Africa’s debt dilemma: The role of ECAs and new strategies

(Trade Finance Global, London, 15 February 2024) The African economy has suffered three major shocks in quick succession, namely, the COVID-19 pandemic, spillovers from geopolitical tensions and supply chain disruptions. This, coupled with widening fiscal deficits, exchange rate volatility and natural disasters have eroded the fiscal space of African economies and increased debt levels. The rising debt in Africa and the high risk of sovereign default hampers the activities of export credit agencies (ECAs) on the continent. However, this challenge has also presented opportunities for flexibility, for example, cover for down payments, higher percentages of cover for both political and commercial risks, as well as longer tenors. The continent facing debt issues, continues to be a major playing field for Export Credit Insurance Corporation of South Africa (ECIC SA), with Ghana accounting for 51.4% of total exposure, followed by Zimbabwe and Ethiopia at 23.0% and 7.7%, respectively. From an industry viewpoint, the ECIC portfolio has shifted away from its traditional mining focus. Currently, power generation leads as the top sector, accounting for 45.8% of total exposure, with construction following closely at 40%.