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<\/a>George Kiluva, KCB Group; Phanice Mokua, Stanbic Bank; Patrick Makau, Standard Chartered.<\/p>\n\u201cThe trade cycle for African corporates in Eastern Africa has increased drastically, which means you need to have more funding capital requirements,\u201d added Arnaud Levasseur, executive vice-president of trade finance at Mauritius Commercial Bank (MCB). \u201cAnd obviously, the credit committee teams are working day and night on approving temporary excesses.\u201d<\/p>\n
Against this backdrop, Kenya has fared better than its neighbours, regional trade finance leaders argued. In 2023, facing acute foreign exchange shortages, the Kenyan government struck a series of direct, state-to-state oil supply deals with GCC-based national energy companies. Rather than buying fuel on the open spot market, the East African nation locked in long-term contracts that fixed the costs of freight and the premium fees charged on top of the global benchmark price.<\/p>\n
The arrangement, which channels oil imports through a small number of contracted government-affiliated suppliers, was originally designed to ease pressure on Kenya\u2019s dollar reserves by allowing payments to be deferred. It has since proved an unexpected buffer against the Red Sea and Strait of Hormuz disruptions of the past couple of years.<\/p>\n
\u201cKenya has been shielded, to some extent, from the impact of the Middle East shocks on oil prices,\u201d said Mokua. \u201cSome elements of the cost are fixed over and above the global benchmark price, which contains price volatility if compared to levels in the spot market.\u201d<\/p>\n
That shielding did not cover all price components, she added, as Kenya has still seen \u201cthe value of a vessel coming into the country increase twofold\u201d. \u201cBut it could have been worse if we had not entered into long-term oil supply arrangements.\u201d<\/p>\n
Patrick Makau, who leads trade and working capital across East Africa at Standard Chartered, pointed to contracted supply security as the key differentiator. \u201cWe\u2019re seeing the benefits of consistent supply because those cargoes are contracted, as opposed to other markets where we\u2019ve seen disruption and non-contracted cargoes being diverted.<\/p>\n
\u201cIn periods like this, what matters is not only access to cargo but the strength of the trade corridor supporting it \u2013 from origination and documentation to financing and settlement across multiple markets.\u201d<\/p>\n
International financial institutions like Standard Chartered have provided a critical de-risking layer by confirming the letters of credit underpinning the deals, he argued. \u201cWe know the international producers in the Middle East would want that level of comfort.\u201d<\/p>\n
In light of the current Gulf crisis, the programme has faced some scrutiny. \u201cWe have had to answer fresh questions and confirm that things are still the way they were\u201d pre-conflict, said Kiluva, \u201cand it has come to pass that we have not seen a major shift in the confidence that the international banks have given to the programme\u201d.<\/p>\n
Other East African nations have handled the price swings in different ways. In Tanzania, initially maintaining the standard bulk procurement system meant the country would have absorbed the full market-pricing shock before the government activated an interim emergency programme to bring in roughly 860,000 metric tonnes by consolidating orders over a period of three months under the bulk procurement system.<\/p>\n
\u201cTanzania has also experienced consistent supply through contracted cargoes,\u201d noted Teggisa. The main challenge is \u201cthe price hikes and volatility that are prevalent across markets beyond East Africa\u201d.<\/p>\n
Meanwhile, Uganda is relatively shielded by a diversified sourcing strategy coordinated through the Uganda National Oil Company, which imports fuel from its international supplier, Vitol Energy, Makau added.<\/p>\n However, fuel prices suffer a \u201clag effect\u201d, Du Preez noted, meaning \u201cwe are only now feeling the impact from events two months ago\u201d.<\/p>\n \u201cWe all pray the crisis goes away and we begin recovery quickly before the effects become more entrenched,\u201d said Kiluva.<\/p>\n Export diversification: an opportunity within disruption<\/p>\n The disruption of GCC trade routes has triggered a strategic rethink across the region\u2019s export sectors. For decades, East Africa\u2019s commodity exports have flowed to established markets via well-worn routes.<\/p>\n But the region\u2019s diversified export base \u2013 unlike West Africa\u2019s reliance on oil and cocoa or southern Africa\u2019s reliance on minerals, East Africa\u2019s export portfolio spans tea, coffee, horticulture, pulses and a growing mineral sector \u2013 gives it more room to manoeuvre when one market or route is disrupted, pointed out Leslie Fatch, head of global markets and trade finance at Malawi\u2019s FDH Bank.<\/p>\n \u201cThis gives us an opportunity to diversify markets. We have commodities which are in demand. It gives us a chance to define where we channel them,\u201d he said.<\/p>\n Tea is one such example, with Makau reporting a jump in demand from Standard Chartered\u2019s tea clients since the first quarter of the year: \u201cThe Arabian countries are still drinking tea despite what is happening,\u201d he said, and demand in Asian markets like Pakistan remains robust.<\/p>\n \u201cWhat the disruption is really doing is forcing exporters to think more actively about corridor diversification \u2013 not just where demand sits today, but how goods move reliably across Africa, the Middle East and Asia when one route comes under pressure.\u201d<\/p>\n The region\u2019s exporters are also opening new channels across cut flowers, horticulture, coffee and other agricultural goods, Makau noted. \u201cEast African exports will hit about a trillion dollars by 2030, and intra-African trade will hit US$140bn,\u201d he projected.<\/p>\n Meanwhile, Tanzania is deepening its mineral portfolio, Teggisa added, with the sector \u201cplaying an increasingly active stabilising role\u201d not just in generating export revenue but also providing the foreign exchange buffer that allows the country to finance its import bill, including fuel and food.<\/p>\n \u201cWhen it comes to ports and further investments in the mining sector, those aspects are needed to continue bringing in FX inflows, which is an aspect of resilience that is highly required for a net importing country,\u201d she said.<\/p>\n Tanzania also has vast arable land, second only to Ethiopia in the region, but Teggisa argued the potential remains untapped. \u201cHow are we truly optimising the ability to scale in agriculture and support national requirements for food and agri-related exports? Exports regionally have grown, but the potential for that growth is really massive, especially where there is collaboration in terms of investment and reverse origination \u2013 banks speaking more to each other.\u201d<\/p>\n But diversification comes at a cost. New markets introduce uncertainty, longer trade cycles and heavier working capital demands for exporters already operating on squeezed margins. \u201cThe traditional trade route provides certainty,\u201d acknowledged Fatch. \u201cThe new markets provide uncertainty, but the opportunity there is that you have new markets where you can explore selling your products.\u201d<\/p>\n The greater prize, Makau argued, lies further upstream: \u201cWe should be doing the value addition here. We do that for tea. We don\u2019t do that for cobalt, titanium, uranium. We should be doing the value addition here so that when we send it out, more money comes to the continent.\u201d<\/p>\n Kiluva highlighted refinery capacity within East Africa for import substitution of both fuel and fertiliser as an upstream opportunity with the clearest near-term prospects.<\/p>\n \u201cI think fertiliser is going to come much, much faster, because there are already plants within East Africa. The Dangote fertiliser plant [in Nigeria] is a benchmark. We expect to see a big leap in getting self-sustainability for fertiliser and for fuel,\u201d he said.<\/p>\n Meanwhile, Ethiopia\u2019s ban on internal combustion engine vehicle imports, he added, signals a broader EV transition.<\/p>\n<\/a>Linda Teggisa, NMB Bank; Leslie Fatch, FDH Bank; George Kiluva, KCB Group.<\/p>\n