A high powered team from the Cairo-headquartered bank spent days in the country two years ago hammering out the details of the proposed funding, which was intended to be spread out over three years.
However, no firm ground could be found, with reports that Finance Ministry technocrats were unimpressed with the loan’s terms. The offer would have been the first time the pan-African trade bank partnered directly with government, as its previous deals in the country have been limited to private sector support.
The offer came after high-level talks between President Mokgweetsi Masisi and Afreximbank president and chair, Benedict Oramah.
Speaking on the sidelines of the bank’s annual meetings held in The Bahamas last week, Afreximbank group chief economist, Yemi Kale, told BusinessWeek the organisation, with assets of $37.3 billion, was still open to any requests from Botswana.
“The bank’s relationship with Botswana and other countries on the continent is very good,” he said. “Ours is not to force transactions on any country. “The countries if they need our help, come and we are happy to support. “I don’t think there’s any problem in Botswana saying we don’t need the loan now or we will need it later. That’s fine. “All that matters is that whenever they need the bank to support, the bank is ready to support and that has always been the case.”
According to the original offer, the loan, known as a country programme, would have targetted sectors such as rail infrastructure, agriculture and light manufacturing. Other sectors to be targeted would have included Small to Medium Enterprises and “one or two” locations for the Special Economic Zones initiative.
“Through the country programme, we will, among others, make available to Botswana the Afreximbank Group suite of products,” Oramah said at the time. “In this regard, we will work with your government to create a joint project preparation facility which we can use to develop projects and bring them to bankability.”
It was expected that the country programme would include direct loans to government, possible equity in certain projects, grants, technical assistance and potential support in helping government raise capital such as through international bonds.
Finance Minister, Peggy Serame, previously told BusinessWeek that there were no commitments made to take up the loan from Afreximbank.
“It's a pledge of how much they are willing to support Botswana in monetary terms,” she said after the offer was announced. “We will agree on how much can be technical assistance, private sector support, projects etc.”
Afreximbank was behind Lucara’s fundraising of $220 million towards the company’s underground mine at the Karowe Mine.
However, the government has traditionally shunned external financing due to concerns around the sustainability of paying back hard currency denominated debt while budget revenues are largely reliant on the cyclical performance of mining, especially diamonds.
While the country has been able to largely forego hard currency denominated debt by leaning on its strong diamond-backed reserves, these have since been impacted by the COVID-19 pandemic.
The pandemic prolonged and deepened budget deficits seen before 2020, but government has opted to raise its funding locally through the domestic note issuance programme. The programme, through which the Bank of Botswana floats bonds in the capital market, was increased from its P30 billion ceiling to P55 billion in March.
Yields or the cost of borrowing to government, have been declining since the second half of last year, as inflation has cooled, while more funds are looking for investment in the capital market due to the repatriation of pension funds under changes to the Retirement Fund Act.
