Afreximbank, CDP Sign MoU for €200m Facility to Support Food Security across Africa

•Pact to enhance cooperation between Italian, African companies

•Fragility, unstable exchange rate, inflationary pressure, others to characterise African economies, says bank

James Emejo in Abuja and Dike Onwuamaeze

Cassa Depositi e Prestiti S.p.A (CDP) Italy, the official Italian financial institution for international development cooperation and the Africa Export-Import Bank (Afreximbank) have signed a new financing facility worth €100 million to support the Bank’s interventions in food security and climate-smart agriculture in Africa.

The financing added to an initial commitment from CDP of €100 million, lifting the total financing from CDP to €200 million.

This was just Afreximbank stated that the future of African economies would be characterised by fragility, high inflationary pressure, tight monetary policy, unstable foreign exchange (FX) regimes and increased debt services

The CDP and Afreximbank also entered into a Memorandum of Understanding (MoU) to foster synergies between Italian and African companies.

The partnership between both institutions was announced during the inauguration of CDP’s new office in Cairo, the first operational headquarter of the Italian institution in Africa.

Executive Vice President of Afreximbank, Haytham ElMaayergi and the Chief Executive Officer of CDP, Dario Scannapieco, signed the agreement.

According to a statement, the new financing from CDP would be used to provide support, either directly to eligible African enterprises, or indirectly through local financial intermediaries.

Some of the projects that would be financed would include those related to local production and import of essential soft commodities such as cereals and fertilisers.

Commenting on the event, ElMaayergi said the facility would support Afreximbank’s drive to increase food production in its member countries and would also help Africa to achieve food security through private sector intervention. Additionally, it would support the development of alternative food channels, including increasing investments in climate-smart agriculture, to increase food yield and provide resilience to businesses in the food and agriculture space.

He added that, “the MOU will promote collaboration between Italian and African enterprises and will bring Africa and Italy closer with the aim of promoting intra and extra-African trade.”

The collaboration, he said, includes co-financing of eligible transactions with sovereigns, corporates and financial institutions in Afreximbank’s member countries, and the organisation, participation and promotion of matchmaking events with African stakeholders and local business communities in Italy, or any of Afreximbank’s member countries.

On his part, Scannapieco said: “Food security and the resilience of agricultural supply chains are key issues for the development of the African continent, as also highlighted by the initiatives undertaken by the Italian government with the Mattei Plan. “Through collaboration with Afreximbank, CDP will be able to guarantee resources to local SMEs operating in these sectors, while at the same time favouring the creation of opportunities for Italian companies.

“This commitment will further be reinforced through the opening of our new office in Cairo, which confirms the centrality of Africa in CDP strategy.”

This new facility would enable Afreximbank  provide timely and necessary support to its member countries through businesses in the food security space and bolster management of supply chain crisis, particularly around soft commodities. This would in turn contribute to the stabilisation of food security and the diversification of supply sources in Africa.

 Afreximbank: Fragility, Unstable Exchange Rate, Inflationary Pressure others to Charactise African Economies

Meanwhile, Afreximbank has stated that the future of African economies would be characterised by fragility, high inflationary pressure, tight monetary policy, unstable foreign exchange (FX) regimes and increased debt services.

These projections were contained in the bank’s “Monthly Developments in the African Macroeconomic Environment” that was prepared by the Research and International Cooperation Afreximbank, which stated that African finance ministers are now clamouring for a recalibration of the global financial system to suit the continent that is faced with debt challenges.

The report issued by the Managing Director and Group Chief Economist of Afreximbank, Dr. Yemi Kale, stated that, “while overall outlook for Africa in 2024/2025 remains positive and clear signs of improvements in some countries/sub-regions, the overall global economy remains uncertain and African economic environment remains fragile, with still-high inflation pressures, tight monetary policy, unstable FX regimes and elevated debt services” adding that “more capital raising activities expected by African countries.”

The report also contained a snapshot of key events shaping African economies at the moment, which included the growing Russian influence in the continent, business slowdown in major economies, monetary tightening amidst inflation, high vulnerability to climate change, copper race, high debts and calls for financial recalibration by finance ministers in the continent.  

According to the report, Russia was aggressively expanding its influence in Africa, focusing on areas from NATO’s southern borders in Libya to resource-rich parts of Central Africa.

It observed that, “Russia’s growing presence in West Africa is particularly assisted by recent coups and reduced U.S. intervention and in countries like Niger and Mali.”

The report also noted the business slowdown in major African economies as shown in the JP Morgan PMI’s data since the start of 2024, which indicated “a general trend of business slowdown amongst Africa’s top three economies, with PMI mostly below the 50 threshold” in Nigeria and Egypt.

Afreximbank stated that the monetary policy environment in Africa would remain tight to tame inflation and address currency depreciation.

According to the report, inflation rates in Sudan, Zimbabwe and Sierra Leone were 63.30, 47.60 and 47.60 respectively while in South Africa, inflation continued to accelerate for the second month reaching 5.6 per cent in February and in Nigeria, the Central Bank of Nigeria (CBN) hiked policy rate to 22.75 per cent as inflation reached an all-time highest of 31.7 per cent in February 2024.

In addition, the report observed the continent’s high vulnerability to climate change as “severe drought and associated diseases caused by climate change in the Horn of Africa (including Djibouti, Eritrea, Ethiopia, and Somalia) and Southern Africa continued to fuel food insecurity, endanger livelihoods, and promote economic instability.”

It noted that, “climate support and resilience strategies are therefore pertinent. This is worsening the impact of armed conflicts and social unrests.”

The World Bank is also allocating $40 million for climate research in Ethiopia, Zambia, Kenya, Mali, Senegal, and Ghana to address the critical need for data and technological solutions in agricultural development amidst severe climate change effects such as droughts and floods.

The report also stated that recent discovery of large deposits of one of the finest grades of copper in the African copper-belt zone, which accounts for 75 per cent of world cobalt used in Electric Vehicles (EVs) batteries, has led to a copper rush and prospects of investment influx to Zambia from the West and China.