Services for modernisation of infrastructure rank high on the agenda in fast-growing economies such as Ghana, where Swedish consultants and equipment transform potholed and frequently flooded roads into modern transport arterials.
Strong economic growth fuelled by increased exports of cocoa, gold and oil has placed Ghana among Africa’s 10 fastest-growing economies. Since infrastructure is crucial to sustain and spread the fruits of economic growth, Ghana’s Ministry of Roads has launched several road upgrade projects.
“Streets of Accra” and “Streets of Tamale” are financed by EKN and The Swedish Export Credit Corporation (SEK) and entail surfacing of local roads and construction of drainage systems, with QGMI Group as chief EPC contractor. “Roads fulfil a crucial function in modern society by providing increased mobility for people, goods and services. They also play a key role in the determination of social progress and economic growth of a country,” says Marco Meloncelli, Business Director Structured Export Finance at Intesa Sanpaolo IMI Corporate & Investment Banking (ISP), coordinator and lead arranger in the Accra project.
Much of the construction equipment will be delivered by Swedish suppliers like Volvo Construction Equipment, Atlas Copco, Dynapac, Husqvarna and others, which paved the way for support from the Swedish export credit system.
Threat of delayed start
The two projects are budgeted at a total of 103 million euros, 85 per cent of which is financed by EKN and SEK over 10 years. Covid-19 threatened to severely delay the start, recalls Cristiano Becker Hees, Managing Director at QGMI UK, and responsible for the financial structuring of infrastructure projects in Latin America and Africa.
Without the support from EKN and SEK we would probably not have been able to close the deal when we did.
Cristiano Becker Hees, QGMI UK
“The immediate effect was that many banks and institutions reneged on previous commitments or delayed the closing. Without the support from EKN and SEK we would probably not have been able to close the deal when we did.”
Sustainable lending – in the sense of lending on conditions that a borrower can honour – is paramount to QGMI, Becker Hees adds: “Given the limitations of countries under surveillance by the IMF and the World Bank, the involvement of ECAs has become necessary to secure sustainable lending to government to ensure that new borrowing does not jeopardize the country’s ability to meet existing obligations given the level of indebtedness.”
More favourable loan conditions
In Ghana’s case, he says a pure commercial loan would not have offered the same terms and conditions, “The triple-A funding of SEK and EKN underpins more favourable loan conditions.”
At ISP, Meloncelli adds: “We believe that the Swedish export credit system is extremely important and well-structured to support Swedish exports. Moreover, it lets non-Swedish financial institutions with ratings below AAA and higher cost of funding than SEK offer their structuring and arranging capabilities in the service of Swedish exporters.”
As a result, 120 kilometres of what was once sandy and potholed roads suffering from lack of upkeep and frequent rainstorms, will be transformed into asphalt arteries that bring increased road safety and improved public health. Hinterland dwellers can participate in the urban economy by selling their produce or commuting to work in the city.