Export Development Canada has signed a co-operation agreement with the African Trade Insurance Agency (ATI) to enhance trade between Canada and Africa.

The memorandum of understanding (MOU) aims to provide financial products and services including joint insurance, parallel insurance and reinsurance, to help trade and foreign direct investments between the two regions. The agreement will mainly target the mining, infrastructure and information and communication technology sectors.

In mid November, EDC extended a US$30mn five-year credit line to the African Export Import Bank (Afreximbank), to finance purchases of Canadian goods by African importers.

The deals fit into EDC’s strategy to diversify Canada’s export opportunities, and will help meet demand from Canadian exporters in high-risk countries, according to Patricia Bentolila, EDC chief representative for Africa.

“We have demand from exporters, but for a lot of clients, we cannot really address the demand, either because the African entities involved are not necessarily bankable or the countries cannot take up financing on a commercial basis. When it comes to providing buyer financing, it is difficult because of the risk profile in Africa,” she tells GTR, adding that having Afreximbank as an intermediary on the transactions will help reduce risk.

“This credit line is designed to assist mid-sized transactions, no smaller than US$2-3mn, for which it would be difficult for us to go through the due diligence process, but Afreximbank knows the continent. Besides, it has a lot of relationships in Africa, so it’s also a way for us to connect with their relationships and try to introduce the Canadian supply chain.”

Africa currently represents around 2.5% of EDC’s total exposure (C$2.4bn in 2011), and this is the first time the Canadian export credit agency has signed this type of deal on the continent.

“It’s important for the country to diversify and rely a bit less on the US – it’s a matter of risk and growth. We need to look at more emerging markets and Africa is definitely a growth destination,” Bentolila adds.

EDC CEO Stephen Poloz explains that the line of credit is intended for all sectors, but that a lot of opportunities are already developing in information and communication technologies (ICT), as well as mining.

Afreximbank president Jean-Louis Ekra says the bank will use the facility for medium-term financing to support purchases of Canadian goods and services from sectors including mining, telecommunications, transportation, manufacturing, energy and agro-industry.

“The goods and services that are expected to be imported into Africa under the facility will serve to boost export diversification and enhance the economic growth and development of the continent,” he adds.