Exim Bank's Financing Initiatives and Activities in Africa
Mr. Debasish Mallick, Deputy Managing Director, Export-Import Bank of India

Africa is positioning itself as a key partner in the global arena, with a collective GDP of around USD 2 trillion and a population base of more than 1 billion, offering a great market potential. Africa is estimated to present business opportunities worth USD 2.6 trillion per year by 2020 and consumer spending amounting to USD 1.4 trillion.

While Africa witnessed an annual GDP growth rates in excess of 5% over the last decade, economic growth of the region, however, has not been fully translated into shared prosperity and better livelihoods for the majority.

India-Africa trade has grown by almost 1.6 times in the last 10 years. India’s exports have grown from USD 146 bn in 2007 to USD 260 bn in 2016. Imports on the other hand has increased from USD 218 bn to USD 356 bn during the same period.

Exim Bank’s financing initiatives and activities in Africa

Countries in the African region constitute as a focus region for Exim Bank and are a critical component of the Bank’s strategy is to promote and support two-way trade and investment flows. Exim Bank has representative offices in Johannesburg (South Africa), Addis Ababa (Ethiopia) and Abidjan (Cote d’Ivoire), which play an important role in facilitating economic cooperation with the African region. The representative offices interface with various institutions, as well as Indian missions in the region. Exim Bank plays the role of coordinator and facilitator for the promotion of Project Exports covering overseas industrial turnkey projects, civil construction contracts, supplies as well as technical and consultancy service contracts. Exim Bank through its number of financing, advisory and support programmes has been striving to facilitate and promote India’s trade and investment relations with the African region, in line with Government of India’s (GOI) initiatives.

Lines of Credit (LOCs) to Africa

Exim Bank’s LOCs extended to Africa supplement the “Focus Africa” programme of the GOI that focus on priority sectors, helps in building mutual cooperation and benefit. Besides these operating LOC extended at the behest of Government of India, Exim Bank also extends its own commercial Lines of Credits to various financial institutions and other entities in Africa. As on March 31, 2017, the total number of operative LOCs to Africa stood at 153 extended to 44 countries and amounting to USD 7.63 billion. These LOCs have been utilized for priority sectors in Africa, such as railway rehabilitation, setting up of industrial & IT parks, cement factories, vocational training centres, irrigation projects, cotton processing plants, sugarcane crushing plants, fertilizer plants, rural electrification projects, hydro-power projects, exports of tractors and agricultural equipment, and power transmission. Institutions in Africa benefitting from Exim Bank’s LOCs include Afrexim Bank, ECOWAS Bank for Investment & Development (EBID), PTA Bank, West African Development Bank (BOAD), Nigerian Export Import Bank and Indo-Zambia Bank.

Buyer’s Credit under National Export Insurance Account (BC-NEIA) to Africa

To boost large scale project exports from India viz. turnkey, construction & consultancy projects, sovereign governments and government-owned overseas entities can avail the Buyer’s Credit facility for financing import of projects from India on deferred payment terms. Under the BC-NEIA programme, till May 15, 2017, Exim Bank has sanctioned loans aggregating USD 2.84 bn for 23 projects valued at USD 3.07 bn. Out of the above, loans aggregating USD 1.80 bn for 15 projects valued at USD 1.90 bn have been sanctioned to African countries with projects including power transmission and distribution network in Cameroon, Ethiopia, Senegal and Zambia; integrated LPG facility at bitumen storage facility in Mozambique; supply of vehicles and spares to Cote d’Ivoire, Senegal, Tanzania and Zimbabwe; construction of railway line in Ghana; supply of blast hole drill and mining equipment to Zimbabwe and city de-congestion project in Zambia. The Bank has also given in-principle commitments for supporting 31 projects aggregating USD 4 bn under BC-NEIA to African nations.

Buyer’s Credit-Commercial

Exim Bank also extends Buyer’s Credit-Commercial to overseas Borrowers, under which Exim Bank facilitates Indian exports by way of extending credit facility to the overseas buyers (other than sovereign government and parastatal entities) for financing their imports from India, based on available securities. The facilities are generally extended for long term. As on May 15, 2017, the Bank has sanctioned loans for an aggregate amount of USD 310 mn for 10 projects, in sectors including oil & gas, fertilizer, cement, steel, hydro, wind and peat-based power. Out of the above, loans aggregating USD 216 mn for 5 projects have been sanctioned to African countries, with projects including petrochemical and fertilizer complex in Nigeria, cement plants in Ghana and Cote d’Ivoire, wind power in Mauritius and peat-based power in Rwanda.

Non-funded facilities

Exim Bank further provides assistance by way of non-funded facilities including Bank guarantees such as Bid Bond Guarantee (BBG), Advance Payment Guarantee (APG), Performance Guarantee (PG) and Retention Money Guarantee (RMG) to Indian project exporters to secure and facilitate execution of export contracts or deemed export contracts. As on May 15, 2017, out of the total guarantee facilities of USD 1,236 mn, Exim Bank has provided guarantees to the tune of USD 231 mn for project exports in Africa.

Finance for Joint Ventures Overseas

Exim Bank supports Indian companies in their endeavour to globalise their operations, through joint ventures (JVs) and wholly owned subsidiaries (WOS). Such support includes loans and guarantees, equity finance and in select cases direct participation in equity along with Indian promoter to set up such ventures overseas. In the African region, the Bank has supported several such ventures in countries such as South Africa, Kenya, Mauritius, Nigeria, Zambia, Morocco, Uganda and Tanzania, in areas such as pharmaceuticals, chemicals, fertilizers, textiles, agro-based products, plastics & rubber products, electronics, engineering goods, cycles and telecom systems. These ventures serves to promote value addition, as also contribute to capacity building and capacity creation in host countries.

Program for Financing Creative Industry

India is the 8th largest exporter of creative goods in the world and the growth rate in 2010 was the highest among the top 10 exporters. However, India’s share in export of creative goods was USD 13.8 billion as against China’s exports of USD 97.8 billion. Creative industries include Arts, Crafts, Design, Film & Video, Music, Publishing, Interactive leisure software, Architectural services, Advertising, Video games, Animation, etc. Nigerian Export-Import Bank (NEXIM Bank) had commissioned Exim Bank to undertake an assignment to design, develop, and implement a programme on Film Financing for expanding its exposure in financing films, especially those having potential to earn foreign exchange. Exim Bank has also facilitated capacity building training programmes for select officials of NEXIM Bank, and organized study visits to major film production house/facilities/ studios in India. NEXIM Bank has launched a film financing programme based on Exim Bank’s consultancy.

Association with African Development Bank (AfDB)

India is a member of the African Development Bank (AfDB) Group. Exim Bank works very closely with AfDB and has an active programme which offers a range of information, advisory and support services to Indian companies to enable more effective participation in projects funded by multilateral funding agencies, including AfDB. Exim Bank assists Indian companies in projects supported by AfDB by not only fund and non-fund based assistance, but also by providing advance alerts on upcoming opportunities. With support from Exim Bank, Indian project exporters have secured a number of overseas contracts in Africa in sectors such as power, telecommunications, transport, water supply & sanitation. Exim Bank and AfDB have also signed an agreement for co-financing projects in Africa. The agreement envisages joint financing of projects (priority being given to support projects of small and medium enterprises) in regional member countries of AfDB. Exim Bank also organizes Business Opportunities seminars in Projects funded by AfDB across various centres in India.

Kukuza Project Development Company (KPDC) in Africa

Africa is a region of opportunities, as the continent is receiving plenty of investments in the infrastructure space. The PPP structure is slowly getting popularised by the national governments, increasing the interest of the private sector in infrastructure development. Exim Bank has been playing a pivotal role in various initiatives in Africa such as KPDC, which will encourage in building Indian project exports while simultaneously aiding the furtherance of economic and political ties between India and Africa. ‘Kukuza’ has been incorporated in Mauritius in July 2015. ‘Kukuza’ in Swahili means ‘a cause to growth’. Reflecting the name, KPDC is expected to provide specialist project development expertise to take the infrastructure project from concept to commissioning in the African Continent.

Exim Bank’s Engagements in ITC’s ‘Supporting India’s Trade and Investment Preferences for Africa’ (SITA) Project

On March 09, 2014, Department for International Development (DFID) mandated the International Trade Centre (ITC), United Kingdom, to design and implement a project, called ‘Supporting India’s Trade Preferences for Africa’ now called ‘Supporting Indian Trade and Investment for Africa’ (SITA). SITA is a six-year (2014-2020) project that aims at promoting exports from five East African countries – Ethiopia, Kenya, Rwanda, the United Republic of Tanzania and Uganda – to India through investment and skills transfer from the Indian side. Exim India had entered into an MOU with ITC in Geneva on March 26, 2014, under which it was associated with ITC’s SITA initiative.

In Sum, the various financing mechanisms and advisory and consultancy services that Exim Bank extends serve to promote value addition, technology transfer, generate local employment as also contribute to capacity building and capacity creation in host countries.

Contributor’s Profile

Mr. Debasish Mallick was appointed by the Government of India as Deputy Managing Director of Export-Import Bank of India on 21st July 2014. Prior to this appointment, Mr. Mallick was the Managing Director and CEO of IDBI Asset Management Company Ltd., where he had intensive and extensive experience in dealing in the Equity and Debt Capital markets in India. He had a post graduate in Economics and a Certified Associate of Indian Institute of Bankers.

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