Sub-Saharan Africa’s infrastructure boom will probably draw increased interest from investment banks and commercial lenders, underpinning growth in syndicated loans, the Loan Market Association said.
The annual amount of credit in the region organized by groups of lenders grew to $17.7 billion last year from $11.2 billion in 2011, according to data compiled by Bloomberg. Syndicated loans total $19.6 billion in the year to date, the data show.
African nations are spending $45 billion annually upgrading roads, ports, electricity plants and other infrastructure, according to the African Development Bank. The continent needs to spend $93 billion a year help accelerate economic growth, leaving a financing gap of about $50 billion, the Tunis-based lender said in May.
“There is a lot of requirement for infrastructure investment,” Clare Dawson, managing director of the London-based LMA, said in an interview in the Kenyan capital, Nairobi. “Many international banks see that there are very good opportunities for investing particularly in infrastructure projects.”
Inadequate infrastructure reduces economic growth across the continent by at least 2 percentage points a year and lowers the productivity of companies by as much as 40 percent, or $40 billion in lost output annually, according to the bank.
Middle Class
International lenders’ interest in the continent is also being driven by a growing population and expanding consumer base, Dawson said.
Africa’s middle class is estimated at 34 percent of the continent’s population, or 350 million people, according to the African Development Bank. The middle class has been defined as individuals with annual income exceeding $3,900.
African industries receiving the most funding include telecommunications and commodities such as cocoa, oil and gas, Dawson said. “Some of the African banks are also becoming more active on a regional basis rather than just in their own countries,” she said.
Banks including United Bank for Africa Plc and Ecobank Transnational Inc. (ETI) of Nigeria, Standard Bank Group Ltd. (SBK) of South Africa and Union Gabonaise de Banque SA of Gabon are among African lenders that have participated in syndicated loans this year, according to Bloomberg data.
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