Global food prices increase by 1.1% in January 2022
The race to rebuild the global economy after the lockdowns is picking up speed. The rise in inflationary tendencies, the worrying food insecurity, the failure of channel management systems, the sharp increase in the number of companies going bankrupt and the alarming infrastructure deficit are the recent consequences of the COVID-19 outbreak.
As a result, development agencies and government economic managers have acted at global and regional levels to revitalize booming economies. Reconstruction aid and financial instruments are being procured to counterbalance the intervention strategies developed in the markets to promote a speedy recovery from the various shocks of the virus outbreak.
Africa, home to over 1.2 billion people, is struggling to meet its commitments to meet the food needs of its growing population and to plug the massive infrastructure deficit evidenced by erratic electricity supplies, deteriorating road transport systems, low internet penetration levels, and rising unemployment rates and faulty communes in its 30.3 million km2 area.
According to the German Institute for Global and Area Studies (GIGA), the lockdown regulations implemented across the African continent led to drastic short-term income losses for informal workers, as very few of the workers had access to social security. Foreign direct investment (FDI) also fell sharply as trade on the continent fell dramatically, while the government’s ability to keep the economy afloat weakened and state managers were left with little or no means of support.
A speedy recovery from the continent’s deep deficits would require strong public-private partnerships at the socio-economic level. The private sector, which provides up to 90% of jobs in economies and plays an active role in implementing key growth strategies, is a powerful driver of the national and regional economic agenda. A faster, large-scale post-lockdown recovery is hard to imagine without effectively engaging the private sector.
Absa, a pan-African financial institution, is leading private sector interventions to spur a faster recovery in trade, investment and infrastructure development. The bank is using its broader operational capability, tailored offerings and experience on a global scale to support the various post-lockdown recovery efforts being undertaken by some state actors.
One of Absa’s latest moves to support efforts to rebuild Africa’s economy is a collaboration agreement with Proparco, a French development finance institution, to help SMEs recover from the shocks of the lockdown.
The cooperative business development agreement aims to raise and disburse US$20 million to SMEs operating in sectors such as construction, manufacturing, tourism and retail, which have been hard hit by the Covid-19 crisis, particularly in South Africa.
By supporting the SME segment by providing accessible loan instruments, Absa is tackling a critical issue on the continent.
Of course, the African SME segment has played a significant role in the continent’s impressive average growth of 5% over the past decade. The segment has been a convenient lever to attract investment to the continent over the years. It also outperformed other segments in creating jobs for the population and tax revenue for various governments.
Therefore, by providing a support framework for the segment through collaborative efforts, Absa is leveraging its impressive development network to strengthen a key site of economic recovery in the post-lockdown operating environment.
Speaking about the cooperation agreement between Proparco and Absa, Parin Gokaldas, Group Treasurer at Absa said: “The agreement also allows Absa to provide financial support to SMEs, which are an important part of the local economy, while recovering from the effects of the Covid19 pandemic . We are particularly pleased with the agreement as we view the relationship with Proparco, a major development financier in Africa, as strategically important.”
For Emmanuel Haye, Associate Head of Financial Institutions Debt Group for Africa and the Middle East at Proparco: “…We are delighted to begin and be a part of this partnership with Absa Bank, a key player with a strong pan-African presence a much-needed counter-cyclical role.”
Similarly, Absa was recently involved in raising a $400 million syndicated loan for Africa Finance Corporation (AFC), a leading infrastructure solutions provider targeting critical infrastructure development on the continent. The pan-African bank, through its Corporate and Investment Banking division, along with a number of other global banks, acted as bookrunner and designated lead arranger to help AFC secure the development loan.
Participation in the syndicated loan agreement to support infrastructure development in Africa is another significant intervention effort that speaks to the Bank’s development focus.
Banji Fehintola, Senior Director & Treasurer at AFC, stated: “This loan will be instrumental in filling the infrastructure gap we are facing on this continent, especially following the damaging effects of the Covid-19 pandemic. We remain committed to partnering with experienced, like-minded organizations to provide sustainable finance for infrastructure development in Africa while achieving the lowest borrowing costs of any institution on the continent.”
It is precisely solid investments in infrastructure development that enable trade and create a dynamic environment that drives companies. It provides millions of construction and maintenance jobs to the local population every year.
According to a statement recently released by the AFC, the syndicated loan will support Africa’s post-pandemic recovery “through critical infrastructure development.” Africa undoubtedly needs strong support for infrastructure development to improve road and freight network standards, broadband penetration and the modernization of the continent’s power infrastructure.
Sadiq Abu, Chief Executive Officer of AbsaNigeria, said: “As a pan-African financial institution dedicated to deepening growth and creating shared value, Absa consistently applies its extensive knowledge of the operating environment to engage both public and private development stakeholders in the… Promote faster post-lockdown to support economic recovery on the continent.”