CAPE TOWN - Financial services group Absa and the African Development Bank Group (AfDB) have signed a $250-million (more than R3 billion) risk participation agreement (RPA) which, when fully utilised, is estimated to mobilise over $2 billion (more than R29 billion) worth of trade business over three years.
The RPA was signed on November 12, on the side-lines of the African Investment Forum held in Johannesburg.
The group said this facility, through a 50:50 risk-sharing approach, would help to promote broad-based economic growth on the African continent through increased facilitation of import-export activities of African corporates and small and medium-sized enterprises. It would furthermore increase intra-Africa trade and regional financial integration in line with the AfDB’s High 5 strategic priorities.
The RPA enables Absa and AfDB to equally share the risk of issuing trade finance facilities to African banks who have been unable to access trade finance support, due to a number of multinational banks exiting the continent through de-risking.
“Intra Africa Trade is crucial to harness the potential of Africa, which boasts 60 percent of the world’s arable land and an abundance of resources. AfDB and Absa are financial institutions that are intimately involved in the provision of financial services to support these flows,” said Temi Ofong, deputy chief executive of Absa regional operations and chief operating officer, Absa Corporate and Investment Banking.
Carmel Kistasamy, head, global development organisations at Absa Corporate and Investment Banking said the agreement would benefit many African banks and their clients who have been unable to access trade finance after the 2008 financial crisis.