholders, member countries, are particularly committed. As you may know, the demands for financing at our counters are high. We want more capital to further multiply our support for the African economy. According to the African Development Bank (AfDB), the trade finance gap is $120 billion. On infrastructure, the gap is around $100 billion. Therefore, we want more capital for more financing capacity. Our financial institutions need more support to fulfill their missions. That is why we are pleased that the AfDB, in partnership with the IMF, has reached an agreement to channel SDRs towards financing the economy.
What is the weight of African member countries in your capital today?
We have 4 classes of shareholders. Class A dedicated to sovereigns holds 60% of Afreximbank’s capital. The latest decisions taken allow sovereigns to defend up to 35%, which will not reduce their support in any way.
We have gone through several crises in recent years. What about the NPLs in your portfolio?
Indeed, we have had cycles of disturbances in our economies. I would start with 2015-2016 with the end of the long commodity cycle. Central banks then had difficulty accessing foreign currencies. Afreximbank implemented a program that allowed these entities to have liquidity. Similarly, during the Covid-19 pandemic, Afreximbank put $2 billion on the balance sheet allowing Africa to cope with the pandemic and find vaccines. Recently during the Ukrainian crisis, we set up a facility that allowed purchasing fertilizers, grains, and supporting the states. We are committed to innovative solutions, which explains the structuring of our commitments around high standards in terms of risk management. This is what explains the maintenance of NPLs within reasonable thresholds, with a ratio decreasing between 2022 and 2023.
You support many African commercial banks in trade finance but also in capital?
The commercial banking sector was until now dominated by foreign brands now departing. Over the last three years, BNP and Standard Chartered have liquidated their assets. Société Générale follows suit. This represents an opportunity for African banks to take position, and we accompany them in their acquisition processes. We are convinced that we cannot control our economies if we do not control the banking sector. China’s success story, which has been unfolding since the 80s, comes largely from the fact that this country controls its economy. Banks play a major role in our model as a distribution channel. We are only present in 5 countries and rely on them, through credit lines, to reach SMEs and economic operators in general. Some 52% of our portfolio passes through financial institutions. Our range of services, from trade financing to payment services and correspondent banking, allows us to support concrete solutions including all countries on the continent, including Zimbabwe and Eritrea, two countries where credit institutions have a lot of trouble finding foreign counterparts.
What is the quality of Afreximbank’s signature with rating agencies today?
The Global Credit Ratings (GCR) agency, which has an African focus, has given us an AA after reviewing our activities in all countries. The Japanese credit agency has awarded us an A-. As for Moody’s, they credit us with a BAA1 equivalent to BBB+. Fitch rates us BBB. Thus, we are in the investment grade class with all these agencies. In fact, our intrinsic rating with Fitch is A-. The differential comes from our exposure to Africa, seen as a risky area. This is a problem we face first at the level of the rating and then on the international capital market where, for equal ratings, the African entity pays a higher interest rate.
What will be your role in the development of trade relations between Africa and the Caribbean?
As a bank and development institution, we have a role as a facilitator and lender. The “Global Africa” concept, which encompasses the continent, its diaspora, and the Caribbean, is rich in opportunities for economic operators and for African banks and institutions. In three years, we have already built a portfolio of $3 billion with the Caribbean. Let’s unite and we will achieve more.
