CDC Group is continuing to target Africa’s vast trade finance gap, announcing that a new US$100mn risk sharing facility has been agreed with Société Générale.
London-headquartered CDC, a publicly funded development finance institution, says the deal will bolster trade finance offerings “in hard-to-reach African markets”, increasing access to capital for local businesses and importers. It is the first partnership between CDC and Société Générale.
The agency says the funds provided will support Société Générale’s efforts to increase the limits it already provides to local and new banks, with a particular focus on Francophone West Africa.
“Our partnership is a significant step closer to narrowing the trade finance gap in the region,” says Admir Imami, CDC’s director of trade and supply chain finance.
“This commitment will stimulate trade and supply chain efficiency in Africa by supporting banks and smaller financial institutions in providing capital and increasing credit that businesses need for their continued growth.”
Société Générale’s global head of trade finance, Pierre-Antoine Barreault, adds that the agreement forms part of the bank’s Grow with Africa programme – a strategic plan to provide responsible and sustainable financing across the continent.
The International Chamber of Commerce and the African Development Bank each estimate the value of the continent’s trade finance gap to total up to US$120bn, with CDC previously suggesting the majority of that is related to open account and working capital needs.
That challenge has only worsened since the outbreak of Covid-19 and the subsequent containment measures put in place across the globe.
A recent International Monetary Fund economic outlook for Sub-Saharan Africa projects that economic growth will this year shrink by an unprecedented 1.6%, while World Bank analysis from April predicted an even steeper drop of 5.1%.
The value of that lost output across the region is estimated to total between US$37bn and US$79bn. Robert Besseling, executive director of risk consultancy firm EXX Africa, warned at the time that “a particular fear here would be that much investment committed or pledged to infrastructure projects will drop out”.
CDC and Société Générale acknowledge there is currently “little access to international capital for local companies and importers” across the continent.
In a joint statement, the duo say their partnership intends to “help companies through the current economic crisis and to support job creation in Africa”, adding: “In addition, several trades facilitated by CDC’s capital will support food and agricultural value chains, which are key priorities in CDC’s Covid-19 response.”
It is also intended to promote two of the UN’s sustainable development goals (SDGs): increased efficiency across supply chains to expand households’ access to competitively priced commodities; and supporting sustainable industrialisation by contributing to employment at GDP.
The agreement follows other efforts by CDC to expand its trade finance offerings in Africa. Early this year the agency announced it would lend US$100bn to South African bank Absa and establish a US$75mn risk-sharing facility with the Eastern and Southern African Trade and Development Bank.
July 1, 2020