As Africa’s appeal to international investors grows, players – both new and old – are making sure they are in on the game, writes Shannon Manders.

As investment outpaces aid, Africa’s growth is changing its future. Long plagued by political unrest and economic strife, the continent’s profile in the global economy is improving.

Financial institutions are becoming increasingly keen to set up shop and ensure that Africa forms part of their global strategy. International banks are growing their presence on the continent, while local and regional banks are fortifying their coverage of the market.

“Africa is attracting more attention. The risk may still be there, but the investment community is more comfortable with the risk and understanding it,” says Lodewyk Meyer, director at Norton Rose in Johannesburg.

GTR readers voted Norton Rose as the best law firm in Sub-Saharan Africa in 2012. Meyer reports that the firm has seen an increase in activity levels in the region, and lists some of the highlights that Norton Rose has achieved over the past year: “From a trade perspective in South Africa, we’ve done some pretty sophisticated value chain financing where banks have looked at the entire agricultural value chain as a source of refunding loans.”

Nevertheless, despite the definite uptick in business, Meyer believes that one of the challenges facing trade in Africa today is the lack of standardisation of legal documents and advice, which affects the evolution of the African loan market.

“There’s a real drive by the banks to achieve that so that syndications and the selling down of debt can happen more easily. As a result we are more comfortable with working with local counsel in many of these markets as new transactions enter,” he says.

Meyer also notes an increase in the activity of development finance institutions (DFIs) and multilateral development banks in the region.

“We’ve done some fairly sizeable transactions where local African DFIs are funded in syndications by commercial banks, where those DFIs are then onlending or utilising the funds for infrastructure development, which is always a great story for trade,” he explains.

The International Finance Corporation (IFC) for one has visibly increased its support for African countries. IFC investments in Sub-Saharan Africa topped US$2bn in 2011 for the second year running. Perhaps the corporation’s most notable African investment for 2012 was the extension of the global trade liquidity programme (GTLP) first launched in 2009. The IFC teamed up with the African Development Bank (AfDB) and Citi to extend a US$175mn three-year revolving credit facility to improve the availability of trade finance in Africa.

As part of the agreement, Citi will originate US$175mn in trade finance transactions from 125 financial institutions across 32 countries in Africa. The IFC and AfDB will jointly fund US$70mn of the portfolio balance.


New players

Across Sub-Saharan Africa, banks are following the money in pursuit of new markets. “Ignore Africa at your peril,” says Kennedy Bungane, chief executive and head of Africa strategy at Barclays.

South Africa’s big banks, which are already invested in the region, want to expand into more untapped markets.

But competition is formidable as international rivals such as Standard Chartered and JP Morgan are also looking to grow their business.

“There are more players coming to the market, which we didn’t see before. It’s the DFIs, the African regional banks, the pan-African banks and the South African banks,” says Meyer at Norton Rose.

Regional banks, which have been fighting higher fixed and operating costs, and are often constricted by a poor credit culture and bad contract enforcement, have been taking steps towards banking reform and consolidation, and remain active players in trade transactions.

Ecobank, which won the award for best trade finance banks in five African countries in GTR’s readers’ poll, kept the deals ticking over in 2012.

In December, Ecobank Capital raised a US$202mn syndicated credit facility for IHS Holding, Africa’s largest mobile infrastructure provider. The proceeds of the loan will be used to finance mobile tower networks in Cameroon and Côte d’Ivoire. The credit facility comprises two transactions for each country. The Cameroon facility, totalling US$102mn, is split into a five-year and seven-year tranche, while the transaction for Côte d’Ivoire, worth US$100mn, is comprised of a single five-year tranche.

Earlier in the year, Ecobank Nigeria acted as one of the lead arrangers on a US$550mn syndicated bank guarantee and bridge facilities for Shoreline Natural Resources. The loan will be used by Shoreline to acquire 45% in OML 30, an oilfield in the Niger Delta of Nigeria.

Another noteworthy transaction took place in Gabon in July, when Ecobank arranged a US$300mn facility for Olam Palm Gabon, which the company will use to build a palm oil plantation and refinery in the country.

Ecobank has also sought to strengthen its international operations; in early December it opened a representative office in Beijing. At the time, Albert Essein, Ecobank’s group deputy chief executive officer and head of Ecobank Corporate and Investment Banking, commented: “China’s economic engagement in Africa has developed rapidly in recent years, in line with the Chinese government’s globalisation strategy. Our representative office in Beijing will strengthen the co-operation between Ecobank and the Chinese financial authorities, as well as facilitating bilateral trade and investment.”

The bank also plans to open offices in New York.

The Eastern and Southern African Trade and Development Bank (PTA Bank), which readers voted as the best trade finance bank in two African countries last year, has also been involved in its fair share of transactions. In November, the bank teamed up with the Africa Agriculture and Trade and Investment Fund to sign a US$30mn facility that will go towards financing the agricultural sector on the continent.

The month before, the bank raised an oversubscribed US$150mn loan from the international syndicated market. A total of 12 banks joined the transaction, which was arranged by Commerzbank, FirstRand and Standard Chartered. Commenting on the facility, Admassu Tadesse, president of PTA Bank, said: “Our successful loan syndication is a very welcome sign of the growing capacity of global and international banks to embrace the emerging opportunities and improve credits in Africa’s fast-growing economies.”


SA banks move to the next level

South African banks, for long the lone economic stalwarts responsible for financing African trade, are looking to maintain their position on the continent, hoping that their recent downgrades will not put them at a disadvantage in the long run.

“Other banks are trying to build and consolidate,” agrees Craig Polkinghorne, Standard Bank’s global head and director of structured trade and commodity finance. “I would expect that in 12 months’ time and they’ve got their teams right, they will be far more aggressive in terms of how they approach their clients and where they’re doing business.”

Standard Bank’s most interesting recent expansion was in June 2012 when its subsidiary CFC Stanbic opened its first branch in South Sudan.

In October, Standard Bank announced that it had opened another branch in Luanda, following an announcement from the bank’s CEO Clive Newson that it plans to make a significant expansion in oil-rich Angola.

As GTR went to press, Absa was finalising plans to acquire Barclays Africa in a R18bn transaction which will see the bank acquiring operations in the Seychelles, Botswana, Ghana, Kenya, Mauritius, Tanzania, Uganda, Zambia and the regional office in Johannesburg.

What’s more, in November, Rand Merchant Bank (RMB), through its parent FirstRand, secured an investment banking licence from the Central Bank of Nigeria. RMB Nigeria will provide corporate advisory services, infrastructure and project finance, structured trade and commodity finance, as well as other services to local, regional and international corporates already operating in or entering Nigeria and the broader West African economies.

According to Sizwe Nxasana, CEO of FirstRand, the move was in line with the bank’s strategy to build a presence in high-growth African markets with attractive long-term prospects.


International banks win points

Among the international players is Standard Chartered, which is also looking to boost its presence on the continent. In October the bank told investors that it plans to invest over US$100mn on 110 new branches in Kenya, Ghana and Nigeria, alongside five other core markets over the course of the next three years, as well as making hires across both the wholesale and consumer banking business. As part of this expansion, it also intends to open new wholesale banking office locations in South Africa, establish an onshore presence in Mozambique, and invest in new products, including Islamic finance.

Another global bank looking to expand more broadly across Sub-Saharan Africa is JP Morgan, which announced in mid 2012 that it had begun offering escrow services in South Africa. The bank also plans to open representative offices in Ghana and Kenya in the near future.

Chinese banks are also looking to solidify their banking operations across the region. Their business is to support the coveted state-owned Chinese corporates that are snapping up the majority of infrastructure contracts on the continent.

“It will be interesting to see what the change in Chinese leadership will bring, and whether their policy vis-à-vis Africa will be more of the same, or an increase in activity,” says Polkinghorne at Standard Bank.

Click here to read the results of the GTR Africa Leaders in Trade 2012 poll