An Omani bank has thrown a US$5 million credit line across the Indian Ocean to help exports and re-exports from Oman find new and wider markets along Africa's eastern seaboard.

Bank Muscat has signed with the Eastern and Southern African Trade and Development Bank (PTA Bank) an agreement under which the Omani bank will provide the African bank with credit line facilities to support letters of credit for the export and re-export of goods and services from the Sultanate to eastern and southern African countries.

New mechanism

Around 6% of Oman's total volume of exports and re-exports go to Tanzania, Kenya, Zambia and Zanzibar, amounting to a value of around $US117 million. Leading exports include vehicle parts and tyres and wheatflour.

The credit line introduces for the first time a modern-day trade finance mechanism to support and stimulate Omani exports to eastern and southern Africa - which from a historical perspective is somewhat surprising.

Historic ties

For centuries Arabs sailed from Oman to trade primarily in ivory, slaves and spices, using the islands of Zanzibar and Pemba (both now part of Tanzania) as trading posts. In 1832, Sultan Seyyid Said, of the Busaid Dynasty that had emerged in Oman, moved his Sultanate from Muscat, which was considered more difficult to protect, to Zanzibar where he and his descendants found security and ruled for over 130 years.

Omani traders are now looking for a different type of security to boost their exports to eastern and southern Africa. The new mechanism provides assurance of payment to the Omani exporter, while allowing the exporter to consider providing extended credit to the importer. Security for the exporter and favourable terms for the importer should lead to increasing trade volumes.

Development remit

The PTA Bank - so called after the Preferential Trade Agreement (PTA) that has transformed into the Common Market for Eastern and Southern African States (COMESA) - aims to promote the socio-economic development of its member states by providing financial and technical assistance to projects and trade activities.

Current membership of the PTA Bank includes Burundi, Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Malawi, Mauritius, People's Republic of China, Rwanda, Somalia, Sudan, Tanzania, Uganda, Zambia and Zimbabwe. The African Development Bank is a non-regional institutional shareholder of the bank.

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