The Covid pandemic hit African borrowers hard as international investors pulled back. Standard Chartered, which has had decades of experience and onshore presence in key sub-Saharan markets, made sure it kept talking to its clients.
“In a market backdrop characterised by unprecedented volatility, issuers need a trusted adviser who can partner up with them for the longer term as opposed to looking for the next transaction,” says Salman Ansari, head of capital markets west, covering MENA, Europe and the Americas. “Given our extensive platform across Africa, we ensured to fully understand issuer requirements and helped construct the right narrative to highlight the resilience of our clients to global investors. The rationale was to create a stable platform so that when the risk subsided, African issuers would be at the forefront of any capital markets reopening.”
James Nelson, head of Africa debt capital markets, is particularly proud of the way the has worked to create market access for deals that might not otherwise have been possible.
“Sub-Saharan Africa is very much the last bastion of frontier emerging markets and with that comes some execution risk,” says Nelson. “We’ve learned over the years that you need to think a lot about de-risking execution before you come to the market. Where I think we can genuinely say we’ve made an important impact is the involvement of strategic investors.”
He points to the transaction Standard Chartered brought as sole sustainability structuring agent for Ecobank Transnational (ETI) in early June — the first 10-year, non-call five tier two bond from outside South Africa, and the first sustainable notes issuance from sub-Saharan Africa — as a deal that benefited from de-risking.
Development Finance Institutions (DFIs), committed $50m as a lead order ahead of the deal.
“It’s a good example of how we look to de-risk,” he says. “We wall-crossed the DFIs when we started work on the transaction a few months ago and they were very open to talking about how they could anchor a eurobond. They understand the importance of the role they can play to crowd in financing for African-focussed development capital by sponsoring these types of transactions.”
Standard Chartered pioneered the technique for high yield corporate issuers in Nigeria and now uses it more widely. A $620m bond for Liquid Telecom in February, for example, was supported by strategic anchor investors International Finance Corp, DEG and Emerging Africa Infrastructure Fund.
Nelson says the bank considers the de-risking strategy for any bond where a true partnership either exists or is possible between a DFI and a borrower.
“We’ve taken the market into areas where previously it may have been a lot more difficult to get these deals done,” he says.
Sustainability is closely tied to the development agenda in sub-Saharan Africa, where countries desperately need economic growth to be able to provide access to health facilities, schools and infrastructure.
“The capital markets will play an important role in development on the continent,” says Khalil Belhimeur of the EMEA bond syndicate team. “The importance of ESG is dawning upon issuers in sub-Saharan Africa and we hope the establishment of sustainability frameworks will further assist in the efficient allocation of capital in Africa.”
Nelson adds: “The traditional EM investor base is more focussed on ESG than ever before, and we are going to need to ensure every deal addresses this, regardless of whether it is a labelled bond or not.”
SC has also been at the forefront of bringing ultra-long dated issuance for the continent’s sovereigns over the last few years, with the likes of Senegal, Kenya, Ghana and Nigeria all issuing in 30-year and even 40-year maturities for the first time.
Finally, it has taken the leadership it has shown in the bank capital market in the Middle East to Africa, where it jointly-arranged the first additional tier one (AT1) deal from the region for South Africa’s Absa Bank in May.
“We remain optimistic regarding the outlook of the Sub-Saharan African markets in light of the growing funding needs on the continent which will result in more varied offerings, in terms of types of issuers as well as structures,” says Belhimeur. “In addition, we are continuing to see the growth of the regional and local investor base, which will help the market depth and access for issuers.”