COVID-19: AfDB unveils US$3bn shock absorber

By Business Reporter

The African Development Bank (AfDB) has raised US$3bn as it moves to lessen the economic and social impact of coronavirus on regional member countries and Africa’s private sector.

The money was raised through the issuance of the three-year The Fight Covid-19 Social Bond which was subscribed for by central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors. Bids for the bond exceeded US$4.6bn.

This is the largest Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75% per annum. 

AfDB president Akinwumi Adesina said the continent faces a critical time to address the challenges caused by coronavirus.

“The African Development Bank is taking bold measures to support African countries. This US$3bn Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced,” Adesina said.

“We are here for Africa, and we will provide significant rapid support for countries.”

The order book for this record-breaking bond highlights the scale of investor support, which the African Development Bank enjoys, said the arrangers.

“As the Covid-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.

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George Sager, Executive Director, SSA Syndicate, Goldman Sachs said AfDB has been able to brave the capital markets in order to secure invaluable funding in “a time of unprecedented market volatility”. 

“Not only that, but in the process, delivering their largest ever USD benchmark. A truly remarkable outcome both in terms of its purpose but also in terms of a USD financing,” Sager said. 

AfDB established its Social Bond framework in 2017 and raised the equivalent of  US$2bn through issuances denominated in Euro and Norwegian krone. In 2018, AfDB was designated by financial markets, ‘Second most impressive social or sustainability bond issuer” at the Global Capital SRI Awards.

AfDB Treasurer Hassatou Diop N’Sele said: “Our Social bond programme enables us to highlight our strong development mandate to the investor community, allowing them to play a part in improving the lives of the people of Africa. This was an exceptional outcome for an exceptional cause.”

Coronavirus, also known as Covid-19, began in China’s Hubei province in December and has ravaged global economies. 

Coronavirus cases were slow to arrive in Africa, but the virus is spreading quickly and has infected nearly 3,000 people across 45 countries, placing strain on the already fragile health systems.

A recent report by the Economic Commission for Africa showed the the virus will lead to the disruption of global supply chains, demand side shocks in oil, tourism, remittances and job losses due to a slowdown in investments.

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The report estimated that the continent’s oil exporters will lose revenue of up to US$65bn. It projected that the virus would lead to unanticipated increases in health spending of up to US$10.6bn.

On Tuesday, Africa’s trade finance bank, Afreximbank, announced a US$3bn facility to billion facility to  help African countries deal with the economic and health impacts of the COVID-19 pandemic.

The Pandemic Trade Impact Mitigation Facility will provide financing to assist Afreximbank member countries to adjust in an orderly manner to the financial, economic and health services shocks caused by the virus.

It will support member country central banks, and other financial institutions to meet trade debt payments that fall due and to avert trade payment defaults.

Zimbabwe is a shareholder in AfDB and Afreximbank and has recorded 5 positive cases of Covid-19. President Emmerson Mnangagwa recently declared the pandemic a national disaster and banned gathering of more than 50 people to contain the spread of the virus.

Companies are in partial lock down with experts warning that Covid-19 would sink the already struggling Zimbabwean firms.

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