Afreximbank proposes P20bn economic support package
Mbongeni Mguni | Monday November 7, 2022 06:00
Afreximbank president and chair, Benedict Oramah made the announcement on Wednesday while sharing the stage with President Mokgweetsi Masisi during the launch of the Global Expo Botswana.
The offer marks the first time the pan-African trade bank could potentially partner directly with government, as its previous deals in the country have been limited to private sector support.
While Oramah did not specify the type of financial support the bank would make, he said sectors such as rail infrastructure, agriculture and light manufacturing would be targeted.
Other sectors to be targeted include Small to Medium Enterprises and “one or two” locations for the Special Economic Zones initiative.
“Through the country programme, we will, among others, make available to Botswana the Afreximbank Group suite of products,” he said. “In this regard, we will work with your government to create a joint project preparation facility which we can use to develop projects and bring them to bankability.”
It is expected that Afreximbank’s support package, known as a country programme, could include direct loans to government, possible equity in certain projects, grants, technical assistance and potential support in helping government raise capital such as through international bonds.
According to its website, Afreximbank’s country programmes may be designed to “assist a country undergoing economic difficulties or to support the economic development strategy of a country calling for a multiplicity of financing products”.
Masisi’s administration is prioritising a transformation agenda to move away from a reliance on diamond mining and pursue export-led growth anchored on manufacturing, agriculture, tourism and other sectors.
“Whilst trading in commodities has carried us thus far, we recognise that our next growth phase requires us to restructure our economy and develop our value chains, driven by technological transformation,” Masisi told delegates at the Global Expo. “We have a keen interest in developing domestic and regional value chains in sectors such as automotive and components manufacturing, including e-mobility solutions, meat and meat products, fruits and vegetables, leather and leather products, textile and clothing, as well as financial services and pharmaceuticals.”
In a separate interview, Finance minister, Peggy Serame told BusinessWeek that discussions with the bank were at an early stage and details on the nature of support would be finalised in due course.
“It's a pledge of how much they are willing to support Botswana in monetary terms,” she said. “We will agree on how much can be technical assistance, private sector support, projects etc.”
Serame told a 'fireside chat' held after the Global Expo’s official opening that the country was open to assistance from Afreximbank.
“We are looking forward to working with you on finalising the country programme and making sure we benefit and access some of the funds,” she told Oramah. “There’s room for providing the necessary infrastructure to help trade such as roads and railways and there’s a role for the bank in the work we require.”
While Afreximbank has not finalised many deals with the private sector in the country, Oramah revealed that recently, the bank was behind Lucara’s fundraising of $220 million towards the company’s underground mine at the Karowe Mine. The deal was finalised last July.
Botswana has traditionally shunned external financing due to concerns around the sustainability of paying back foreign-denominated debt while budget revenues are largely reliant on the cyclical performance of mining, especially diamonds.
While the country has been able to largely forego foreign-denominated debt by leaning on its strong diamond-backed reserves, these have since been impacted by the COVID-19 pandemic. The reserves are slowly being built up and from a low of P3 billion in December 2020, were last measured at P17 billion, thanks to resurgent diamond receipts.