![[South Africa] Absa looks to promote intra-regional trade and investment through $250 million trade finance deal](Images/2019/05/Absa-3-1024x683.jpg)
[South Africa] Absa looks to promote intra-regional trade and investment through $250 million trade finance deal
Absa and the African Development Bank Group (AfDB) have signed a US $ 250-million Risk Participation Agreement (RPA) which, when fully utilized, is estimated to mobilize over US $ 2 billion worth of trade business over three years. The RPA was signed on the side lines of the 2019 African Investment Forum (AIF) in Johannesburg.
This facility, through a 50:50 risk sharing approach, will help to promote broad-based economic growth on the African continent through increased facilitation or import-export activities of African corporates and small and medium-sized enterprises, and increase intra-Africa trade and regional financial integration in line with the AfDB's High 5 strategic priorities.
The RPA enables Absa and AfDB to equally share the risk of issuing trade finance facilities to African banks who have been unable to access trade finance support, due to a number or multinational banks exiting the continent through de-risking.
“Intra-Africa Trade is crucial to harness the potential of Africa, which has 60% of the world's arable land and an abundance of resources. AfDB and Absa Financial institutions that are intimately involved in the provision of financial services to support these flows,” said Temi Ofong, Deputy CEO or Absa Regional Operations and Chief Operating Officer, Absa Corporate and Investment Banking.
Carmel Kistasamy, Head, Global Development Organizations at Absa Corporate and Investment Banking says the agreement will benefit many African banks and their clients who have been unable to access trade finance after the 2008 financial crisis. Kistasamy sees demand for trade finance coming particularly from sectors such as agriculture and manufacturing.
She said the investment spending gap for Africa's development continues to widen with latest estimates of between US $ 130 - US $ 170bn per annum. Small and medium-sized enterprises, which are seen as drivers for economic growth and job creation, require significant funding to expand their businesses and the private sector has a key role to play in cross-border investment.
George Wilson, Head of Institutional Trade Finance at Absa Corporate and Investment Banking said AfDB has played a crucial role in assisting with reducing Africa's trade finance gap.
“Not only does their involvement directly address their developmental mandate, it greatly expands the reach and capacity of Absa's continental Trade Hub and has the potential to practically broaden the access to trade finance and developmental growth in Africa. We see this as a key stepping stone for even more impactful trade finance collaboration with the AfDB into Africa,” said Wilson.
"This deal is the result of what happens when you have the bravery to imagine and the will to get things done and we look forward to working with the AfDB to bring our clients' possibilities to life," said Ofong.
