Germany’s KfW Ipex-Bank and the Africa Finance Corporation (AFC) have signed a US$300mn framework facility, connecting European exporters with African infrastructure projects.

The three-year facility will benefit projects developed by the AFC by providing long-term financing of European equipment and services.

Only projects that fulfil the requisite criteria will qualify for funding. Vice-president for financial institutions at KfW Ipex, Sylvia Sedlacek, confirms to GTR that qualifying projects must be in line with AFC’s mandate to support African infrastructure, must have European suppliers and must have approval from the supplier country’s ECA, which will be prepared to support the project.

Funds will either be disbursed directly to the AFC from the German lender, or to the European exporter for the goods or services against the receipt of shipping and delivery documents. An AFC spokesperson confirms to GTR that terms of specific loans for projects, including tenor and pricing, will be agreed on a transaction-by-transaction basis.

No projects have been presented to ECAs so far but European appetite to support projects under the facility is anticipated.

According to Sedlacek, no projects have been presented to ECAs so far but European appetite to support projects under the facility is anticipated.

“Based on Moody’s A3 rating for AFC we anticipate that all European ECAs would be ready to accept AFC risk at terms and tenors that are in line with the OECD consensus and the specific sector agreements,” Sedlacek tells GTR. “AFC has identified ECA financing as a very competitive funding source in view of pricing and tenors.”

It is as yet unclear which types of projects will obtain financing under the facility, but GTR understands the AFC focusses on developing infrastructure projects across five main sectors in its nine West African member countries: power, oil and gas, heavy industry, transport and telecommunications infrastructure.

There is an option to extend the facility after three years should both organisations consent.