BUSINESS REPORTER
Pan African lenders, the African Development Bank (AfDB) and Afreximbank, have unveiled war chest of US$3bn apiece to lessen the economic and social impact of coronavirus on regional member countries and Africa’s private sector.
AfDB raised US$3bn through the issuance of the three-year The Fight Covid-19 Social Bond which was subscribed for by central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors. Bids for the bond exceeded US$4.6bn.
This is the largest US$-denominated Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the bank.
It will pay an interest rate of 0.75% per annum.
AfDB president Akinwumi Adesina said the bank is taking “bold measures” to support African countries.
“This US$3bn Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced,” Adesina said.
“We are here for Africa, and we will provide significant rapid support for countries.”
The order book for this record-breaking bond highlighted the scale of investor support, which the African Development Bank enjoys, said the arrangers.
“As the Covid-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
George Sager, Executive Director, SSA Syndicate, Goldman Sachs said AfDB has been able to brave the capital markets in order to secure invaluable funding in “a time of unprecedented market volatility”.
“Not only that, but in the process, delivering their largest ever USD benchmark. A truly remarkable outcome both in terms of its purpose but also in terms of a USD financing,” Sager said.
AfDB established its Social Bond framework in 2017 and raised the equivalent of US$2bn through issuances denominated in Euro and Norwegian krone. In 2018, AfDB was designated by financial markets, ‘Second most impressive social or sustainability bond issuer” at the Global Capital SRI Awards.
Coronavirus, also known as Covid-19, began in China’s Hubei province in December and has ravaged global economies.
Coronavirus cases were slow to arrive in Africa, but the virus is spreading quickly and has infected nearly 3,000 people across 45 countries, placing strain on the already fragile health systems.
A recent report by the Economic Commission for Africa showed the virus will lead to the disruption of global supply chains, demand side shocks in oil, tourism, remittances and job losses due to a slowdown in investments.
The report estimated that the continent’s oil exporters will lose revenue of up to US$65bn.
It projected that the virus would lead to unanticipated increases in health spending of up to US$10.6bn.
Last week, Africa’s trade finance bank, Afreximbank, announced a US$3bn facility to help African countries deal with the economic and health impacts of the Covid-19 pandemic.
The Pandemic Trade Impact Mitigation Facility will provide financing to assist Afreximbank member countries to adjust in an orderly manner to the financial, economic and health services shocks caused by the virus.
It will support member country central banks, and other financial institutions to meet trade debt payments that fall due and to avert trade payment defaults.
Afreximbank president Benedict Oramah said the Covid-19 pandemic is projected to cost the global economy up to US$1 trillion and to result in a significant 0.4% decline in global GDP growth, which is expected to drop from 2.9% in 2019 to 2.5% in 2020.
“A rapid and impactful financial response is required to avert a major crisis in Africa,” he said, pointing out that “Africa is exposed in many fronts, including significant declines in tourism earnings, migrant remittances, commodity prices and disruption of manufacturing supply chains.”
Zimbabwe is a shareholder in AfDB and Afreximbank and has recorded eight positive cases of Covid-19. It began a 21-day lockdown on Monday to help contain the virus.
Experts warn that Covid-19 would sink the already struggling Zimbabwean firms.
