CDC Group plc (“CDC”), the UK’s development finance institution and impact investor, has today announced a US $75 million risk sharing facility with Absa Group Limited (Absa). One of Africa’s largest diversified financial services groups, Absa has a presence in 12 countries across the continent and around 42,000 employees.
This is one of CDC’s largest trade finance commitments in Africa. The enhanced capacity will benefit local businesses and their growth as they take advantage of trade opportunities domestically and internationally.
Many international banks have been though a de-risking process. This has decreased the flow of hard currency to African banks that on-lend to local businesses to facilitate trade of their goods and services. In addition, this has negatively impacted the number of corresponding banking relationships across Africa, weakening the ecosystem on which trade can exist.
“We believe supporting local businesses is critical to the growth and development of the region where there is a shortfall in available trade capital. This facility will make a valuable contribution towards alleviating the challenge of managing trade finance risk appetite” says CEO Absa Corporate and Investment Charles Russon.
CDC’s $75 million funded and unfunded facility will help stem this decline by supporting Absa to increase its lines of credit to other banks across Africa. Subsequently, these banks can increase their trade finance offering to thousands of local business clients. This facility will also enable Absa to expand its network of local banks, particularly into the harder to reach African markets where trade finance will help fuel economic prosperity.
Stimulating trade in African businesses is key to alleviating poverty where average GDP per capita stands at just US$1,930 (*NoE 3). Critical to advancing trade are the region’s businesses, yet they often face constraints in accessing finance which stagnates their growth, with trade finance a significant challenge. Current estimates for Africa’s trade finance gap are between US$90 billion to $120 billion.
CDC is playing key role in closing the trade finance gap in Africa. This partnership with Absa is a considerable positive step in addressing this challenge. As Absa expands into a leading pan-African bank, trade finance is a key focus with a US $1 billion pipeline of related business. The bank operates in some of Africa’s most challenged countries such as Botswana, Mozambique and Zambia.
Nick O’Donohoe, CEO of CDC Group commented:
“The role of DFIs such as CDC in opening access to trade finance for local businesses is paramount in tackling poverty in Africa. Using our capital, we are committed to addressing a US $90 billion to $120 billion financing gap to bring critical growth finance to businesses across Africa.
We partner with both international and local banks to boost levels of trade finance to their clients. We focus on countries where raising capital is a challenge which stagnates economic prosperity. Now, we have US $775 million commitments in place with four partner banks and have subsequently supported over 1,500 transactions across Africa and South Asia since 2015.
We know that by committing US $75 million to Absa, Sub-Saharan Africa’s third largest bank with operations in some of Africa’s most challenged countries, our capital will reach local businesses that need it most.”
Absa Corporate and Investment Banking CEO, Charles Russon commented:
“As a leading Pan- African bank, we believe that we have a role to play in supporting trade finance using our infrastructure and our expertise to bridge the trade financing gap. We understand the important role we play as a regional player and largely systemic bank in the majority markets where we operate. We believe in collaboration to achieve the desired outcomes and this why we have partnered with the CDC to improve access to capital where it’s needed the most.”
Clare Murray, CDC group, +44 20 7036 4353 / [email protected]
Sizwekazi Mdingi +27834163017/[email protected];
Notes to Editors:
- CDC Group plc is the UK’s development finance institution. Established more than 70 years ago, it is wholly owned by the UK Government. By investing in the private sector for impact, CDC aims to help countries in Africa and Asia provide sustainable opportunities for all citizens.
- CDC takes a flexible approach and provides capital in all its forms, including equity, debt, mezzanine and guarantees, to meet businesses’ needs and achieve development impact. CDC has net assets of £5.8bn. Find out more at www.cdcgroup.com
- *International Monetary Fund 2018
- CDC accelerated its commitment to trade finance when it signed its first master risk participation agreement (MRPA) in 2013. We offer these facilities on an unfunded and funded basis to support our partner banks’ trade confirmation services. Under this arrangement, the bank provides confirmation lines to local financial institutions to support their trade businesses and increase capacity to undertake trade finance transactions. Currently, we have MRPA commitments in place totalling US$700mm with four such partner banks. Through these facilities, CDC has supported over 1,500 transactions across Africa and South Asia since 2015. And through these partnerships, we currently share risk on trades with over 50 local issuing banks.
- Currently, we have MRPA commitments in place totalling US$700mm with four such partner banks. Through these facilities, CDC has supported over 1,500 transactions across Africa and South Asia since 2015. And through these partnerships, we currently share risk on trades with over 50 local issuing banks.
About Absa Group Limited
Absa Group Limited (‘Absa Group’) is listed on the Johannesburg Stock Exchange and is one of Africa’s largest diversified financial services groups. Absa Group offers an integrated set of products and services across personal and business banking, corporate and investment banking, wealth and investment management and insurance.
Absa Group has a presence in 12 countries in Africa, with approximately 42 000 employees. The Group’s registered head office is in Johannesburg, South Africa, and it owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, South Africa (Absa Bank), Tanzania (Barclays Bank Tanzania and National Bank of Commerce), Uganda and Zambia. The Group also has representative offices in Namibia and Nigeria, as well as insurance operations in Botswana, Kenya, Mozambique, South Africa, Tanzania and Zambia.
For further information about Absa Group Limited, please visit www.absa.africa
About Absa Bank Limited
Absa Bank Limited (‘Absa Bank’) is a wholly-owned subsidiary of Absa Group Limited, which is listed on the Johannesburg Stock Exchange and is one of Africa’s largest financial services groups. Absa offers a range of retail, business, corporate and investment banking and wealth management and insurance products and services primarily in South Africa and Namibia.
Absa Group is represented in 12 countries, with approximately 42 000 employees.
For further information about Absa, please visit our website www.absa