The Government of Tanzania has secured a US$250-million seven-year loan facility from a consortium of local and global financiers, led by Stanbic Bank Tanzania and its parent bank, Standard Bank Group (SBG), to fund development projects such as road and rural electrification.
The deal is a first of its kind for a sovereign government involving local and international commercial banks as well underwriting by multilateral financial institutions and commercial insurers. The loan also signals that African governments are serious about commercial banks as alternative sources for much-needed capital.
Speaking on behalf of the United Republic of Tanzania, Minister for Finance Mustafa Mkulo says that the Tanzanian government chose to raise the funding from the loan market as a first step in its diversification of funding sources for its long term needs.
"This transaction arranged by Stanbic Bank Tanzania is a testament of how a good partnership between the government and the private sector can benefit the nation. With this loan we aim to invest in infrastructure development especially in the areas of power and roads," says the Minister.
Helmut Engelbrecht, Standard Bank Group's Head of Investment Banking in Africa, says the deal is syndicated in three ways which collectively amount to US$250-million. Standard Bank acted as the global coordinator of the components of the funding.
Says Mr Engelbrecht: "Standard Bank Group was able to mobilise several private and public sector institutions to raise this amount of credit for the Tanzanian government. This is a feat that few banks can achieve.
"Standard Bank Group was able to source, originate and sign up the deal because of our geographic footprint, established in-country presence and localised experience, and our relationships with the government and multilateral institutions. We are providing very favourable rates to the Tanzanian government in comparison to what other capital markets have to offer," he says.
"In this deal we have employed innovative risk participation techniques to facilitate the liquidity that Standard Bank Group has arranged. This deal is a landmark transaction for a sovereign because normally governments would issue bonds to raise debt. It is an additional source of liquidity and it opens up more avenues of financing for African governments."
Mr Engelbrecht says the facility for Tanzania could become a benchmark for other African governments looking to use similarly structured debt facilities. "We have indications that a number of African governments have the appetite to borrow commercially, which will help to accelerate investment in development projects and infrastructure across the continent."
Mr Engelbrecht believes Standard Bank Group is strongly positioned to undertake further transactions on the basis of its solid capital base and strong reputation as a leading African institution.
The group was this month named Africa's top bank in the The Banker magazine's 2011 rankings of the world's top banks by their Tier 1 capital. The Banker reported that Standard Bank has increased its Tier 1 capital to $12.06-billion, an increase of 26.15% on the previous year and almost twice as much as the second ranked bank in Africa.
Mr Engelbrecht says Standard Bank Group's sustained presence and growing influence in African markets received further recognition recently with the announcement that it has been named Best Debt House in Africa, Best Risk Adviser in Africa and Best Investment Bank in Nigeria in the Euromoney Awards for Excellence 2011.
"These awards confirm that our sustained and patient investment in building franchises in African markets is delivering results for customers and positioning us for continued growth" says Mr Engelbrecht.
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