In an export finance market traditionally focused on larger deals and blue-chip borrowers, this transaction is relatively small, highly structured and focused on supporting a mid-sized African supplier as it grows its business in its home market.
Ghana Infrastructure Company Ltd (GIC) was last year bidding to sign contracts with the Ministry of Roads and Highways Ghana to construct storm drainage along various roads in Tamale. It was also looking to engage in the rehabilitation and reconstruction of numerous roads within the Ashanti region in central Ghana.
The company needed a financing structure that allowed it to implement the project against contract receivables from the Ministry of Roads and Highways, without any direct guarantee from the Ministry of Finance. Despite having never lent to the company previously, it was Investec Bank South Africa that stepped up to structure the financing and fund the projects. Export credit agency Export Credit Insurance Corporation of South Africa supported the financing based on procurement of key goods (steel) and services (design and engineering) from South Africa.
The finance was structured as a supplier credit, which allowed GIC to manage payments and terms negotiated with the Ministry of Roads and Housing. “whilst some banks are able to arrange transactions in Ghana where the Ministry of Finance is the borrower, it is less common for the repayments source to be a local contractor relying online ministry receivables,” a spokesperson for the bank tells GTR.
The deal enabled GIC to not only win the work, but also keep a high level of localisation of jobs in Ghana and grow GIC’s and Ghana’s capacity to deliver such projects domectically.
“local contractors such as GIC are often viewed as potential sub-contractors to foreign contractors in export credit transactions. In this case GIC was the lead contractor who set up an African supply chain to implement it,” Investec says in its award submission.
