Absa, Stanbic partner in historic R680m sustainable funding deal
Mbongeni Mguni | Sunday February 18, 2024 04:23
The deal unveiled on Monday was at least two works in its arrangement and represents the first sustainable-linked funding developed in the local market. Sustainable funding refers to financing linked to the borrower’s pursuit or attainment of Environmental, Social, or Governance (ESG) targets.
Typically, such funding is incentivised in terms of the cost of funding and is tightly monitored for impact by the lenders.
The deal comes hot on the heels of Absa Bank Botswana’s listing of the first green bond in the local market, an indication that ESG funding is not only gathering steam in the country but that local institutions are increasingly capable of structuring such transactions.
Onalenna Keseabetswe, head of investment banking at Stanbic, said the transaction was a milestone for the bank and the local market as it comprised financing that was linked to a specific purpose.
“We enter into different funding arrangements but we have never really had the causes of that funding embedded into the covenants,” he said at the signing ceremony.
“We have gone the extra mile to link this funding to sustainability, to women, and the youth, and we will be tracking that year by year. “This moves the viewpoint away from saying we want to do this for the sake of doing it, to rather saying we want to do this for this particular purpose. “We are helping financial inclusion, women and youth empowerment to be more purpose-driven in our funding and this also shows the ability of our banks to work together.” Norsad, a 33-year-old investment and credit firm based in Botswana but focused on Sub-Saharan Africa, will utilize the funding for opportunities in the Rand Monetary Area, which comprises countries such as South Africa, Lesotho, Namibia, and Eswatini. “This is the first transaction of its kind in Botswana, and we believe it will chart a course for similar funding in the country and beyond,” said Norsad CEO, Jon Davies. “We have 33 years of investing; this facility fully supports and allows us to pursue our mandate of sustainable lending in the region.”
Officials involved in the deal told BusinessWeek that the rates from the banks to Norsad would be concessional, allowing the credit firm to extend cheaper funding to its beneficiaries. The cost of funding is linked to Key Performance Indicators around financial inclusion, women and youth empowerment, as well as the annual targets included in the facility. “We started this journey about two years ago, as Absa with Stanbic, to raise funding for Norsad, and we are proud to have extended this facility,” said Botho Phiri, Absa's head of financial instruments.