The Trade and Development Bank (TDB) is attracting new members and institutional investors as it continues to back projects across Eastern and Southern Africa and completes its rebrand from PTA Bank. With a mandate to finance and foster trade, socio-economic development and regional integration through trade finance and project infrastructure finance, the bank has backed projects as diverse as resorts in the Seychelles and agriculture in Malawi. Its president and chief executive, Admassu Tadesse, talks to African Business.
How has the bank developed over the last few years and what are some of the projects you’re looking at in next few months?
The bank has continued to grow well over last couple of years. We’ve managed to continue to support a number of important projects in the power and ICT sectors, and we’ve continued to raise capital from a whole range of institutional investors.
We’ve issued a benchmark-sized Eurobond, the largest ticket we’ve ever done, a $500m issue earlier this year. We’ve also managed to diversify fundraising in different markets, including an Asian syndicated loan, and we’re doing another one this year.
There’s a lot that’s been happening on the fundraising side, both debt and equity. We’ve spoken about a strategy to attract institutional investors into the bank and we’ve met with quite a bit of success in that regard.
We have about 10 institutional investors, five pension funds, reinsurance and insurance companies and specialised investors. Today we’ve got a total shareholder base of 33 and 10 are institutional investors, which is quite an achievement.
What does the support of the extra investors allow you to do?
It increases the capital base. We have more equity in the bank so that allows us to continue growing. You need equity in order to sustain a certain level of growth.
We’ve managed to form valuable partnerships with a whole new range of long-term funders, we’ve got a partnership with the Commonwealth Development Corporation, and partnerships with Agence Française de Développement, the European Investment Bank and KFW. These are four long-term financing partners we’ve managed to go into business with – that’s been an exciting development on the funding side.
You’ve rebranded from PTA Bank to the Trade and Development Bank, what was the thinking behind that?
It’s been very well received and the whole purpose has been to strengthen the licence of the bank to operate in a wider region. Now we are actually looking at consolidating the eastern and southern space. We have countries like Mozambique and Swaziland that have joined, and also South Sudan.
So we’ve got about three new countries that have joined and others are in the process of signing up. The whole idea was to have a name which is clearer to the public in terms of what we do – we are a trade finance bank among other things so we wanted a nameless esoteric than PTA.
TDB speaks to our function very well. TDB is a broader concept and relates to all of southern and eastern Africa.
The economic situation currently looks more favourable in eastern than southern Africa, does that affect your investment strategy?
We have a diversified approach to portfolio building. We like to have exposure to different countries, and we do have appetite for East Africa. A lot of our growth has been in that region – Kenya, Ethiopia, Uganda, Tanzania and Rwanda. Southern Africa is clearly not growing as fast and is disproportionately affected by South Africa.
We see Malawi, Zambia and Mozambique bouncing back. Those three we see as really picking up nicely, and for us we also see that the commodity cycle is coming back a bit but not as much as we’d like. In any case East Africa is diversified and we have a lot of investment coming in there – we co-finance and facilitate investments with debt and that’s been a good story. The East African Community and Ethiopia and Djibouti are attracting good investment.
Do reduced inflows from outside the region make it more important for pan-African institutions to step up to the plate?
We’ve always had a situation in our region where the gaps are huge – the development and trade finance gaps have always been large. The whole question of covering those gaps has never been enough.
We’ve always had limited capacity and when existing banks show less appetite it’s not a good sign but we try our best to step up our game and pick up more, but that depends on our capital. We can only grow so much sustainably.
Is demand robust for trade finance?
There’s a great deal of demand. With the commodity price collapse there’s been a lot less volume coming through than in the years before but demand is still high. The industrialisation agenda of the region requires the importation of equipment and the agricultural and petroleum sector requires strategic commodity flows.
That continues to be a lifeline for economies. And then you have equipment – the power sector is beefing up and that means a lot of generators need to be imported. We see demand for locomotives, the aviation sector. We do a lot of export credit agency partnerships; we facilitate European, American, Chinese, and Indian exports. They give us lines of credit and we facilitate their trade with the region.
The agenda is huge and everyone knows infrastructure requires $50bn per annum for the whole continent. You’re looking at half of that roughly for eastern and southern Africa. The question is finding bankable transactions that we can all rally around. We all need well structured, well analysed details that allow us to get our deals through.
Are you seeing enough bankable projects coming onto the market?
We are, we’ve seen a lot in Kenya, Tanzania and Uganda, including smaller scale power projects but also some big tickets. We’ve seen more opportunities produced because there’s been so many reforms that have improved the environment in which these projects take place – including liberalisation of the power sector and the setting of tariff levels that are more reasonable and reflective of cost.
These are key developments that allow private investment to happen in projects and for them to become more sustainable.