The Multilateral Investment Guarantee Agency, the World Bank Group arm focused on credit enhancement and political risk insurance, announced guarantees for two government-owned South African development banks totalling $677.3 million.
The 10-year guarantees will cover financing to the Land and Agricultural Development Bank of South Africa, which supports agricultural loans, and the Development Bank of Southern Africa, a financier of infrastructure projects in South Africa and elsewhere on the continent.
“Our guarantees enable both banks to diversify their long-term funding sources, and in turn strengthen their portfolios,” said MIGA chief executive Keiko Honda.
The Land Bank, which backs nearly a third of agricultural loans in the country, will see $348.1 million in guarantees for long-term financing along with $100 million in protection for a cross-currency swap. The backing includes a $300 million term loan facility from London-based Standard Chartered Bank, aimed at boosting agricultural growth and food security. Though the loan is denominated in US dollars, the financing structure allows the bank to obtain liquidity in South African rand.
The remaining $229.1 million will back financing for DBSA, which mostly backs infrastructure projects. Most of the guarantee will go towards a $200 million term loan issued by Standard Chartered, which will back key infrastructure and development projects in Africa.
“This transaction is yet another example of how local market knowledge, paired with our global expertise in project and export finance, enables us to forge partnerships which promote long term, sustainable economic development,” said Richard Etemesi, Standard Chartered chief executive officer for South Africa.
The transactions represented Standard Chartered’s first MIGA-backed deals in South Africa. Frankfurt’s Deutsche Zentral-Genossenschaftsbank also received MIGA guarantees.