UK Export Finance, a government agency that facilitates funding for suppliers and international purchasers of British products and services, reported supporting transactions in francophone Africa totaling £1 billion ($1.3 billion) by the conclusion of the 2023-2024 financial year, a significant increase from just £3 million in 2017-2018, as noted by Steven Gray, the agency's West African regional lead.
These nations now account for approximately 13% of UKEF’s portfolio on the continent.
“Traditionally, one might assume that the language barrier would hinder access to these francophone markets for the UK,” Gray remarked during an interview in Accra, Ghana’s capital. “While we may converse in various languages, we share a common language in business.”
For over a century, UKEF has aimed to stimulate global demand for British goods and services by providing government-backed loans, insurance, and additional support. The UK is positioning itself for growth at a time when the French public investment bank Bpifrance is facing challenges in its relationships with some former colonies. Concurrently, China’s export credit agency Sinosure is becoming increasingly influential.
Last year, the Treasury increased UKEF’s global credit exposure limit from £50 billion to £60 billion. “The agency has been actively broadening its reach,” Gray stated.
The UK generally experiences a global trade deficit, and following its exit from the European Union, its largest trading partner has shown reduced interest. This has been somewhat balanced by a surplus with other countries, leading to an overall deficit of £33 billion last year, according to a parliamentary report.
In the financial year ending March 2024, UKEF facilitated £1.3 billion in new business across Africa, making it the agency's largest market for new business, followed by the Middle East, as indicated in the agency’s annual report.
The organization has recently supported initiatives such as a £106 million drainage enhancement project in Benin and £68 million in road construction in Togo, both of which are French-speaking countries.
In recent years, significant investments like these have increasingly depended on loan guarantees or credit insurance, as rising interest rates have made dollar borrowing more costly.
Both UKEF and Bpifrance are gearing up for upcoming events in Africa to establish local partnerships in the months ahead.
“We have not reduced our support for transactions,” stated Arnaud Floris, head of Bpifrance in Africa, from Abidjan, the commercial capital of Ivory Coast. “We are maintaining a strong momentum.”
Floris emphasized that the agency’s efforts extend beyond merely supporting exports, highlighting initiatives such as providing guidance to the Ivorian government on enhancing support and financing for local businesses. “It’s about how we can generate more value collaboratively,” he remarked. “This is what we have been rapidly advancing over the past five years.”
China’s Sinosure has been instrumental in financing projects that align with the Belt and Road Initiative, a global development strategy that has facilitated over $120 billion in Chinese construction contracts and investments in Africa during its initial decade, as reported by the Green Finance and Development Center at Fudan University in Shanghai.
Unlike the UK and France, which adhere to the regulations set by the Organisation for Economic Co-operation and Development (OECD), China operates under different guidelines. In recent years, the OECD has relaxed rules for Export Credit Agencies (ECAs) to allow them to cover expenses incurred in the recipient countries.
Both UKEF and Bpifrance Assurance Export mandate that a minimum of 20% of a transaction’s value must originate from domestic businesses. In contrast, estimates from law firm Norton Rose Fulbright suggest that Sinosure’s minimum requirement could reach as high as 60% in certain instances. Sinosure did not provide a response to an email inquiry.
Fikayo Akeredolu, a doctoral researcher at Oxford University who has studied Chinese lending practices in Africa, noted, “The guarantees and support provided by China do not conform to conventional commercial standards.” She added, “Sinosure’s primary objective is to ensure the success of the Belt and Road Initiative. It may be more inclined to accept greater risks than other ECAs or to extend more advantageous terms to nations that align with China’s strategic interests.”
Furthermore, some ECAs are now “offering untied loans to foster relationships, thereby enhancing their visibility and significance within the borrowing community,” according to Martin Eyok, head of corporate banking for West and Central Africa at Citibank Senegal, which collaborates with various ECAs.
Eyok also remarked, “Developed nations are increasingly coordinating their efforts by integrating financing, technical expertise, and diplomatic initiatives into a cohesive proposal, which elevates ECA financing in trade negotiations.”