Factoring Developments in Africa

Author: Kanayo Awani, FCI Africa Chapter Chair, Managing Director,

Intra-African Trade Initiative, African Export-Import Bank

Africa witnessed growth of 2% in 2018 at EUR 22.1 billion. South Africa remained the continent’s dominant player with volume share of 80% followed by Morocco (15%) and Egypt (2%). Mauritius and Tunisia each accounted for 1%.

Notwithstanding the fact that Africa accounts for only 1% of global volume, the continent witnessed signifcant developments in many areas that portend signifcant potential especially relating to the legal and regulatory environment, and other government interventions which have been key for the emergence of new factoring businesses in Africa.

Legal and Regulatory Developments Egypt recorded the highest level of activity attributed largely to the passing of a revised Factoring and Leasing Law by Parliament in August 2018. Furthermore, the Egyptian Collateral Registry (ECR) was activated to the beneft of smaller and less-established SMEs, whose movable assets most ofen constitute their main or only available collateral to lenders.

The Egyptian factoring market volume grew by 24% y.o.y., which was refected in the number of new entrants such as EFG Hermes Factoring and Commercial International Bank (CIB).

In Nigeria, a Public Hearing of the Factoring Bill happened in July 2018 at the House of Representatives under the auspices of the African Export-Import Bank (Afreximbank), Nigerian Export-Import Bank (NEXIM) and FCI. The House of Representatives subsequently passed the Bill and awaiting approval from the Senate. Furthermore, Afreximbank and NEXIM continued to engage the Central Bank of Nigeria (CBN) advocating for a favourable regulatory environment including putting in place regulatory guidelines for factors as well as foreign exchange guidelines that allowed for open account mode of payment. Noteworthy is the fact that the CBN issued

an operating license to Factoring and Supply Chain Finance Limited with exclusive focus on Receivables Financing.

The Organisation for the Harmonisation of Corporate Law in Africa (OHADA), a treaty involving 17 countries in Central and West Africa, taking inspiration from Afreximbank Model Law, has also made progress towards developing a uniform act of factoring to be adopted by its member states. In 2018, a working group was formed which developed a draf uniform act on factoring. Afer its review by member states, the Council of Ministers also requested inputs from the two regional central banks in October. Consultative meetings are being held with the central banks with the expectation that the uniform act will come into force and be adopted by October 2019.

In Kenya and Zimbabwe, bills on Movable Property Security interests that were enacted in 2017 impacted factoring business positively during 2018.

In Mauritius, the Government launched the SME Factoring Scheme with the objective to provide fnancing to SMEs. The implementation of the Scheme is through Non-Bank-FinancialInstitutions (NBFIs) that provide factoring services. Cim Finance is the sole NBFI participating in this scheme.

Promotion and Awareness

During 2018 Afreximbank and FCI continued to play a leading role in promoting awareness about factoring in Africa. They organised factoring promotional conferences and workshops in Senegal in February and with the Egyptian Factoring Association (EFA), jointly organised another event in September in Cairo on the sidelines of FCI third quarter Executive Committee meeting.

Furthermore, NEXIM (collaborating with Afreximbank and FCI as Facilitators) organised a targeted seminar for regulators, law makers, commercial banks, central banks and factors in Nigeria on the sidelines of Afreximbank Annual General Meeting in Abuja in July 2018.

Membership Mobilisation

The foregoing developments translated into 9 new members, drawn from Egypt, Morocco, Nigeria, Mauritius, Cameroon, Zimbabwe, Botswana and the Republic of Congo, joining FCI during 2018.

Education

Afreximbank continued its partnership with FCI and the University of Malta and successfully organised the 3rd edition of the Certifcate of Finance in International Trade (COFIT) program. In addition, Afreximbank sponsored 100 free e-foundation course licenses to African regulators from Egypt and Nigeria.

Regional Director Africa

Afreximbank and FCI are fnalising the process of hiring a Regional Director Africa to assist in implementing the Africa Chapter’s activities.

References:

– The Egyptian Factoring Association

– Unifactor (Tunisia)

– CIM Group (Mauritius)

– Olympia Factors (Botswana)

– Harare Receivables Exchange (Zimbabwe)