The argument by the Organisation for Economic Cooperation and Development (OECD) that tightening South Africa’s wealth tax regime would rebalance ... generational inequality has a fundamental flaw: it targets a “flighty” base, says an expert from the African Tax Institute.
The event in London on Wednesday 19 October, which brought together senior delegates from Senegal, Côte d’Ivoire, Cameroon, Benin, Niger, Guinea, Gabon, and Togo was punctuated by two financial packages focussed on Benin and Togo.
UK Export Finance (UKEF), the UK’s export credit agency, announced it will guarantee both a £106.5m loan ($123m) from Deutsche Bank to the Benin Government to fund the construction of a new Ministerial City. It also promised a £68.6m financing from MUFG Bank to build a new road between Benin and Togo to accelerate inter-Africa trade.
Both projects will unlock £82m in export opportunities for UK businesses, says Humphrey.
“We have seen a deepening of ties between Francophone Africa and the UK beyond our established relationships with Anglophone countries over the last few years, as countries in West Africa have joined the commonwealth,” Humphrey told The Africa Report. Gabon and Togo joined the Commonwealth in June 2022.
“Moving on, financial commitments will continue to focus on infrastructure and clean energy, which will bring in a number of opportunities for British businesses going forward,” he says.
Together with @UKEF we’re supporting two new deals to finance UK construction projects in Benin🇧🇯 & Togo🇹🇬 – worth a combined £174.5m.
This means opportunities for UK exporters in some of the world’s fastest-growing markets.
— Department for International Trade (@tradegovuk) October 19, 2022
Question of risk
Given the current risk-off sentiment of investors, persuading British investors to engage in risky frontier and emerging markets in Africa may be a difficult task for the commissioner who has only been on the job for two months.
“Someone once told me the price of risk in Africa is overpriced, and underpriced in other parts of the world,” says Humphrey. “I think a large part of my job is selling Africa and its potential to investors and UK firms, which of course is a challenge in most circumstances.”
READ MORE Africa-UK: Business as usual
“While companies will always have the final say in how and where they deploy their investments, there are tools we can use to de-risk projects,” he says.
UKEF stipulates that British companies must make up 20% of the total commitment of investment projects initiated by the agency, “which is much less than other export credit agencies at the moment.”
We have seen a deepening of ties between Francophone Africa and the UK beyond our established relationships.
This means the agency has much more opportunity to source funding and partners from outside the UK. “We are more than happy to work with a consortia of companies in a number of regions, which makes us a lot more flexible in meeting our objectives,” he says.
Nevertheless, the need for investment in Africa still hugely outweighs current commitments. As the AfDB estimates, the continent’s infrastructure financing needs could be as much as $170bn a year by 2025.
“There are huge questions around how we can unlock private capital to fund Africa’s development going forward, and guarantees to de-risk projects in Africa are increasingly gaining ground,” says Humphrey.
“But unfortunately, this is not at the scale we need it to be.”
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