Afrexim Bank is guaranteeing the import of 745 trucks payable by four local banks on behalf of Ethiopian transport businesses with a USD 63 million loan.
Afrexim Bank guaranteed Jampur International FZE, a Dubai-based supplier of Sinotruck. The trucks will be supplied by Jampur from the Chinese truck manufacturer. Jampur is selected by the transport companies after Sinotruk, the Chinese manufacturer refused to directly supply the trucks on deferred LC.
The trucks have already been prepared for export from China and are scheduled to arrive in mid-September. The guaranteed deferred payments for Jampur will be made by Ethiopian local banks over the next two years.
On the other end, the National Bank of Ethiopia (NBE) assured Afrexim to finalize the payments of the 63 million dollar within the next two years. However, if Ethiopian commercial banks fail to pay the postponed LC during the next two years, Afrexim will be accountable for Jampur.
End of 2020, a procurement committee comprising 168 Ethiopian transportation companies requested the Ministry of Transport and Logistics (MoTL) to purchase 2,600 trucks. Following MoTL’s positive nod, the National Bank of Ethiopia (NBE) allowed the transport companies to open deferred LCs for the 2,600 trucks.
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For 745 of them, a letter of credit (LC) has been opened, for which Afrexim gave the guarantee confirmation. Once their LC is opened, the remaining 1,855 trucks will be processed through time as well.
All trucks will be delivered using a delayed payment plan with guaranteed credit.
The NBE has already directed Awash, Enat, Abyssinia, and the Commercial Bank of Ethiopia to prepare and pay the USD 63 million to Afrexim Bank before the two-year deadline.
Jampur sought Afrexim to ensure the long-guaranteed confirmation after losing faith in local Ethiopian banks.
Despite the fact that the MoTL and NBE initially permitted local commercial banks to provide the guarantee, Jampur refused to accept the assurance from Ethiopian commercial banks. After failing to honor a previous USD 30 million credit supply deal, Sinotruck and Jampur declined to sign into any credit supply agreement directly with Ethiopian commercial banks.
“We don’t trust Ethiopian banks to arrange the forex,” said a Sinotruck representative in Ethiopia who spoke on the condition of anonymity to the reporter.
Tikur Abbay Transport Plc is one of the transport companies that ordered the vehicles. It had planned to buy 250 trucks at first, but owing to pricing changes, it ended up with 231.
“We requested a USD 18 million letter of credit from Awash Bank, and we received the confirmed letter of credit from Afrexim Bank two weeks ago. We paid a 30 percent deposit in birr on the pricing of the trucks in Awash,” Seyoum Bemelaku, CEO of Tiku Abbay Transport, stated.
SOURCE: The Reporter
