The African Development Bank (AfDB) re-affirmed its intention to boost economic and regional development on the African continent when its Board of Directors approved a $300 million support facility for the Eastern and Southern African Trade & Development Bank (TDB).
In a statement, the AfDB noted that the COMESA regional trade and project finance package consists of a composite funded trade finance and project finance facility, and an unfunded trade finance risk participation agreement (RPA).
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This comes on the heels of the African Continental Free Trade Area (AfCFTA) agreement, which came into force in July 2019; and the Bank’s partnership framework featuring African DFIs, including the TDB, which committed to working together to scale up, speed up, and synergise African development.
The facility’s trade finance component will enhance the TDB’s confirmation capacity, support its rapidly expanding forfeiture business, and help it become a globally acceptable confirming bank.
The project finance component will facilitate the delivery of export-oriented infrastructure, which will promote regional trade within the COMESA region. The facility further demonstrates the Bank’s longstanding and growing partnership with the TDB as a regional development finance institution in pursuit of shared development goals.
In presenting the project to the Board, the Bank’s Director for financial sector development, Stefan Nalletamby, said that the RPA “will enable the Bank and the TDB to share confirmation risk on African issuing banks. This will promote broad-based economic growth on the African continent by making international trade easier. It will benefit no less than 43 financial institutions operating in over 15 regional member countries, catalysing up to $2 billion worth of trade over the three-year period”.
The financing will also scale up intra-African trade, and foster regional integration. The trade finance funding will boost the import-export trade activities of local corporates and SMEs, while the project finance component will support regional infrastructure development, all crucial for the attainment of the Bank’s strategic objectives under the High 5s.
The TDB is a trade and development financial institution for Eastern and Southern African member states. With a balance sheet size of $5.56 billion as of December 2018, the TDB provides trade and project finance for projects in high impact sectors. The TDB’s shareholders include 22 countries in East, North and Southern Africa as well as two non-regional countries. The African Development Bank is a shareholder, alongside other institutional investors.
The project is well aligned with the Bank’s ten-year strategy and cuts across several High 5 priority goals; Integrate Africa, Industrialise Africa, and Improve the quality of life for the people of Africa. It is also in line with the Bank’s operational priorities for the financial sector development strategy, which promotes increased access to finance for small- and medium-sized enterprises as well as widening and deepening African financial markets.