COCOBOD’s $1.5b facility largest non-oil deal in sub-Saharan Africa – Standard Bank

The $1.5 billion pre-export finance facility the Ghana Cocoa Marketing Board (COCOBOD) secured in September 2012 is said to be currently the largest non-oil trade financing in sub-Saharan Africa.

The facility, which was fully underwritten by the Initial Mandated Lead Arrangers, was oversubscribed and banks’ commitments were scaled back following a successful syndication.

According to the Standard Bank Group which assisted COCOBOD to secure the facility, the state-owned agency is using the facility to purchase cocoa beans in the 2012/13 cocoa season.

“The facility is currently the largest non-oil deal in sub-Saharan Africa,” the bank said March 5, 2013 when it wrote about trade financing gaps in Africa as international banks pull back their resources.

It therefore asked African banks to be active in trade financing on the continent as international commodity traders are turning to “African banks to finance trade transactions as the global economic slowdown, Eurozone debt crisis and tougher capital requirements force international banks to pull back their lending in Africa.”

Standard Bank’s Global Head of Structured Trade and Commodity Finance, Mr Craig Polkinghorne, says the pull-back forced on global banks is happening at a time when Africa’s trade continues to grow across a broad front of geographies and sectors.

According to Polkinghorne, the scale of trade finance opportunity is substantial when considering that Africa’s exports alone grew to $500-billion in 2012 from $445-billion in 2011.

“It is something of a phenomenon that the general tightening of global credit continues to curtail availability of commodity trade finance from the traditionally dominant players, even as African countries ramp up trade relations with the fastest-growing economies,” he said.

Many international banks are said to have reviewed their risk appetite and have withdrawn from, or limited their exposure to trade finance in Africa, but Mr Polkinghorne believes that the funding gap has consequently “opened up, creating an opportunity for other players to fill that vacuum.”

“This has created great opportunities for African banks to be more active in trade finance because they have strong balance sheets, the necessary capital and liquidity, and risk appetite. For domestic currency transactions they also have competitive funding costs compared to global counterparts,” he says.

Polkinghorne indicated that as European and US demand has continued to decline, the liquidity from African banks has helped to deepen intra-African trade and increase trade flows between the continent and other emerging market regions.”

He indicated that China is increasingly accounting for a significant portion of Africa’s trade compared to its trade with the rest of the world.

Trade with China has grown from 10% of overall trade in 2008 to 18% in 2011, according to the Standard Bank.

By Ekow Quandzie