AFCTA

Exploring AfCFTA with cross-border expansions

by with No Comment Business

The gains of cross-border transactions in Africa are fast rising. Still, the implementation of the African Continental Free Trade Agreement (AfCFTA) is expected to make such benefits more pronounced in the years ahead.

READ ALSO: NICON Insurance Faults Report On Senate Summon

For many stakeholders, the AFCFTA offers significant opportunities for the private sector, especially financial institutions to expand into new markets, and seek new business opportunities.

But the benefits from the AfCFTA deal to a financial institution or company depend largely on the level of preparedness undertaken by such institution in readiness for the trade pact full implementation.

The Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, last week urged Nigerian businesses to seize the AfCFTA opportunity to ensure that Nigeria serves as a significant hub for international and domestic companies seeking to serve the West, Central and East African Markets.

Access Bank Plc expressed its commitment to be at the centre of the AfCFTA implementation process, providing banking services to the rising African population. The bank is expanding its operations across Africa to ensure that it is fully ready to meet the increasing banking needs of the over 1.3 billion Africans targeted in the AfCFTA deal.

Access Bank has also unfolded plans to expand to more African countries as part of a strategy to support trade and finance in the continent and take advantage of the AfCFTA.

For instance, Access Bank Plc recently entered into a definitive and binding agreement with ABC Holdings Limited to acquire 78.15 per cent shareholding in the African Banking Corporation of Botswana Limited (BancABC Botswana).

Read Also: Govt targets $504b goods in AfCFTA deals

The transaction, which is subject to regulatory approvals and customary conditions precedent, is expected to close before the end of this quarter. ABC Holdings is a subsidiary of the London Stock Exchange-listed group – Atlas Mara Limited.

Access Bank Company Secretary, Sunday Ekwochi, described Bostwana as renowned for its quality sovereign credit rating and stability with the bank’s market entry expected to further solidify its strategy as, “a strong banking partner in key verticals across retail and corporate banking, including especially supporting trade-in payments across southern Africa and Sub-Saharan Africa more broadly.”

Speaking on the deal, the Group Managing Director/Chief Executive Officer, Access Bank Plc, Herbert Wigwe, said: “We remain committed to a disciplined and thoughtful expansion strategy in Africa, which we believe will create strong, sustainable returns for our shareholders and stakeholders at large, over the medium and long-term.

“The establishment of Access Bank through this acquisition in the Republic of Botswana will position the bank to deliver a more complete set of banking solutions to its clients active in and across the SADC and COMESA regions.

According to him, the transaction complements our recent strategic growth acquisitions in South Africa, Zambia and Mozambique. “We are building a bank of the future that Africans across Africa and the world would be proud of and look forward to welcoming the employees, customers and other stakeholders of BancABC Botswana to Access Bank.”

BancABC Botswana is the fifth-largest bank in Botswana and is a very well-capitalised banking institution poised for growth and success in its local market. The bank has been perennially profitable, given an existing high-quality retail loan book with opportunities and scope for diversification and further expansion into corporate and SME lending.

Continuing, Wigwe explained that across Africa, there is an opportunity for the bank to expand to high-potential markets, leveraging the benefits of AfCFTA. He said AfCFTA, among other benefits, would expand intra-Africa trade and provide real opportunities for the continent.

He stated that the plan is for the bank to establish its presence in 22 African countries to diversify its earnings and take advantage of growth opportunities in Africa.

According to him, Africa has enormous potential and there are opportunities for an African bank that is well run, that understands compliance and can support trade and the right technology infrastructure to support payments and remittances, without taking incremental risks.

“We believe that we are best positioned to do all of that. Our focus is to become an aggregator in Africa and we are building a global payment gateway and providing trade finance support and correspondent banking across the continent. We are focusing on the key markets.

“The approach would always be that in the country we wish to go to, that we have the right skills. We would not just be a drop in the country in which we are present, we would make sure that we have an impactful presence in each of the major countries in which we are present.

“In doing this, we are also mindful of the country we are going to to make sure that it is of benefit to the bank. As we do this, we are working with our friends and partners.

“We are diversifying our earnings away from volatile markets as well and we are orchestrating our operations from the global payments gateway and ensuring that using Access Bank UK, providing corresponding services from digital platforms, the overall profitability of our franchise,” he explained.

Commenting further, on AfCFTA, he said the bank would use its digital framework to benefit from the continental agreement.

“Coming to Nigeria, we think we need to continue to entrench ourselves in the local market because there is still so much work to be done. So, we are doing everything possible to satisfy our customers and also to ensure that our channels are adequately secured. We are also ensuring that our staff are very efficient,” the CEO said.

According to Wigwe, Access Bank has invested around $60 million to acquire a stake in South Africa’s Grobank.

Access invested both equity and debt in the South African bank, part of a regional expansion to tap into correspondent and trade banking deals on the continent.

He said Access will expand trade finance capability within Grobank which is currently focusing on the agricultural sector in South Africa.

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LivingTrust

AFCFTA: DBN gives first tranche of N1 billion MSMEs fund to LivingTrust Mortgage Bank

by with No Comment BusinessfinanceNews

The aforementioned reforms and policy interventions provide the needed environment for small businesses in Nigeria and the coming of the AfCFTA could not have been at a better time.

Independent of the AfCFTA, the Federal Government of Nigeria has in recent times embarked on some far-reaching reforms aimed at enhancing ease of doing business both for the Small and Medium-sized Enterprises (“SMEs”) and across other strata of business in Nigeria.

READ ALSO: Excitment as FG credits Nigerian man under Survival Fund program.

Some of these reforms can be seen in the areas of policies, laws, business formation and registration, post-incorporation filings and taxation.

Two of the legislative instruments which are critical to these reforms deserve some mention here:

Companies and Allied Matters Act, 2020 (CAMA, 2020)

The signing of CAMA, 2020 into law by President Muhammad Buhari on 7th August 2020 came as a very cheering news to the SMEs community.

Some of the provisions which impact directly on SMEs include but not limited to the following

(i) a single member/shareholder for a private company

(ii) minimum share capital in place of authorized share capital. This allows promoters of business to pay for only shares that are needed at the point of incorporation;

(iii) exemption of SMEs, small companies or companies with single shareholders from the requirement of appointing Auditors to audit their financial records

(iv) filing, share transfer and meetings can be done electronically by private companies

(v) Statement of compliance which was hitherto signed by legal practitioners can now be signed by the business owner or his agent

(vi) introduction of Limited Partnerships and Limited Liability Partnership thereby providing options for promoters who may want to incorporate partnership instead of limited liability companies

(vii) Appointment of company secretary now optional for private companies

(viii) AGMs and other company meetings can now be held virtually, amongst other reforms.

Finance Act, 2020

Complementing the reforms under the CAMA 2020 is the Finance Act.

Enacted first in 2019, the Act was further expanded and re-enacted to among other things address the negative impacts of COVID 19 on small businesses and this led to the new Finance Act, 2020.

The new Finance Act was signed into law on 31 December 2020 and took effect from 1st January 2021.

It introduced over 80 amendments to 14 different laws such as the Personal Income Tax Act, Companies Income Tax Act, Capital Gains Tax Act, Value Added Tax Act, Customs & Excise Tariff Act, Tertiary Education Trust (TET) Fund Act, Fiscal Responsibility Act, Public Procurement Act, CAMA, Nigerian Export Processing Zone Act and Oil and Gas Export Processing Free Zone Act.

SMEs are expected to take advantage of the incentives provided under the new Act.

SMEs with a turnover of less than N25 Million are exempted from Companies Income Tax and TET tax amongst other incentives.

SMEs engaged in primary agricultural production are qualified for pioneer status for an initial period of four years and an additional two years.

MSME Survival Fund

In a bid to ameliorate the impact of COVID-19 on small businesses, the Federal Government of Nigeria launched the N75 Billion Survival Fund for Micro, Small and Medium Enterprises (MSME).

The Fund which was touted as part of the economic sustainability Plan of the Federal government is meant to support small businesses to meet basic operational needs and provide funding in order to boost the production capacity of MSMEs in Nigeria.

The AfCFTA

The aforementioned reforms and policy interventions provide the needed environment for small businesses in Nigeria and the coming of the AfCFTA could not have been at a better time.

The critical question remains, how SMEs can leverage the opportunities provided under the AfCFTA to scale up their operations.

SMEs are often considered the economic backbones particularly in developing countries as they account as major contributors to the GDP and in the area of job creation.

Nigeria has a vibrant SME ecosystem. Out of the 95 Million SMEs in Africa, over 45 Million of them are in Nigeria.

Thus, on the continent Nigeria plays a huge role, accounting for close to 50% of SMEs.

In terms of economic impact, SMEs contribute 48% of national GDP in Nigeria, make up the 96% of businesses and contribute 84% of employment.

Despite the contribution to the economy, SMEs in Nigeria in particular, have continued to grapple with the challenges of high cost of capital and lack of access to funding as well the inability to compete globally.

Due to the largely informal nature of SMEs in Nigeria, obtaining data for the purpose of planning has also been difficult.

On this, the role of Small & Media Enterprises Development Agency of Nigeria (SMEDAN) in amongst other things, formalization of SMEs in Nigeria should be encouraged.

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MSMEs AFCTA

How SMEs can scale up under the AfCFTA

by with No Comment Business

SMEs can to take advantage of the incentives provided under the new Finance Act to scale up under the AfCFTA.

READ ALSO: Access Bank unveils SwiftPay to boost Digital Payments for SMEs

Independent of the AfCFTA, the Federal Government of Nigeria has in recent times embarked on some far-reaching reforms aimed at enhancing ease of doing business both for the Small and Medium-sized Enterprises (“SMEs”) and across other strata of business in Nigeria. Some of these reforms can be seen in the areas of policies, laws, business formation and registration, post-incorporation filings and taxation. Two of the legislative instruments which are critical to these reforms deserve some mention here:

Companies and Allied Matters Act, 2020 (CAMA, 2020)

The signing of CAMA, 2020 into law by President Muhammad Buhari on 7th August 2020 came as a very cheering news to the SMEs community. Some of the provisions which impact directly on SMEs include but not limited to the following (i) a single member/shareholder for a private company (ii) minimum share capital in place of authorized share capital. This allows promoters of business to pay for only shares that are needed at the point of incorporation; (iii) exemption of SMEs, small companies or companies with single shareholders from the requirement of appointing Auditors to audit their financial records (iv) filing, share transfer and meetings can be done electronically by private companies (v) Statement of compliance which was hitherto signed by legal practitioners can now be signed by the business owner or his agent (vi) introduction of Limited Partnerships and Limited Liability Partnership thereby providing options for promoters who may want to incorporate partnership instead of limited liability companies (vii) Appointment of company secretary now optional for private companies (viii) AGMs and other company meetings can now be held virtually, amongst other reforms.

Finance Act, 2020

Complementing the reforms under the CAMA 2020 is the Finance Act. Enacted first in 2019, the Act was further expanded and re-enacted to among other things address the negative impacts of COVID 19 on small businesses and this led to the new Finance Act, 2020. The new Finance Act was signed into law on 31 December 2020 and took effect from 1st January 2021. It introduced over 80 amendments to 14 different laws such as the Personal Income Tax Act, Companies Income Tax Act, Capital Gains Tax Act, Value Added Tax Act, Customs & Excise Tariff Act, Tertiary Education Trust (TET) Fund Act, Fiscal Responsibility Act, Public Procurement Act, CAMA, Nigerian Export Processing Zone Act and Oil and Gas Export Processing Free Zone Act. SMEs are expected to take advantage of the incentives provided under the new Act. SMEs with a turnover of less than N25 Million are exempted from Companies Income Tax and TET tax amongst other incentives. SMEs engaged in primary agricultural production are qualified for pioneer status for an initial period of four years and an additional two years.

MSME Survival Fund

In a bid to ameliorate the impact of COVID-19 on small businesses, the Federal Government of Nigeria launched the N75 Billion Survival Fund for Micro, Small and Medium Enterprises (MSME). The Fund which was touted as part of the economic sustainability Plan of the Federal government is meant to support small businesses to meet basic operational needs and provide funding in order to boost the production capacity of MSMEs in Nigeria.

The AfCFTA

The aforementioned reforms and policy interventions provide the needed environment for small businesses in Nigeria and the coming of the AfCFTA could not have been at a better time. The critical question remains, how SMEs can leverage the opportunities provided under the AfCFTA to scale up their operations. SMEs are often considered the economic backbones particularly in developing countries as they account as major contributors to the GDP and in the area of job creation. Nigeria has a vibrant SME ecosystem. Out of the 95 Million SMEs in Africa, over 45 Million of them are in Nigeria. Thus, on the continent Nigeria plays a huge role, accounting for close to 50% of SMEs. In terms of economic impact, SMEs contribute 48% of national GDP in Nigeria, make up the 96% of businesses and contribute 84% of employment. Despite the contribution to the economy, SMEs in Nigeria in particular, have continued to grapple with the challenges of high cost of capital and lack of access to funding as well the inability to compete globally. Due to the largely informal nature of SMEs in Nigeria, obtaining data for the purpose of planning has also been difficult. On this, the role of Small & Media Enterprises Development Agency of Nigeria (SMEDAN) in amongst other things, formalization of SMEs in Nigeria should be encouraged.

One of the objectives of AfCFTA is providing free movement of goods and services on the continent and it is expected that the new trade bloc will afford SMEs the opportunities to scale up and lead to value chain aggregation across Africa. In addition to the limitations identified above, poor infrastructure, multiplicity of regulations and taxes and lack of skills in international trade equally militate against the growth of SMEs. To make matters worse, most SMEs often fail to appreciate the role of professional advisors such as lawyers in the formative stage of their business. The role of trusted professional advisors in navigating the regulatory bottlenecks should not be a trade-off for cost-saving measures as the value of these technical and professional services to SMEs cannot be over-emphasized.

To increase global competitiveness of the SMEs, harmonization of business rules and regulations across Africa is required. Governments in the member States should invest heavily not only in physical infrastructures but in digital technology as most SMEs particularly those in service sector rely on internet and digital platforms to drive their operations. For instance, the expected gains under the CAMA, 2020 have not been fully actualized as recent experience has shown that SMEs still face challenges accessing and using the Corporate Affairs Commission’s online platform because of slow and poor services. Related to this is the need for patient capital to encourage start-ups in order to drive innovations amongst the teaming youths.

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