Standard Chartered is actively targeting mid-sized African companies for debt sales. This strategic shift comes amidst a changing perception of Africa as an investment destination, with reforms across various governments in countries like Nigeria and Uganda making the continent more attractive to foreign funders. These reforms, including streamlined regulations, reliable central bank policies, and improved transparency, are attracting both concessional funding and market-rate cash from hedge funds and asset managers.
The improved investment landscape is notable after a "risk-off mindset" following the COVID-19 pandemic. Dalu Ajene, Standard Chartered's Africa chief executive, highlighted that these cooperation frameworks are unlocking substantial investments that previously were capped around $100 million. The bank itself is facilitating significant financial activities in the region, including a $100 million deal with British International Investment for micro, small, and medium-sized enterprises in Kenya, and a partnership with the Central Bank of Kenya and Clearstream to open Kenya's debt market to international investors.
Furthermore, the deep discount at which many African countries' debt trades makes the continent ripe for debt-for-nature swaps. African bond yields are approximately 120 basis points higher than those of emerging-market peers, according to JPMorgan Chase & Co. data. This premium presents an attractive opportunity for swaps where sovereign debt is bought at a steep discount, with part of the savings redirected towards conservation efforts.
Standard Chartered also plans a significant risk transfer linked to a corporate loan portfolio worth about $2 billion, including loans from North America and Europe. The bank also defends the use of financial instruments like total return swaps (TRS) by African governments, despite concerns from entities like the IMF about their opacity. Ajene argues that TRS can be more flexible and faster to execute, offering alternative funding when markets are tight, and are unfairly categorized as risky.
