Boom In African Infrastructure Boosts Syndicated-Loan Growth

Boom In African Infrastructure Boosts Syndicated-Loan Growth

From Bloomberg

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.

Read more at Bloomberg.