Sub-Saharan Africa is experiencing a renewed focus, with infrastructure projects receiving a significant boost
ANALYSIS | FELIX THOMPSON | There was a rebound in export credit agency activity in Sub-Saharan Africa last year, as agencies struck big-ticket deals across infrastructure and renewable energy sectors, fresh data shows.
In its annual State of the Industry Report, the Berne Union reveals that export credit agencies (ECAs) and insurers recorded US$23bn in new medium and long-term (MLT) business in Sub-Saharan Africa in 2023, marking a resurgence in activity following a lull period in the immediate aftermath of the Covid-19 pandemic.
Export credit activity in Sub-Saharan Africa slumped during the pandemic as large-scale projects were postponed. Given the complex nature of such transactions, ECA deals often take years to be launched and finalised.
New ECA and insurer-backed transactions worth US$12bn were signed in Sub-Saharan Africa in 2022, and US$14bn in 2021, says the Berne Union, which represents ECAs, multilateral insurers and commercial underwriters. But last year an “infrastructure boom” triggered a rebound in the export finance market.
“Sub-Saharan Africa is experiencing a renewed focus, with infrastructure projects receiving a significant boost,” the association says.
In the infrastructure sector, US$9.5bn-worth of new MLT and political risk insurance commitments were made in the region last year, while renewable energy was another key driver of growth.
“The recovery of new business to Sub-Saharan Africa in 2023 was driven by contributions of all member types but predominantly an increase in business from ECAs and multilaterals,” the Berne Union says.
The report highlights how ECAs and insurers have sourced new markets over the past five years, with certain countries – not least Ghana and Zambia – having fallen into default in 2022 and 2020 respectively.
“The countries within Sub-Saharan receiving support have shift[ed] with Angola, Senegal, Tanzania, and Nigeria being the biggest winners and business to Ghana, Zambia and Mozambique declining due to heightening sovereign difficulties for these countries,” the Berne Union says.
Angola has been a particular hub for activity, with agencies from the US, UK, Italy, Poland and Germany signing transactions – collectively worth billions of dollars – for water infrastructure, education and power projects over the past 18 months.
Angola accounted for 36% of MLT export credit volumes – or US$10.7bn – signed in Sub-Saharan Africa last year, while Egypt ranked second with US$6.3bn (21%) and Senegal third on US$2.67bn (9%).
But growth is not isolated to Africa.
MLT business shot up by 40% to US$165.4bn globally last year, the biggest market growth since 2015. Broadly, this trend was fuelled by a strong year for ECAs and robust manufacturing and infrastructure demand.
Certain geographies, such as Europe and East Asia, are recording far greater levels of growth than elsewhere, helped by corporate obligor requests and a “booming” project finance environment, the Berne Union says.
There was a “huge” 169% rise in fresh project finance business globally, up to US$25bn.
Comparatively, the Middle East and Africa and South Asia regions “faltered” in terms of new MLT business, though weak activity can be attributed to ECAs and insurers focusing on domestic, untied products.
Even as ECAs and insurers resume MLT coverage in Africa, certain countries remain unattractive to lenders.
There was a notable US$1.5bn increase in MLT export credit claims, rising to US$5.1bn, amid sovereign debt issues.
The top African country for claims paid was Zambia (US$708mn), while Ethiopia (US$524mn) and Ghana (US$327mn) were other markets where ECAs and insurers ran into difficulty last year.
UK Export Finance, which published its annual report this week, said it expects to pay £258mn in claims in the 2023/2024 period, more than double the £122mn paid out the year prior.
“A number of sovereigns including Sri Lanka and Ghana experienced significant economic stress, resulting in an increase in claims paid,” the UK’s ECA says.
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Source: Global Trade Review