The African Development Bank (AfDB) has raised $3 billion in a three-year bond to help alleviate the economic and social impact of COVID-19 on Africa’s economies. It is thought to be the largest dollar-denominated social bond ever launched in international capital markets.
Although cases of COVID-19 were slower to arrive in Africa than in other parts of the world, the virus has now gained a foothold on the continent and is spreading quickly. Almost 5,000 cases have been reported across all but eight African nations, straining already fragile health systems.
The African Development Bank Group is working to lessen the severe economic and social impact of the pandemic with its Fight COVID-19 Social bond. The order book for this record-breaking bond highlights the scale of investor support, said the arrangers.
With a three-year maturity, the social bond garnered interest from central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, with bids exceeding $4.6 billion. This is the largest Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75 per cent.
Critical times, critical measures
‘These are critical times for Africa as it addresses the challenges resulting from the coronavirus,’ said Dr Akinwumi Adesina, President of the African Development Bank Group.
‘The African Development Bank is taking bold measures to support African countries. This $3 billion COVID-19 bond issuance is the first part of our comprehensive response that will soon be announced.’
Dr Adesina continued: ‘This is indeed the largest social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries.’
The landmark nature of the transaction has drawn international attention, especially at a time when extraordinary measures are needed.
‘In a time of unprecedented market volatility, the African Development Bank has been able to brave the capital markets in order to secure invaluable funding to help the efforts of the African continent’s fight against COVID-19. Not only that, but in the process, delivering their largest ever USD benchmark,’ said George Sager, Executive Director, SSA Syndicate, Goldman Sachs. ‘A truly remarkable outcome both in terms of its purpose but also in terms of a USD financing.’
It is estimated that Africa will require many billions of dollars to cushion the impact of the disease as countries implement contingency measures, including lockdowns. South Africa, Kenya, and Zimbabwe have already made that step, and other African nations have taken the significant measures of closing their borders.
Economies in other parts of the world have already taken a serious hit from stringent measures to contain the virus. Factories have been closed and workers sent home, disrupting supply chains, trade and travel, as well as causing unemployment rates to soar.
‘As the COVID-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,’ said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
African Development Bank
The African Development Bank established its Social Bond framework in 2017, raising $2 billion. In 2018, the Global Capital SRI Awards called AfDB the ‘Second most impressive social or sustainability bond issuer’.
‘Our Social bond program enables us to highlight our strong development mandate to the investor community, allowing them to play a part in improving the lives of the people of Africa,’ said Hassatou Diop N’Sele, AfDB Treasurer. ‘This was an exceptional outcome for an exceptional cause.’