By Elvis Ndunguru, managing executive, Absa Corporate and Investment Banking, NBC, Tanzania
East Africa, led by Kenya, is emerging as a powerful trade hub driven by infrastructure investment, regional integration and expanding intra-African trade. As a gateway for natural resources, it boasts rare earths, gold, nickel, cobalt, graphite, and other commodities the world needs.
Trade finance is the key to unlocking cross-border flows, supporting SMEs and enabling regional value chains, opening up economic benefits for the region.
As East African trade accelerates, better Foreign Direct Investment (FDI) policies have a stronger bearing on the Tanzanian mainland and Zanzibar, attracting capital movement. As stronger regional demand reshapes trade patterns, increased urbanisation and population growth are driving intra-African trade in fast-moving consumer goods (FMCG), construction materials, and processed goods. Improving macro-stability boosts investability as better fiscal and monetary management emerge.
But global flows demand dependence on solid infrastructure. As corridor-led infrastructure unlocks trade flows, investments in establishing ports, rail, and roads enables trade in new ways. For example, the Port of Mombasa and the Standard Gauge Railway are reducing transit times and connecting important inland markets like Uganda and Rwanda. Regional integration is being driven particularly under the East African Community (EAC) and the
African Continental Free Trade Area (AfCFTA), resulting in lowered tariff and non-tariff barriers.
Between South Tanzania and North Kenya, strategically placed ports improve both inter-and intra-continental trade flow. To bolster regional connectivity, Tanzania will spend 12 trillion shilling (TZS) on port expansions. Meanwhile, the $1.4 billion Tazara (Tanzania-Zambia Railway Authority) Railway rehabilitation is underway. Kenya is investing in rail, and a new fuel pipeline is being established from Uganda to Tanzania. The Tanzania Standard
Gauge Railway is indeed positioned to complement and strategically link with the Lobito Corridor, even though they originate in different parts of the continent. The strategic connection lies in creating a transcontinental logistics network for DRC: goods (especially critical minerals like copper and cobalt) can move more efficiently across Africa, either east to Indian Ocean markets or west to Atlantic routes. This reduces reliance on single export routes, improves resilience, and enhances intra-African trade under frameworks like the
African Continental Free Trade Area.
These developments give life to new trade flows, like transporting fuel from Uganda to the
Middle East, or moving copper from Congo to China.
In the SADC and EAC regions, comprising over half a billion people, the demand for goods and services, including fuel, is significant. Regional agreements must be fostered to harmonise customs, tariffs, regulations, and the movement of goods, people and services.
Frameworks like the EAC Customs Union and AfCFTA have reduced tariffs, but the system is often plagued by border delays and inconsistent enforcement, which dilute the impact of trade. If banks with trade finance capabilities, including institutions like Absa with a growing pan-African footprint, support infrastructure development, this will boost connectivity, lower transport costs, and improve trade opportunities. Currently, it’s cheaper to move goods from China to Dar es Salaam than to transport them from Dar es Salaam to Mwanza, a
region within Tanzania.
Trade finance is most impactful in sectors with predictable cross-border demand on agriculture, energy, and FMCG. Structured trade finance and supply chain finance help large corporates extend terms to suppliers, indirectly supporting SME participation.
The East African economy is largely driven by SMEs. In Tanzania, 96% of our economy depends on SMEs, but they lack funding to support themselves. The majority are trade-based, with imports from the Middle East, China, India, and others, and exports like minerals or agri-commodities to other parts of the world. While banks can help support SMEs, the locals must also support them to benefit the local market.
Besides raising capital, risk perception and informality are constraints to their success. Better credit data with digital identities and scalable guarantee schemes backed by Development Finance Institutions (DFIs) help to mitigate risk. While simplified, digital trade finance products are now available, these are still limited. Anchor-led eco-systems with stronger linkage to large corporates is manifesting in the mining, FMCG, manufacturing and
agricultural sectors.
DFIs as key stakeholders can work alongside financial institutions to help enhance trade routes. While it might be difficult for them to be on the ground, they can collaborate with the banks in certain markets within the continent to extend their reach.
To help digitisation, we must empower fintechs to enable much stronger platforms. In Tanzania, SME customers work together to collaborate on small platforms, to submit bulk orders to China. There’s strength in numbers.
Banks have capabilities to support trade flows and payment via digitisation in areas like Ethiopia and the DRC. While some markets like DRC are high-risk, our competitors are growing there. Last year, a regional bank made 30% of their profit in Congo, for example. We can find safe ways to play in those markets, selecting the sectors we can perform in.
Banks with a Pan-African presence, such as Absa, which operates across key trade corridors, must bring a true corridor strategy to build sector-specific solutions like agri-value chains across multiple countries; use digital platforms to serve mid-market clients, not just large corporates; partner with DFIs to expand risk appetite in frontier markets; and position themselves as a trade enabler, not just financiers, by integrating advisory, foreign exchange, and working capital solutions.
The real differentiator will be the ability to intermediate not just capital, but meaningful connectivity, helping to link clients across markets, currencies, and the supply chain.
