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Balancing the ‘E’ and ‘S’ in Environment, Social and Governance (ESG) crucial to sustaining liquidity and resilience

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2 years ago

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Loan Market

The loan market had a challenging 2021, with volumes in the sub-Saharan African market falling to just $28bn, in 110 deals, from about $40bn in each of 2020 and 2019

JOHANNESBURG, South Africa, July 13, 2022/APO Group/ — 

By Miranda Abraham, Co-Head: Loan Syndication at RMB in London (www.RMB.co.za)

Sub-Saharan Africa’s loan market had a slow start to this year but is showing resilience and is set to continue to grow, offering favourable opportunities for the region’s sovereign and corporate borrowers as well as for investors.

The market dynamics are being shaped by global geo-political and macro-economic factors, particularly the ongoing war in Ukraine and rapidly rising inflation and interest rates in advanced markets. They are shaped too by the dynamics between the private loan market, and the public bond markets.

The loan market had a challenging 2021, with volumes in the sub-Saharan African market falling to just $28bn, in 110 deals, from about $40bn in each of 2020 and 2019. Initially growth appeared to be picking up this year. However, Russia’s invasion of the Ukraine cast a pall over markets globally, amidst high levels of uncertainty and supply chain disruptions which forced central banks to act aggressively to attempt to contain inflationary pressure.

The first four months of 2022 saw volumes of $5.4bn in 35 deals in the sub-Saharan African loan market. Borrowers and potential borrowers who had become accustomed to more than a decade of low interest rates became reluctant to commit, as the environment became more hawkish. However, many have now realised that interest rates are likely to go only one way and that’s up. It is increasingly evident that borrowers need to take advantage of any opportunities to tap the market sooner rather than later.

The private loan market still offers borrowers the flexibility to customise their loans in ways that the public markets cannot

Some borrowers were waiting early in the year to refinance existing loans in the belief there was no pressure, and they could wait and see. However, the deteriorating global environment has underlined the fact that there is never going to be a perfect time to launch a loan into the market – and that it’s worth taking the gap when you can.

At the start of the Russia-Ukraine crisis some borrowers turned to their banks for bridge finance and underwritten loan financing, as an alternative to the bond market. That helped to sustain the resilience in the loan market, at a time when levels of uncertainty were high, and the bond market was almost closed to emerging market issuers. The bond market for sub-Saharan issuers has had sporadic windows for issuance but is still not the easiest to navigate in challenging times. In February, RMB led a successful $750m Eurobond issue for Bank of Industry, Nigeria’s largest development finance institution, just before the onset of the Russia-Ukraine crisis. And then in April, RMB led the issuance of the South African Sovereign’s $3bn bond.

However, the private loan market still offers borrowers the flexibility to customise their loans in ways that the public markets cannot. And it provides a useful gateway especially for those borrowers who have yet to build a track record that would enable them to tap the public market at attractive rates. The loan market has remained incredibly resilient despite a tough environment. One challenge it is facing, however, is that tenors are being stretched to unprecedented levels. Sovereigns are now looking to do 7-10 year financing, where only a few years ago Kenya was doing its first three year issuance. In debut deals, shorter tenors may well make for more successful execution of deals. That is especially so given that many investors in this market are reluctant to lend for more than 3-5 years, so the more borrowers try to stretch the tenors, the smaller the pool of liquidity available to them.

One of the themes that is increasingly shaping liquidity conditions in the market is the growing importance of ESG (environment, social and governance) for investors. There is some tension between the approach of advanced market investors and the needs of developing markets borrowers. Many African economies are underpinned by energy products such as oil and gas, on which communities are heavily dependent. Consequently, full, immediate compliance with the ‘green’ environmental standards imposed by advanced country financiers would undermine these countries’ development.

For sub-Saharan Africa, and for emerging markets more generally, the ‘social’ in ESG is just as compelling a need as the “E” in the short to medium term.  And that raises the question for investors of what the right thing is to do in relation to countries which are in desperate need of industrialisation and economic empowerment and are being hardest hit by the fallout from the Russia-Ukraine crisis and its impact on food and fuel prices.

The market has begun to see a trend of addressing the ‘S’ as well as the ‘E” in ESG in Africa. Working with clients and investors to strike that difficult balance will be key to sustaining liquidity and resilience in the loan market.

Distributed by APO Group on behalf of Rand Merchant Bank.

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Ministers among hundreds of energy-sector leaders to attend AOW event

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October 4, 2024

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The event kicks off with an invitation-only ministerial symposium focused on the theme of “Fostering innovation, attracting investment, and promoting sustainable growth in the oil, gas, and energy sectors”

CAPE TOWN, South Africa, October 4, 2024/APO Group/ — 

AOW: Investing in African Energy (https://AOWEnergy.com) – Africa’s leading oil, gas and energy event – has confirmed attendance for more than 80 ministers and senior officials, representing African governments, energy departments and regulators at next month’s event.

These influential stakeholders will be among the more than 1 600 senior delegates and industry leaders who will be attending the event to develop policy, share discoveries, secure investment, and shape Africa’s energy future.

The event kicks off with an invitation-only ministerial symposium focused on the theme of “Fostering innovation, attracting investment, and promoting sustainable growth in the oil, gas, and energy sectors.”

Given the recent major oil-and-gas discoveries across Africa, the energy transition and major geopolitical events, it is clear that the energy sector needs positive intervention

Among the officials and government ministers attending will be energy leaders from South Africa, Nigeria, Namibia, Cote d’Ivoire, Mozambique, DRC, Ghana, Kenya, Madagascar, Eswatini, Uganda, CAR, Guinea Conakry, Guinea Bissau, Ethiopia, The Gambia, Gabon, Malawi, Morocco, Zanzibar, Liberia, Senegal, Congo Brazzaville and Sierra Leone.

In addition, the event will feature high-level delegations from numerous national oil companies, as well as multilateral bodies including the African Union, (AU), African Energy Commission (AFREC), African Petroleum Producers’ Organization (APPO) and the Southern African Power Pool (SAPP).

AOW will see these energy leaders networking with C-suite executives and decision-makers from more than 760 top energy companies at daily networking events, to discuss insights, forge new relationships, and negotiate major energy deals.

“We are so excited to see the calibre of delegates at this year’s AOW event,” says Chief Executive Officer of Sankofa Events, Paul Sinclair. “Given the recent major oil-and-gas discoveries across Africa, the energy transition and major geopolitical events, it is clear that the energy sector needs positive intervention. The high-powered attendance proves AOW is a key platform to enable this intervention.”

Key themes to be discussed at this year’s AOW will be sustainable upstream development; expanding gas value chains; renewables and new energies; adoption of best-in-class technologies; and access to finance.

AOW: Investing in African Energy will culminate in a special anniversary party at Groot Constantia Vineyard to celebrate 30 years of the AOW event.

Distributed by APO Group on behalf of AOW: Investing in African Energy.

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Afreximbank approves US$20.8 million for Starlink Global’s cashew factory project in Lagos

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October 4, 2024

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The facility is expected to promote value addition which will guarantee increased earnings to the company while also fostering the creation of about 400 new jobs

CAIRO, Egypt, October 4, 2024/APO Group/ — 

African Export-Import Bank (Afreximbank) (www.Afreximbank.com) has approved a US$20.8 million financing facility for Nigeria-based Starlink Global & Ideal Limited to enable the company construct and operate a 30,000-metric tonne per annum cashew processing factory in Lagos.

We are delighted at this partnership which promises to deliver significant impact on employment in Nigeria

According to the facility agreement signed in on July 22, 2024, Afreximbank will provide the funds in two tranches with the first tranche of US$7.48M going toward capital expenditure for the construction of the factory and the second, totalling US$13.25M to be deployed as working capital for the operations of the factory.

The facility is expected to promote value addition which will guarantee increased earnings to the company while also fostering the creation of about 400 new jobs once the factory becomes operational. It is also expected to support about 40 small and medium-sized enterprises.

Commenting on the transaction, Mrs. Kanayo Awani, Executive Vice President, Intra Africa Trade and Export Development, Afreximbank, said that by supporting Starlink Global to establish a modern processing facility, Afreximbank is making it possible for Africa to add value to its agro-commodities, thereby facilitating exports and subsequent inflow of much-needed foreign exchange into the continent.

“We are delighted at this partnership which promises to deliver significant impact on employment in Nigeria. It will contribute to value creation and to the development of the local community while also improving the lots of smallholder farmers and small business suppliers that will work with Starlink across the value chain,” Mrs. Awani added.

Distributed by APO Group on behalf of Afreximbank.

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Sonangol to Lead Decarbonized Oil & Gas (O&G) Development, Says Angolan National Oil Company (NOC) Head

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October 4, 2024

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Participating in an on-stage interview at Angola Oil & Gas 2024, Sonangol CEO Sebastião Gaspar Martins emphasized that oil and gas remains a core focus for the national oil company

LUANDA, Angola, October 3, 2024/APO Group/ — 

Angola’s national oil company Sonangol reiterated its commitment to driving sustainable hydrocarbon development during the Angola Oil & Gas (AOG) conference this week. Speaking during an “In-Conversation with” session, Sonangol CEO Sebastião Gaspar Martins stated that the company will not abandon oil and gas, but rather advance decarbonized oil and gas development.

We are looking at opportunities in the gas sector and have identified the right partner to develop non-associated gas

By investing in upstream oil and gas production while prioritizing low-carbon projects, Sonangol aims to boost national crude output, while diversifying and decarbonizing the industry. The NOC is focusing efforts on non-associated gas development, as well as alternative energy sources such as solar.

“We are looking at opportunities in the gas sector and have identified the right partner to develop non-associated gas. Gas produced from Angola LNG will be used for the production of fertilizer and we are evaluating the utilization of gas in the south of the country, linking gas with steel industries. We also have a blue carbon project, linked to the reduction of carbon through the plantation of mangroves. We have one area in Luanda and have identified four additional areas for this,” stated Gaspar Martins.

Sonangol has undergone transformation in recent years: following the creation of the National Oil, Gas & Biofuels Agency (ANPG) in 2019, Sonangol transferred its role as national concessionaire and regulator. This transformation has aimed to make Sonangol more competitive and strengthen its capacity as an upstream operator. Concurrently, the government is partially privatizing the NOC, with privatization set to be complete in 2026. This process will enhance financial capacity, allowing Sonangol to drive new upstream projects forward.

“The transformation of Sonangol started several years ago, when we passed the regulatory, concessionaire role to the ANPG. At the time, we transferred almost 600 employees to the ANPG. After that, Sonangol underwent a restructuring program where we created five core business units from 36 different entities – starting with exploration and production. We want to go public, but we want to do it properly. So, we are currently going through all the processes to do this,” stated Gaspar Martins.

Distributed by APO Group on behalf of Energy Capital & Power.

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