EXIM Africa Strategy a Bust Says Audit

The US Export-Import Bank has failed to make an impact on trade and investment in sub-Saharan Africa, despite a congressional mandate for expansion and extensive overseas travel by EXIM President and Chair of the Board of Directors, Reta Jo Lewis.

The findings of an office of the Inspector General Evaluation of EXIM’s Sub-Saharan Africa Mandate released May 15 conclude that “the evaluation found that EXIM had not successfully expanded its performance to achieve its Sub-Saharan Africa Mandate,”ascribing responsibility for this failure to a lack of leadership and accountability.

The report calls for Ms. Lewis to designate “a lead office or officials” to coordinate the Bank’s Sub-Saharan Mandate.

The Audit:

The objectives were to:

1. Measure EXIM’s performance and efforts to promote the expansion of its financial commitments in sub-Saharan Africa;
2. Evaluate the impact of EXIM’s programs and policies on increasing the export of U.S. goods and services to sub-Saharan Africa and strengthening U.S. jobs;
3. Evaluate the effect of EXIM’s programs and policies on job creation in sub-Saharan Africa.

The evaluation covers the period from FY 2014 through FY 2023. This report contains nine recommendations.

The evaluation found that EXIM had not successfully expanded its performance to achieve its Sub-Saharan Africa Mandate.

Not Recovered from “Lapse Period”

Over the evaluation period, EXIM authorizations and supported trade declined with limited exceptions. EXIM experienced a lapse in statutory authority and a quorum of its Board of Directors from July 2015 to May 2019, which negatively impacted EXIM’s efforts and performance in sub-Saharan Africa.

According to one exporter who uses EXIM’s long-term programs, the lapse significantly impacted its business and provided an advantage to its European competitors in the sector.

EXIM officials also stated that the lapse negatively impacted existing EXIM relationships with importers and exporters, causing significant losses in the project pipeline.

Although EXIM regained a Board quorum in May 2019, EXIM’s performance in sub-Saharan Africa has not fully recovered to pre-lapse levels.

Multiple Initiatives, No Designated Authority

The evaluation found that multiple EXIM offices and officials have taken initiatives related to sub-Saharan Africa, but no specific program or office within EXIM has been explicitly designated with the responsibility and authority to coordinate the efforts or oversee the strategy to address the Sub-Saharan Africa Mandate or tasked with overseeing the strategy on how to grow in the region.

EXIM lacks a lead office or division with the explicit responsibility and authority to coordinate efforts across multiple offices and guide the mandate's implementation across all relevant offices. The audit also notes that the Sub-Saharan Africa Mandate is “not central in the EXIM Strategic Plan 2022 – 2026.”

The Sub-Saharan Africa Mandate

While Congress established the Sub-Saharan Africa Advisory Committee to provide guidance and recommendations, EXIM has not formally established a specific division or office to implement or monitor those recommendations.

Under its Sub-Saharan Africa Mandate, EXIM is required to promote the expansion of EXIM’s financial commitments in sub-Saharan Africa, however  EXIM’s Charter does not identify specific goals or target areas for meeting the mandate.

The evaluation found that EXIM did not successfully expand its performance to achieve its SubSaharan Africa Mandate during the evaluation period (FY 2014 to FY 2023).

Small Impact on Employment

The evaluation found that EXIM programs and policies in sub-Saharan Africa had a small positive impact on employment in the United States, while “The amount of EXIM-supported trade to sub-Saharan Africa is too small to have a material impact on employment in countries of sub-Saharan Africa; EXIM supported trade is 0.0081 percent of the economic output (GDP) of sub-Saharan Africa.

EXIM “Not a Key Driving Force”

The evaluation also found EXIM has not made a significant difference in increasing U.S. exports to sub-Saharan Africa. “EXIM's programs and policies in sub-Saharan Africa were not a key driving force in the growth of U.S. exports to the region during this period."

The volume of EXIM supported trade, i.e., EXIM’s disbursements and shipments, did not account for a significant portion of total U.S. exports to sub-Saharan Africa from FY 2020 to FY 2023.

A Few Large Transactions

While EXIM sub-Saharan Africa authorizations make up a larger portion of total global authorizations, these authorization amounts primarily consist of a few large transactions.

Since disbursements and shipments typically lag behind their respective authorizations by several years, it could take several years for EXIM sub-Saharan Africa authorizations to translate into exports and job growth.

Overall sub-Saharan Africa authorizations have remained under FY 2014 levels, except for two significant authorizations--a single direct loan of $5 billion in Mozambique in 2019 and a single transaction of $907 million in Angola in 2023. As of FY 2023, neither has resulted in EXIM-supported trade.

CTEP Angola Initiative Stalled

In 2023, EXIM’s Board approved a $907 million direct loan to build two photovoltaic solar power plants in Angola. This transaction is the largest renewable energy project EXIM has authorized to date and was approved as a transaction under EXIM’s China and Transformational Exports Program (CTEP). EXIM officials stated that this transaction is currently stalled in the documentation phase following the Board's approval.

[On May 9th EXIM announced the Angola transaction had been "signed and closed.. See 12260] 

Mozambique LNG Project on hold.

In 2019, EXIM’s Board authorized a direct loan of $5 billion to support the development and construction of an integrated Liquefied Natural Gas (LNG) project in Mozambique. The transaction has been on hold since 2021, when escalating security concerns in Mozambique resulted in a pause in construction. According to EXIM staff, the security situation in Mozambique has improved, and the project will have to be reauthorized.

EXIM has not made a significant difference

"EXIM has not made a significant difference in increasing U.S. exports to sub-Saharan Africa," the report states.  For example, EXIM supported trade volume to sub-Saharan Africa was 6.3 percent and 6.4 percent of total U.S. exports to sub-Saharan Africa in FY 2014 and FY 2015, respectively.

In recent years, the volume of EXIM-supported trade accounted for a smaller share of total U.S. exports to sub-Saharan Africa compared to that of the period before the lapse (FY 2014 – FY 2015). The share fell to 0.2 percent in FY 2022 before increasing to 1.6 percent in FY 2023.

Sustainable Rules, Policies and Standards

The lower creditworthiness of several countries in sub-Saharan Africa impacts the ability to expand EXIM-supported transactions in sub-Saharan Africa, according to the report. As most of the importers in sub-Saharan Africa are sovereign entities, EXIM adheres to sustainable lending procedures that aim to avoid burdening a country with excessive debt.

EXIM officials also stated that due to basic issues, such as unfamiliarity with U.S. products and incompatibility of voltage on standard electrical products, give comparative advantages to exporters from other countries.

Further, EXIM officials stated that EXIM policies are perceived as more rigid and less adaptable compared to strategies adopted by other ECAs and countries in the region.

Reccomendations

1.  Designation of a Lead Office: EXIM’s Chair should appoint a lead office or officials to oversee the sub-Saharan Africa strategy, coordinate implementation across EXIM offices, liaise with external stakeholders, and report to the Board of Directors and other relevant parties.
2. Development of a Specific Strategy: The Lead Office or Officials should create a dedicated strategy for the sub-Saharan Africa Mandate, ensuring a unified direction and effective communication of EXIM’s commitments and strategies to stakeholders.
3.  Integration into Overall Planning: EXIM’s Chair should ensure the sub-Saharan Africa Mandate is integrated into EXIM’s broader strategic planning to reinforce its importance.
4. Enhancing Collaboration: The Lead Office or Officials should develop a plan to enhance collaboration with the Department of Commerce, the Trade Promotion Coordinating Committee (TPCC), and other relevant government agencies to boost EXIM’s role in trade discussions related to sub-Saharan Africa.
5.  Establish Effective Metrics: The Lead Office or Officials should develop metrics to measure the Sub-Saharan Africa Mandate’s performance, including metrics such as the number of U.S. exporters, lenders, and importers in sub-Saharan Africa, relationships established, total commitments and authorizations, and export value. These metrics should be included in the next EXIM Annual Performance Plan.
6.  Review of Post-Authorization Process: EXIM’s Office of Board Authorized Finance and Office of the General Counsel should review the post-authorization process to identify factors causing delays between authorization and disbursements and develop strategies to address these issues.
7.  Engage Importers Directly: EXIM’s Office of Global Business Development should create a detailed plan to engage importers in sub-Saharan Africa who are not currently participating in EXIM’s programs. This plan should be integrated into the overarching strategy developed by the Lead Office or Officials.
8. Engage US Businesses:  The Lead Office or Officials should devise a plan to directly engage U.S. businesses that are not already engaging with EXIM’s sub-Saharan Africa programs.
9. Domestic Content Reform: EXIM’s Office of Policy Analysis and International Relations should conduct an analysis of the potential impacts of lowering the mandated domestic content policy for EXIM programs targeted to sub-Saharan Africa on U.S. jobs and present its findings to EXIM’s Board of Directors.