Rising Asia-Africa trade flows have received their latest boost with a $120 million structured syndicated trading loan to agricultural commodity dealer Export Trading Group by Standard Chartered Bank and partially guaranteed by the International Finance Corporation (IFC).
Tanzania-based Export Trading, one of the largest agricultural supply chain companies in Africa, will use the funds to finance trade in soft commodities, including maize and soybeans. 80% will be used for flows within Africa and 20% for trade with China and India. Jean Craven, head of corporate finance at the company, said the percentage of funds used for trade with Asia will increase over time.
Standard Chartered is the mandated lead arranger of the structured loan and the IFC will guarantee 50% of the deal. The World Bank Group company originally approved it in December 2009, but Standard Chartered's participation was not confirmed until last week. The loan is a revolving facility and will be available to Export Trading for 12 months.
"This deal demonstrates Standard Chartered Bank's commitment to the development of the agricultural sector across Africa," said Anil Dua, head of origination and client coverage for Africa at the bank. This is in line with the IFC's goal to send the market positive signals about the state of African agribusiness, according to its website.
The agency also said the loan guarantee would support small African farmers' access to markets and create new jobs.
Structured trade deals between Asia and Africa are on the rise. Ong Tee Chong, head of structured trade finance for Asia at South Africa's Standard Bank, said that the products were increasingly popular with traders on both sides of the Indian Ocean because of a lack of "mutual understanding" in an interview last year. Last October, the institution signed a $150 million loan agreement with the Japan Bank of International Cooperation to boost access to trade finance in Africa.
Standard Chartered has structured a number of trade finance facilities between Africa and Asia during the past 12 months. Deals include a $250 million import facility for telecom equipment from China to East Africa, a €143 million cement export facility for cement from Nigeria to China and a $40 million import facility for rice from India to West Africa.
Craven said Export Trading mainly imports fertiliser from China and maize and rice from India. In terms of exports, he said pulses, edible beans and sesame are sent to Asia on a "large scale".
Trade between China and Africa rose 58% year-on-year during the period from January to September 2008 (the most recently available data), totalling $92.7 billion. Between India and Africa, it totalled $13.8 billion from April to September 2009; which was 45.4% of the total for the 2008 fiscal year.