The UK has stepped up business in French-speaking West and Central Africa as it seeks new frontiers for its exports.
UK Export Finance, a state body that helps fund suppliers and foreign buyers of British goods and services, was backing transactions in francophone Africa worth a cumulative £1 billion ($1.3 billion) at the end of the 2023-4 financial year, up from just £3 million in 2017-8, according to Steven Gray, its West African regional lead.
“Historically, you would have thought that because of the language barrier, these francophone markets would have been closed to the UK,” Gray said in an interview in Ghana’s capital, Accra. “We may speak a medley of languages in the room, but we speak a common language, which is commerce.”
For more than a century, UKEF has tried to stoke global demand for British goods and services by offering government-guaranteed loans, insurance and other support. The UK is positioning itself to grow just as French public investment bank Bpifrance grapples with strained relations between France and some of its former colonies. Meanwhile, China’s export credit agency Sinosure is increasingly dominant.
The Treasury raised UKEF’s global credit exposure limit to £60 billion last year, up from £50 billion. The agency “has been aggressively expanding its reach,” Gray said.
The UK typically runs a global trade deficit, and its biggest trading partner, the European Union, lost some of its appetite after the UK left the bloc. This has been partly offset by a surplus with other nations, resulting in an overall deficit of £33 billion last year, according to a parliamentary report.
In the financial year ending March 2024, UKEF covered £1.3 billion of new business across Africa, making the continent its largest market for new business, followed by the Middle East, according to the agency’s annual report.
The organization has recently backed projects including a £106 million drainage upgrade in Benin and £68 million road construction works in Togo, both French-speaking nations.
Major investments like this have become more reliant on loan guarantees or credit insurance in recent years, with a jump in interest rates making borrowing in dollars more expensive.
Both UKEF and Bpifrance are preparing for events in Africa to forge local links in the coming months.
“We haven’t slowed down backing transactions,” Arnaud Floris, Bpifrance’s Africa head, said from Ivory Coast’s commercial capital, Abidjan. “We continue at a good pace.”
Floris said the agency’s work is “not only about supporting exports,” citing initiatives such as advising the Ivorian government on how to better support and finance local companies. “It’s about how we create more value together,” he said. “This is what we have been developing very fast over the last five years.”
Untying Aid
China’s Sinosure has backed projects to support the country’s Belt and Road Initiative, a global development push that brought more than $120 billion of Chinese construction contracts and investments to Africa in its first 10 years, according to a study by the Green Finance and Development Center at Shanghai-based Fudan University.
China is not bound by the same rules as the UK and France, which are members of the Organisation for Economic Co-operation and Development. The OECD has in the past few years made it easier for ECAs to cover costs in the recipient’s country.
Both UKEF and Bpifrance Assurance Export require at least 20% of a transaction’s value to come from businesses in their country. Law firm Norton Rose Fulbright estimates that Sinosure’s minimum requirement may be as high as 60% in some cases. Sinosure didn’t respond to an emailed request for comment.
“The nature of guarantees and support China gives doesn’t operate in the traditional commercial way,” said Fikayo Akeredolu, a doctoral researcher at Oxford University who’s written about Chinese lending to Africa.
“At its core, Sinosure is here to make the Belt and Road Initiative work,” she said. “Sinosure might be more willing to take on higher risks than other ECAs or offer more favorable terms to countries that align with China’s strategic goals.”
Some ECAs today are even “offering untied loans as a means of building relationships, which improves the visibility and relevance of ECAs in the borrower’s community,” said Martin Eyok, head of corporate banking for West and Central Africa at Citibank Senegal, which works with different ECAs.
“Developed countries are organizing themselves much better by combining financing, technical capabilities, and diplomacy into a single proposal, which positions ECA financing upfront in trade discussions,” Eyok said.
