18 February 2019
Ecsponent concludes a ZAR 700 million loan financing term sheet with Afreximbank, transaction expected to close before June financial year end
- Substantial move towards diversification of Ecsponent’s capital raising efforts; reducing reliance on retail funding
- Proceeds to bolster SME lending business
- Significant reduction in the Group’s weighted average cost of capital
- Four-year, rand denominated facility
Johannesburg, 18 February 2019 – JSE-listed specialist Financial Services Group, Ecsponent Limited (“Ecsponent” or “the Company” or “the Group”), today announced that it has concluded a term sheet with the African Export-Import Bank (“Afreximbank”), which sets out terms for a ZAR700 million dual-tranche medium-term loan facility. The facility will support the Group’s lending activities to its growing SME portfolio, reduce funding costs and improve profitability.
The rand denominated transaction translates into ZAR700 million in foreign direct investment inflows into South Africa and marks Afreximbank’s first investment foray into the country.
“The transaction is in line with our ongoing efforts to diversify and grow our funding sources and strengthen our ability to service our growing credit operations, focused towards SMEs in South Africa and neighbouring countries.
Ecsponent’s Credit operations provide the Group with short- and medium-term profitability. To date these operations have been funded through a combination of its preference share and domestic medium-term notes programmes, and more recently institutional funding. The Afreximbank facility is expected to bolster the Group’s results as the reduction in funding costs will translate directly into improved profitability, while also improving tax efficiency.
“We have raised more than ZAR1.6 billion through the issue of preference shares in South Africa since 2014. Agreeing terms in respect of the credit facility with Afreximbank is an important step in our strategy of partnering with Development Financial Institutions (“DFI’s”) and access cheaper funding to support our growth objectives,” commented Ecsponent Chief Executive, Terence Gregory.
As the continent’s largest employers of labour, small to medium sized enterprises hold the key to Africa’s economic growth and to achieving the lofty goals of the African Continental Free Trade Agreement. By supporting as many as 300 SMEs, this facility will strengthen the capacity of South African SMEs to play their role while extending Afreximbank’s footprint to cover sectors where it is unable lend directly due to small balance sheet size,” said Amr Kamel, Afreximbank’s Executive Vice President in charge of Business Development and Corporate Banking.