African sovereign debt poses challenges for ECA activity

(TFX News, London, 31 May 2023) The spectre of increasing sovereign debt has the potential to swamp future export finance deals and projects in several African jurisdictions. The changes to the OECD Arrangement on officially supported export credit financing put forward in March this year has been ‘music to the ears’ of all those in the industry calling for fundamental reform. We expect to hear more detail from the OECD in July, but from the provisional announcement it looks like tenors on certain transactions will be extended and repayment schedules relaxed for deals in certain sectors, giving greater impetus to deals and projects in the energy transition arena as well as providing a boost to social infrastructure transactions. Many African markets are seen as being challenging largely because of a range of serious risks – and the main ones are often cited as: the debt trap, coups, civil war, terrorism and political risk. In fact, at a recent TXF conference I learned that there are currently 68+ armed conflicts taking place across Africa – when I had originally estimated 40. This announcement has been strongly welcomed by those working in emerging markets, and particularly those active in African markets where so much basic infrastructural and social project work is required ... and where ECA-backed finance will be key.