Following the devastating impact of the Covid-19 pandemic on international financial markets and Africa’s public finances, investments into commercial projects in key economic sectors have faced unprecedented limitations and inhibitions. As such, African nations have begun to reprioritize investments in accordance with increasingly limited budgetary constraints. Therefore, the need for sustainable, Export Credit Agency (ECA) backed financing to deliver critical healthcare infrastructure to the continent has never been greater.
“Healthcare is a really key sector,” stated Simon Buckenburg, Civil, Infrastructure & Energy Business Manager at UK Export Finance in Cape Town on 11 March, adding, “we see a massive need for it in Africa, so we’re always happy to look at projects in that area.”
ECA financing opportunities will need to be restructured and adjusted towards the requirements of public and commercial African projects, considering the impact of debt sustainability within the African financial environment and the affordability of financing offerings that accompanies project tenders.
“We think good debt looks like debt that’s associated with a high-quality social infrastructure project, a project with strong economic growth,” said Ed Harkins, Managing Director at GKB Ventures, arguing that what really makes debt good is, “long-term, low-cost financing, – to hit all the buttons around affordability – fixed rates, capping the cost of funding, and where it’s funded in a very transparent manner.”
ECA direct financing is critical to financing infrastructure projects in Africa and is likely to grow significantly in the coming years as markets begin to stabilize following the global economic recovery after the Covid-19 pandemic and investors begin to provide more affordable debt. The prospect for deeper collaboration between ECA institutions and development finance institutions, commercial banks, and the public and private sector, is expected to ensure that the infrastructure deficit on the continent is resolved in the wake of the resumption of active market participation.
“If we look at how projects were perceived ten years ago, the commercial and finance loans and their affordability were seen as completely separate items, but now, they’re looking at it all as one. Whereas we might have been on a level playing field in the cost of the bill, because of the direct lending, the loan has become so attractive that it tends to win the entirety of the project,” concluded Nicholas Oliver, Head of Business Development at NMS International Group.