Effective Financing of Projects in Africa Discussed at AECAS
The topic of financing projects in Africa is the key and, at the same time, the most difficult issue for their successful implementation that requires joining efforts of the representatives of both the Russian financial sector and major Russian companies working in or seeing to expand to Africa, according to Anna Belyaeva, Executive Director of AECAS.
Ms. Belyaeva highlighted two key challenges to successfully fulfil the goal set by the President Vladimir Putin to make a breakthrough in Africa: finding projects and identifying partners to implement these projects, as well as securing the financing of the projects.
She said that the REC group companies (including Roseximbank and EXIAR) play a significant role in the African market by providing comprehensive project finance and insurance facilities to Russian companies, along with Afreximbank, a partner of AECAS and REC on the continent. However, the financial instruments at their disposal are insufficient.
"We understand that the current funding mechanisms are not enough... We have analyzed the experience of European and Western colleagues from developed countries, our direct competitors in Africa: all of them already have mechanisms and funds focused on Africa, while we don’t. We are talking not only about trade and project financing products for which EXIAR can provide insurance support, but also about opportunities related to investments, financing, risk coverage," she said.
The Executive Director of AECAS described the work being done by the Association in this area, including the creation of a Russian public private equity fund in Africa.
"We are also exploring the possibility of involving other, including foreign, financial funds that would be interested in financing Russian projects in Africa," she said. "There is another interesting idea that we are working on together with Russian banks and Afreximbank: the issue of RUB bonds for African issuers on the Russian stock market. This is a new opportunity for raising funds to finance projects, and it is also a good tool for financing Russian contracts in African countries.
Nikita Gusakov, head of the Russian Export Credit and Investment Insurance Agency (EXIAR), part of the REC, said that the African market was a priority for the agency, outlining a number of deals that EXIAR has been involved in on the continent.
"We have the desire and the capacity to finance projects in Africa. In our experience, there are two problems that need to be addressed: the low level of project planning by Russian companies wishing to enter the African market, and the lack of awareness among Russian companies of the opportunities available on the African market," said Mr. Gusakov.
Representatives of major Russian corporations outlined the challenges related to the management of large-scale projects in African countries.
Ilya Kazakov, Deputy CEO of RZD International, explained that the support in terms of a potential source of financing for the project is crucial for the company given the entry threshold for an infrastructure project in Africa of 500 million euros or more.
"The requests for cooperation and the demand for Russian package solutions in Africa do exist, and we are ready to step in and be at the forefront of Russian companies whose products could be integrated into an ongoing comprehensive rail infrastructure project - in other words, we are ready to act as a kind of locomotive that would pull Russian domestic products along with it. But we can only enter the project with a guaranteed source of financing behind us," Kazakov said.
Vladimir Ilyanin, deputy managing director for government affairs at Gazprom EP International, which has a number of successful projects in North Africa, said that most of the challenges of operating in Africa are related to "reaching the solvent demand," and the need to develop infrastructure to meet that demand using your own investment. The future of major infrastructure projects, such as large power plants or pipelines construction, remains uncertain.
Ilya Mokerov, head of OMK's Africa sales department, said that one of the concerns for business is the fact that many African countries face the problem of high debt ratio and are not able to issue state guarantees to support a particular project.
During the meeting, proposals and comments were also made by Mark Patridge and Roman Sukhonosov, Executive Vice Presidents of Gazprombank, Alexander Meshcheryakov, Head of International Business Department of Promsvyazbank, and Alena Yudina, Project Manager for Loan Products for Banks and Financial Institutions at Roseximbank.