20 January 2020
CDC Group plc (“CDC”), the UK’s impact investor for Africa and South Asia, has today announced at the Africa Investment Summit a US$100 million trade finance loan with Absa Bank Limited (Absa), one of Africa’s largest diversified financial services groups.
The fresh injection of finance will be deployed by Absa and its affiliates in 12 countries to support trade transactions undertaken by local businesses, African SMEs and entrepreneurs.
Trade Finance plays a key role in Absa’s strategy to become a leading pan-African bank. The investment will enable trade finance lending to Absa Group subsidiaries in Botswana, Ghana, Kenya, Mozambique, Tanzania, Uganda and Zambia, as well as other non-subsidiary correspondent banks across Africa.
This direct loan follows a recent agreement by CDC to provide a US$75 million trade finance facility to Absa. The combined sum of US$175 million is CDC’s largest trade finance commitment in Africa.
CDC’s dual capital commitment with Absa comes at a critical time for African businesses, particularly for SMEs that have suffered due to the decrease in the flow of hard currency to African banks over recent years. This can often prevent companies from taking advantage of opportunities to grow, secure export opportunities and increase employment.
George Wilson, Head of Institutional Trade at Absa, said: “Having the CDC as a partner will significantly boost our financial commitment to drive African trade and practically support local banks, businesses, SMEs and entrepreneurs - the real source of GDP growth and developmental transformation of African economies. This is a major step in turning back the tide of African de-risking that has starved the continent of trade finance and should profoundly enhance Absa’s Trade Hub contribution to making the Continental Free Trade Agreement (CFTA) the success it needs to be.”
Admir Imami, Director, Head of Trade & Supply Chain Finance at CDC, said: “DC now has US$850 million of commitments in place with five partner banks and has subsequently supported nearly 2,000 trade finance transactions across Africa and South Asia since 2015.
“Our commitment to boosting African trade is paramount to the economic and social development of Africa, and to addressing a US $90 billion to $120 billion financing gap to local businesses.
“Over the last few years, banks headquartered in places such as the US and Europe have reduced their exposure to Africa which has led to an acute shortage of trade finance capacity in countries in Africa that need it the most. This in turn has prevented African businesses from fulfilling their potential and taking advantage of global market opportunities.
Entrepreneurs in Africa deserve the same opportunities as their counterparts in other, more developed economies, where trade financing is much easier to come by.”
CDC partners with both international and local banks to boost levels of trade finance to their clients. The company focus on countries where raising capital is a challenge which stagnates economic prosperity. CDC is playing key role in closing the trade finance gap in Africa. This duel partnership with Absa is a considerable step in addressing this challenge.
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.