Debt Relief: Private Creditors to Assist Africa

By Adedapo Adesanya

Private creditors have established the Africa Private Creditor Working Group (AfricaPCWG) to assist African countries and other debt providers to contain the economic impact of COVID-19 across the continent.

African governments are fighting to manage the fallout from the coronavirus, which the World Health Organisation has warned could infect between 29 million and 44 million on the continent in the first year if not contained.

African countries face a combined $44 billion debt-servicing bill this year alone.

AfricaPCWG is an initiative to represent the views of international private creditors invested in Africa and to work with countries on their financing needs during the COVID-19 crisis.

As part of its duty, AfricaPCWG will provide African Governments, the United Nations Economic Commission for Africa (UNECA), the G20, the International Monetary Fund (IMF) and other Multilateral Development Banks (MDBs) a forum through which all stakeholders can engage transparently and constructively with different categories of private international investors in African sovereign and corporate debt to coordinate the resolution of broad issues arising due to the COVID-19 crisis.

AfricaPCWG will coordinate the views of over 25 asset managers and financial institutions representing total assets under management in excess of $9 trillion, it said in a statement on Friday.

“The AfricaPCWG understands that private sector creditors have an essential role in assisting some of the world’s poorest countries to contain the economic impact of COVID-19, and stands ready to buttress efforts being made by the multilateral and bilateral sectors by offering its collective institutional experience to provide guidance and support on a case-by-case basis.

“Participants in the AfricaPCWG forum have already established a number of core principles of engagement. Upmost amongst these is the belief that a one-size-fits-all solution will be counter-productive for the nations and people of Africa.

“Such an approach risks needlessly cutting many countries off from international commercial debt markets and is likely to lead to an overall increase in the cost of capital for all emerging market sovereign and corporate debt issuers for years to come.

“Each African country has its own very particular fiscal and social dynamics, with some governments having developed hard fought, low cost access to debt markets, and these distinct profiles must be acknowledged as part of any successful approach to debt management.

“Future generations of Africans will need to access private capital to invest in hospitals, roads, education, healthcare systems and other infrastructure critical for economic and societal development. A rushed, blanket approach developed during a time of crisis will put that crucial long-term access to capital at risk.” It said.

As participants in the AfricaPCWG, Lars Bane of Farallon Capital Europe LLP, Kevin Daly of Aberdeen Asset Management PLC, Alex Garrard of Amia Capital LLP, Mike Hugman of Ninety One UK Limited, Hans Humes of Greylock Capital Management, LLC, and Nicolas Sagna of Pharo Management, Inc. noted the following:

“Global cooperation is vital at this time of COVID-19 crisis, which is why international private creditors invested in the continent have established the Africa Private Creditor Working Group.

“We stand ready to provide support to all countries across the continent on a case-by-case basis, ensuring that the conditions for continued access to private capital remain in place, which is so vital for the development of societies and economies in the years ahead.”