Financial partners are key to ATI’s business model.
Be it reinsurers or banks, without these important allies, we would not be able to support African governments to the same level – helping to secure preferential loans that translate to improved transparency, providing a pathway to better governance and projects that meet international best practice and governments’ development objectives. This section highlights some of these silent heroes that are vital to ensuring African governments continue to move beyond aid.
In this issue, we feature MUFG, which is Japan’s largest bank and one of the largest in the world. MUFG is also the leading provider of structured finance to Africa with a portfolio of transactions in each region that includes Benin, Côte d’Ivoire, Ghana, Morocco and Mozambique among others. In their quest to serve Africa, MUFG has also partnered with Africa’s leading development finance institutions such as ATI, AFC, Afreximbank and TDB to issue landmark financing facilities and notes.
To learn more, we caught up with Ankit Khandelwal, Director of Africa Coverage in the Bank’s Corporate Banking Division for Europe, the Middle East and Africa.
Q: Briefly describe your role at MUFG – what does a typical day look like?
I am responsible for the origination of our African business, covering a range of clients such as Sovereigns, SOEs, Corporates and DFIs across the continent. Engaging with all stakeholders is a critical part of my role – our clients, partners, investors and internal colleagues.
MUFG is a client-centric institution, and we take a long term view of our client relationships. Regular interactions with clients, updating them on market developments, understanding their own requirements, and more recently understanding how they are reacting and responding to COVID-19; all of which is essential for MUFG to support effectively our clients by providing bespoke solutions for their funding requirements.
Q: What strategic importance does the Africa portfolio play in the Bank’s overall growth strategy?
MUFG‘s focus is first, to support and grow our local African client franchise, leveraging our strong balance sheet and global distribution platform. Secondly, we want to support our global client base with their African business expansion. Working with Multilateral and DFI partners is a key component of that strategy. MUFG has focused on bridging the financing gap by introducing long term institutional liquidity to the continent.
Over the past 12 to 18 months, MUFG has delivered on many transactions with the support of ATI, including for the Republic of Benin, the Republic of Côte D’Ivoire and the Republic of Togo.
ATI‘s proactive involvement, leveraging their Preferred Creditor Status, was critical in attracting private sector participation – both with insurers and investors.
We are a core bank to major African DFIs such as Afreximbank, TDB and AFC. MUFG has led all of their capital markets, syndicated loan and samurai loan transactions over many years. These institutions, along with ATI, are viewed as strategic partners for MUFG in Africa.
I believe the opportunities that Africa offers will continue to attract global corporates and international investors in the medium term, although COVID-19 will slow momentum in the short term.
Q: What changes are you making or anticipating to your Africa business during this COVID-19 period?
We continue to support our clients, offering a solutions-oriented approach to deliver competitive financing solutions. Given the dislocation in the public capital markets, with many African issuers effectively having no access to these markets, Multilateral and
DFI institutions will play a key role in catalyzing private sector funding. Working with these institutions will be an important feature of our business in the next 12 months, enabling MUFG to deliver cost-effective, long- term solutions for our clients.
Q: What is your overall estimate of the likely impact of COVID-19 on Africa and what is MUFG doing to mitigate these – what keeps you up at night?
COVID-19 is the biggest health challenge facing humanity in generations. Governments across the world have responded by effectively shutting down their economies. African states have been very proactive in taking unprecedented steps to protect their citizens. These measures have been successful in mitigating infection and mortality rates on the continent and I hope this remains the case. However, in a globalized economy, protecting local economies will present a bigger challenge.
The IMF is forecasting the worst recession since the 1930s with sub-Sahara’s GDP set to contract by 1.6% in 2020 (compared to 3.1% growth in 2019). Many countries have limited fiscal space to mitigate the economic fallout.
The IMF, World Bank Group and AFDB have already launched various initiatives but more will be needed as attention moves to fighting economic impacts of the crisis. MUFG will continue to engage with our clients and support them during this unprecedented situation. I have no doubt Africa will emerge stronger in a post COVID world.
Q: It is often said that opportunities can be found in the starkest challenges. What opportunities do you see in this period?
Every crisis comes with new opportunities. The current crisis has forced institutions and individuals to adapt to a new way of working. MUFG has certainly adapted well and we continue to deliver for our clients. I am certain some of the new working practices will continue into the future, leading to a more efficient approach to working.
On a more immediate front, MUFG continues to originate an active pipeline for Sovereigns, whose immediate requirement is to finance their COVID response – both in terms of the healthcare response and the wider economic response.
Our ESG focused institutional investors are ready to deploy long term financing for Africa with well- structured transactions supported by MDBs.
ECAs continue to be active in Africa and some are aligning their focus to respond to the immediate crisis. MUFG is delivering on immediate financing requirements while focusing on medium-term projects fundamental to the continent’s long-term growth: social infrastructure, power and natural resources.
We recognise the short term challenges our clients face and we will continue to support the continent in delivering on its long term potential.
Q: What is the Bank’s near-term objective/strategy for Africa?
We will continue to expand and improve on our successes of the past 18 months with a singular focus on introducing new sources of liquidity to finance African requirements. In addition to introducing long term institutional liquidity for sovereigns and strategic projects, MUFG raised in excess of USD1bn of medium-term liquidity from Japanese local banks for a number of our transactions, including for DFIs.
MUFG has always supported development in Africa by arranging financing to Sovereigns, Quasi-sovereigns, and DFIs.
MUFG will continue to leverage the strength of our balance sheet and the power of our distribution platform to deliver competitive financing solutions. In this endeavor, we will continue to work closely with our partners – ATI, TDB, Afreximbank and AFC, as well as other multilateral institutions.
We aim to deepen and strengthen our existing relationships, whilst cultivating new relationships. MUFG is committed to the continent and will continue to support our clients, despite the short term challenges we currently face.