LUCY KONIE | African banks lead syndicated infrastructure lending

I recently had the honour of forming part of a panel discussion on Africa’s loan market agenda and the role syndicated lending can play in financing the continent’s development.

This was a key part of the recently held inaugural Loan Market Association and International Capital Market Association Africa summit in Cape Town.

The session examined how commercial banks, development finance institutions and private capital providers can work together to close financing gaps and support large-scale infrastructure investment across Africa.

The growing role of African banks in the continent’s infrastructure transactions was highlighted as an emerging theme. For a long time, many African lenders have merely been participants in syndications arranged by global institutions.

Recently, though, African banks are increasingly anchoring and arranging these deals themselves. It’s a shift that reflects the deepening of the continent’s financial sector and the growing ability of local institutions to mobilise capital across markets.

The challenge and the opportunity

Of course, financing infrastructure in Africa is rarely straightforward.

Large projects require funding that can extend over 15 or 20 years, yet commercial bank liquidity is typically shorter dated. Bridging that gap requires fresh thinking, careful structuring and the ability to combine different sources of capital within the same transaction.

This is where loan syndication plays a central role. Rather than relying on a single lender or funding pool, large infrastructure financings are typically structured across multiple layers of capital. What has begun to change in recent years is who is co-ordinating those layers.

As African banks have taken on more of the arranging and underwriting roles, they have increasingly become the institutions responsible for bringing different pools of capital into the same transaction.

In practice, that often means structuring facilities where commercial banks provide shorter-tenor liquidity, development finance institutions support longer maturities, and export credit agencies or insurance markets provide credit enhancement where needed.

This type of structure allows projects that might otherwise struggle to secure financing to reach financial close. It also enables risk to be distributed more effectively across lenders with different mandates and balance sheet constraints.

For African arrangers, this role is critical. It is not only about committing capital; it is about designing financing structures that allow a wider group of lenders and investors to participate.

As African banks have taken on more of the arranging and underwriting roles, they have increasingly become the institutions responsible for bringing different pools of capital into the same transaction.

Another notable shift in the African loan market has been the growing presence of domestic lenders. Data presented during the panel discussion showed that African banks — particularly those from South Africa — account for a significant share of syndicated lending on the continent.

This reflects the increasing depth of regional banking systems and the ability of pan-African institutions to support both sovereign and corporate borrowers.

However, scaling infrastructure financing across the continent will demand that all participants, including banks, go even further. While bank balance sheets will always be important, they are not sufficient on their own to meet Africa’s long-term investment needs. Institutional capital will need to play a much larger role.

Pension funds, insurers and other long-term savings pools are natural investors in infrastructure because their liabilities are similarly long-dated. In theory, these investors could provide a significant portion of the capital required to finance projects across the continent.

In practice, though, the structure of loan markets creates obstacles. Pension funds, for example, often can’t invest directly in bank loans. Accessing that capital therefore requires additional structuring, such as issuing notes or other securities that allow institutional investors to participate indirectly.

The case for more regional integration

Even then, regulatory frameworks do not always permit these investments. Unlocking this pool of capital will therefore require closer alignment between loan markets, securities markets and regulatory frameworks.

If that alignment improves, institutional investors could become an important complement to bank lending in financing long-term infrastructure assets.

There is also an important requirement for greater regional co-operation. Many African markets remain relatively small on their own, but infrastructure projects increasingly span multiple countries and supply chains.

Deeper regional syndication networks can help distribute risk more effectively and attract broader participation from lenders across the continent.

Ultimately, the development of Africa’s loan markets will depend on the continued evolution of both institutions and structures.

African banks need to expand their underwriting capacity and distribution capabilities; development finance institutions need to deepen their role as partners in extending tenors and mitigating risk; and new pools of institutional capital need to be afforded access to clearer pathways into infrastructure finance.

None of these elements works in isolation. Infrastructure financing is rarely about a single institution or funding source; it’s about bringing together many different participants with different mandates and risk appetites into a structure that works for all of them.

If Africa’s banks keep stepping up and playing more of a role in ensuring that co-ordination happens, the result will be a loan market that does more than just provide funding; it acts as an effective engine for mobilising capital at the scale required to drive and support Africa’s sustainable growth.

• Konie is head of distribution & loan syndication at Standard Bank Group.