…Facility will provide financial support to businesses and financial institutions to increase trade finance activities in Africa.
…Better access to trade finance will support the flow of vital goods and services.
…This includes agricultural goods such as fertilisers, seeds and machinery which will help address food security issues in Africa.
MON, MAR 25 2024-theGBJournal|British International Investment (BII), the UK’s Development Finance Institution (DFI) and impact investor, today announced a US$ 100 million finance facility with the Eastern and Southern African Trade and Development Bank (TDB). The investment is designed to strengthen economic resilience in the region by supporting essential trade finance activities, fostering agricultural development and addressing critical challenges such as food insecurity.
The facility will empower TDB to provide financial support to local businesses and financial institutions in several key markets in Africa. Many African economies are facing various economic challenges, including currency depreciation, rising inflation, debt challenges, and climate-related vulnerabilities, all exacerbated by global economic factors such as the Russia-Ukraine conflict and post-COVID economic turbulence.
TDB will use the financing to fund trade transactions, including importing and exporting goods, commodities, and essential services across the region. This allocation of capital is crucial for overcoming the barriers to trade in Africa, including the retreat of international correspondent banks from the continent, and addressing the substantial trade financing gap estimated at $80-120 billion. With improved access to trade finance, businesses can engage more readily in import and export activities, facilitating increased cross-border trade, contributing to food security, and stimulating job creation, economic growth and resilience in Africa.
The financing will enable local companies to procure essential agricultural inputs, such as fertilisers, seeds, and machinery. By facilitating access to these critical resources, the facility aims to enhance local production capabilities, increase agricultural productivity, support both export sectors stimulating forex generation and elevate the overall quality of food products. This helps address immediate food security issues and increases the agricultural sector’s capacity, global competitiveness, and economic output.
In recent years, TDB has strengthened its collaboration with financial institutions, recognising them as essential partners to boost trade. This strategic partnership is vital to increasing the flow of goods and services, including through financial institutions. The transaction builds on BII and TDB’s shared ambition of empowering critical segments of the economy, as well as the private sector including SMEs, which the institutions are committed to supporting to promote inclusive growth across the continent.
Andrew Mitchell, Minister for Development and Africa, said: “This investment underscores the UK government’s commitment to supporting economic and agricultural development across Africa by empowering businesses, stimulating trade, and increasing the flow of essential goods and services. This funding will also help to lower trade barriers so that companies across the continent are better able to expand into overseas markets, access vital resources and tackle critical challenges such as food security.”
Seema Dhanani, Head of Office, Kenya, and Coverage Director, East Africa at BII, said: “Our collaboration with TDB over the past seven years underscores our commitment to bolstering resilient economies and empowering communities across Africa. We are actively pursuing initiatives to deepen capital markets and catalyse innovation in Africa and our collaboration with TDB is instrumental in providing vital liquidity and deepening access to finance.”
Admassu Tadesse, TDB Group President and Managing Director, said: “TDB Group has been playing an important role in the trade finance space, often working countercyclically to contribute to the security of supply of essential commodities in high priority sectors such as agriculture and healthcare. This is the fourth facility we are signing with BII and its predecessor. We are pleased to continue building this strategic partnership, and through this new facility, enhance efforts to address ongoing supply chain disruptions and forex shortages, and their impact on food security.”
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