The Vital Role of Trade Finance in Africa’s Economy
Trade finance is often overshadowed by other financial headlines, yet it serves as a backbone for the global economy. An astonishing statistic reveals that over 80 percent of world trade relies on some form of trade financing. In Africa, the situation takes a more challenging turn, with the African Development Bank (AfDB) estimating a trade finance gap of approximately $81 billion annually. This substantial shortfall significantly limits access to capital for small and medium-sized enterprises (SMEs), hindering their growth potential.
Kevin Ramsamy’s Vision at Alteia Fund
Kevin Ramsamy, the CEO of Alteia Fund, sees a latent opportunity within this landscape. He believes that the essence of trade finance is timeless. “Trade finance itself is the oldest business model in the world,” he emphasizes, adding that as long as consumer goods are in demand, trade finance will flourish. With a trade flow exceeding $2 billion and operations spanning 30 African countries, Alteia has recently expanded into the UAE and Saudi Arabia. The company’s strategy revolves around asset-backed loans, collateralized commodity trades, and a rigorous commitment to governance, which Ramsamy insists is non-negotiable.
Mitigating Volatility in Investment
In an era where equity and bond markets exhibit increasing correlation and vulnerability, Kevin positions trade finance as a stabilizing force for investors. “With trade finance, although the yield is not as exciting as in other places, it is consistent and not correlated,” he notes. This stability is especially appealing to institutional investors eager for diversification. According to the International Chamber of Commerce, the default rate on trade finance transactions globally has averaged less than 0.5 percent over the last decade — a statistic that underscores its reliability compared to other asset classes.
Despite its merits, there are undeniable risks associated with trade finance in Africa. Currency volatility and sovereign debt crises in various countries pose ongoing challenges. However, Kevin believes that having a local presence makes all the difference. “We are not a firm that sits outside Africa trying to do business on the continent. We are anchored in Africa,” he asserts, referencing teams strategically located in nations like Ghana, Côte d’Ivoire, South Africa, the Democratic Republic of Congo, and Tanzania.
Africa’s Emerging Role in Food Security
The ongoing war in Ukraine has highlighted the fragility of global supply chains, bringing Africa’s agricultural and natural resources to the forefront of food security discussions. Kevin observes, “Africa is becoming more and more relevant in terms of agriculture and food security.” The issue is not just about being a supplier; it’s about ensuring that supply can withstand global disruptions. Alteia’s investment portfolio reflects this, supporting energy midstream financing in Ghana, exporting specialized raw materials to Asia, and backing agricultural products within Africa.
Nevertheless, logistics remain a significant bottleneck. Most African nations rank below the global average on the World Bank’s latest Logistics Performance Index, attributing this to insufficient infrastructure and customs inefficiencies. While acknowledging these challenges, Kevin insists that integrating international supply chain players with local contexts is crucial for unlocking trade opportunities.
Navigating Misconceptions and Realities
Many investors cite political risks and corruption as deterrents to engaging with African markets. Kevin acknowledges these issues but argues that perceptions of Africa often fail to capture the full picture. “If someone does not understand the culture and the country, they will definitely lose money,” he states, underscoring the importance of experienced investment management to navigate these complexities.
Diversification serves as Kevin’s strategy to mitigate risks. “When you blend different country risks, products, and commodities together, you de-risk the portfolio,” he explains, highlighting the benefits of a diversified approach. Institutional investors possess the capabilities to conduct deep due diligence, with a focus on governance and process. Alteia even encourages site visits for investors, allowing them to witness the underlying operations firsthand, contrasting with other investment avenues reliant merely on paper transactions.
Skepticism remains, particularly among ESG advocates who question whether private credit funds can deliver impactful results without improved transparency. Kevin refutes these doubts with a commitment to ethical practices. “In Africa, you will be challenged in some cases with unethical practices,” he admits, reinforcing the importance of consistency and integrity.
Technology and Fintech: Embracing Incremental Change
Artificial intelligence and fintech present promising efficiencies, yet Kevin approaches these innovations with caution. He explains, “There are specific countries where it is easier to adapt because the infrastructure allows automation and data is available.” Alteia is piloting fintech-enabled supply chain tracking for select clients but remains aware of the local context’s constraints.
This pragmatic approach to technology perhaps reflects why Alteia emphasizes gradual adoption over disruptive transformation. For potential investors, it serves as a reminder that Africa’s digital landscape is still evolving, despite the successes of mobile money platforms like M-Pesa showcasing the continent’s capability for technological advancement.
Kevin Ramsamy: From Consultant to Fund Leader
Kevin’s journey is a testament to the value of adaptability. With a degree in economics, he began his career consulting on distressed assets before moving to the banking sector. However, he quickly found that the rigid banking environment stifled his ambitions. “SMEs, a core component of GDP, are somehow not the favored lending clients of most banks,” he remarks. Transitioning to a fund offered him the freedom to engage with real trades and address the unique challenges each brought.
Kevin’s focus centers on de-risking strategies to ensure that investments align with both investor expectations and realities on the ground. “Each trade has its own nuance, its own challenge and risk. It is how you de-risk it that drives me,” he notes, emphasizing the importance of delivering on promises to investors.
When asked about returning to the banking sector, his answer is unequivocal: “I would never return back to banking.”
Resilience in Unpredictable Times
The COVID-19 pandemic served as a comprehensive stress test across various sectors. Kevin reflects on the lessons learned, stating, “Although the group does stress testing on every trade, COVID was a reality check for the whole world.” Now, Alteia feels better prepared for unexpected disruptions, though acknowledging that challenges still lie ahead.
As institutional investors decide how to view Africa — whether as a headline risk or a portfolio opportunity — the continent’s trade finance gap remains vast, with fragile supply chains still a concern. However, with structured, disciplined approaches to collateralized lending and an on-the-ground presence, Alteia is convinced that the risks inherent in Africa’s markets are worth embracing. Kevin sums it up succinctly: “Every day, there is something new in trade finance. Whether good or bad, it is never boring.”
