The Exchange - East Africa's Source for Financial News The Exchange MAY 2017 - FINAL (1) | Page 10

10.
MAY 2017
KENYA
Why we should make
trade work for developing
and least developed
countries
Forklift clearing cargo at Kenya Port of Mombasa. Photo Source: geeskaafrika.com
By Benard Ayieko
T
he role of trade in the economies
of developing and Least Developed
Countries (LDCs) continues to
attract significant attention by virtue of
the effect it has on the economic growth
and development agenda of these nations.
Two years ago, Kenya became the first
African country to host the World
Trade Organization (WTO) Ministerial
Conference which culminated in the
adoption of the “Nairobi Package” – a series
of six Ministerial Decisions on agriculture,
cotton and issues related to least-developed
countries.
WTO is a 164-membership organization
whose primary purpose is to open trade
for the benefit of all. It provides a forum
for negotiating agreements aimed at
N
airobi, 4 April 2017: Funding
commercial
property
developments with a mix of hard
and local currency provides an innovative
mechanism for Africa’s commercial
real estate sector, to mitigate currency
volatility and liquidity risk says Standard
Bank, also trading as Stanbic Bank.
Operating across 20 markets in Africa
means that Standard Bank is acutely aware
of how endemic, persistent and volatile
local currencies are - as well as, “just how
high the risk is of markets running out
of hard currency,” says Gerhard Zeelie,
Head, Real Estate Finance, Africa regions
for Standard Bank.
This is no more apparent than in Africa’s
rapidly growing real estate sector where
shortages of hard currency remain a real
and persistent operational challenge.
Whether operating in volatile commodity-
tacked markets, unpredictable interest
rate environments, or economies with
high legislative, regulatory or political
risk, “Africa’s real estate sector needs a
buffer to absorb or delay the impact of
often unforeseen volatility, or the drying
up of hard currency,” says Mr. Zeelie.
Traditionally most property development
projects in sub-Saharan Africa have been
financed in hard currency, ensuring a
predictable funding environment for the
assets. More recently, the US dollar’s
sustained appreciation against African
currencies, for example, means that US
dollar-denominated leases are placing
tenants under pressure.
“In a number of countries across the
continent, local currency rentals are
spiralling upwards as tenants feel the pinch
of funding the growing gap between local
and hard currencies. This is alongside the
added stress of Africa’s endemic liquidity
shortages,” says Mr. Zeelie.
In response, Standard Bank advises
reducing obstacles to international trade
and ensures a level playing field for all,
thus contributing to economic growth and
development.
It should be noted that LDCs have a very
high trade-to-GDP ratios which means
that they are heavily dependent on trade.
Such countries need to focus on trade
reforms that spur economic growth and
development. In the past decades, LDCs
have recorded relatively high economic
growth but the levels of unemployment,
poverty and inequality con