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Janusz Władyczak wants Polish exporters to broaden their horizons. Instead of staying comfortable in traditional markets such as Europe and North America, the chief executive of Kuke, Poland’s export credit agency (ECA), is urging businesses to tap abundant export finance opportunities in Africa.

To help stimulate that expansion – and restore some of the business Kuke itself has lost because of Russia’s invasion of Ukraine – Kuke has turned deal matchmaker, proactively trying to insert Polish suppliers and contractors into deals on the continent.

Because Africa is home to many countries deemed a high credit risk by the OECD, ECAs are often involved in guaranteeing commercial lending for infrastructure projects such as roads, railways, hospitals and utilities. So far, Kuke has been a minnow on the continent, and Władyczak is keen for the agency to boost its role.

“We are eager to participate in any kind of project on the African continent,” he tells GTR. “We could sit and wait for someone to approach us, but I think we need to differentiate ourselves from other ECAs. It’s not only matchmaking as such, we should create an additional type of value [for exporters].”

“Kuke has a great financial potential to guarantee transactions in foreign markets, including African ones, and that is why we actively search for projects in which we can get involved.”

“As Poland is a large production site, it is fairly easy to find Polish suppliers and subcontractors to participate in those projects. We help to find and to match both sides,” explains Władyczak, noting that some other ECAs, such as UK Export Finance, take a similar approach.

Russia’s invasion of Ukraine has been a major challenge for Kuke. The ECA’s coverage of trade with both countries, plus neighbouring Belarus, represented a significant chunk of its business.

Kuke’s business with Ukraine has since recovered to pre-war levels, but Władyczak doesn’t see transactions with Russia and Belarus returning in the near future.

“Filling the hole left by investments in Belarus and Russia, where we were experts and ranked right behind such powers as China and Germany, will surely take us several years,” Władyczak says. “But we do not expect to be able to return to the Belarusian and Russian markets in the coming years, so Africa, the Middle East and hopefully Asia are must-haves on our list.”

To make up for lost business, Kuke wants Polish exporters to take advantage of the many large infrastructure projects under development across Africa.

Despite shaky debt positions of some key African economies, foreign lenders are still actively pursuing export finance deals on the continent. The retreat of Chinese contractors and banks has opened the door further for European – and Polish – participation.

Kuke is currently exploring around 20 opportunities in Africa, with five of them expected to be finalised by the end of this year. If they pan out, it would mark a major uptick in the institution’s involvement with the region.

Earlier this year Kuke covered a US$73mn social loan to finance the expansion of a university in Angola, and in 2021 the agency co-supported a hospital refurbishment project in Côte d’Ivoire alongside Denmark’s ECA.

Both loans were led by Standard Chartered, which Władyczak nominates as a key partner in the push into African export finance.

Limited appetite among Polish banks for providing export finance beyond Europe means the bulk of transactions the agency is weighing up involve international lenders. But the agency is also trying to nurture a shift in outlook among local banks, bringing them in on some of the deals to build an understanding of the African export finance market.

 

Sharing the risk

“We’re pretty happy because we kind of initiated the whole process and it seems it started to work very well,” says Władyczak. “We really created an interest among other companies in Poland.”

“From the normal perspective of an ECA, we should be sitting and waiting for our companies to come to approach us. We kind of reversed the idea of doing business that way,” he explains.

While Polish engineering, procurement and construction contractors, who compete for tenders from governments to complete projects, might not necessarily lead a bid, Władyczak says Kuke’s involvement in the financing ensures that at least 20% of content will be sourced from Poland even if the primary contractor is from a third country.

While Kuke has had to readjust its business in the wake of the war in Ukraine, its impact on the ECA pales in comparison to the effect on many African nations, which have been hit hard by volatility in commodity prices, particularly staple food ingredients such as wheat.

Many African economies are also struggling with sovereign debt. Ghana recently clinched a financial assistance package with the International Monetary Fund to help with its reported sovereign debt burden of around US$30bn. Angola and Kenya are among other countries wrestling with groaning debt to Chinese creditors, largely borrowed to finance infrastructure projects.

Władyczak says Kuke takes into account each country’s macroeconomic situation but considers every case separately, “not rejecting the project just because the government is in talks with the IMF about rescue lending”. He says an uptick in the claims ratio for African transactions is largely limited to short-term export transactions.

Kuke is also keen to co-operate and share risk with other European ECAs, partly as a way to compete with the export credit might of countries such as China and India. Those sentiments echo a study published last month – set to influence an emerging EU-wide export credit strategy – which recommended closer co-operation and risk-sharing between the bloc’s public export credit institutions.

“In general, the whole situation in the ECA world has changed as well,” says Władyczak. “For now, we see the trend that ECAs are eager to share the risk.”