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FirstRand Bank receives US$300 Million to Finance Projects Across Africa.

OTHER NEWS AFFECTING PROJECTS & PM

12 January 2013 – The African Development Bank (AfDB) has approved a seven-year multi-currency line of credit equivalent to USD 300 million to FirstRand Bank Limited (FRB) of South Africa to finance a wide range of projects in local currencies and across Africa. The loan was announced in mid-December 2012.

firstrandAccording to the AfDB announcement, most African countries are characterized by low discretionary rates of domestic savings. As a result, the intermediation capacity of the financial sectors is limited, leading to the gap currently being filled with borrowings denominated in foreign currency. This introduces a currency mismatch in the financial systems’ balance sheets constituting a potential source of instability.  Thus, there is a need for stable sources of local currency financing.

The line of credit from the AfDB will help fill this gap by making available medium-term local currency financing to sub-borrowers across Africa. The line of credit will be drawn in multiple African currencies including the Nigerian Naira, the Kenyan Shilling, the Zambian Kwacha, the Ghanaian Cedi, the Mozambique Metical and the Tanzanian Shilling.

Further, in line with the AfDB’s mandate to contribute to the development of local capital markets, it is expected that the local currencies will be mobilized through the establishment of bond issuance programs in the domestic capital markets and the issuance of local currency denominated bonds to meet the specific local currency requirements of FRB. These programs are expected to complement existing efforts to develop Africa’s local capital markets, thereby providing a strong catalytic and demonstrative effect.

The line of credit to FRB will help mobilize significant financial resources in the countries where its proceeds will be deployed, contributing to economic development and employment opportunities.

Timothy Turner, Director of the AfDB’s Private Sector Department said: “With this line of credit, the AfDB is introducing a new and innovative form of local currency financing. This structure can be replicated by other banks in Africa to gain access to funding in African currencies thereby reducing unnecessary currency mismatches and deepening the local capital markets.”

Andries du Toit, FirstRand Group Treasurer said: “We are very pleased with this loan facility as it further deepens our relationship with AfDB, and provides FirstRand and our clients access to in-country local currency throughout the African continent. This innovative solution will certainly contribute to growth in corporate activity, which in turn supports our own African expansion strategy.”

The African Development Bank (AfDB) is a regional multilateral development finance institution established in 1964 to mobilize resources towards the economic and social progress of its Regional Member Countries (RMCs). It is headquartered in

Abidjan (Côte d’Ivoire). Since beginning operation in 1966, the Bank has become a key player in promoting economic and social development in African states.  The AfDB provides financing for programs and projects across the continent.  For more information, visit www.adbg.org.

Source: African Development Bank