Clarissa Dann Welcome to Trade Finance TV, your insight into the global trade climate for importers, exporters and their financiers. I’m Clarissa Dann.
In this episode, we’re hearing from Louis Taylor, the CEO of the UK’s export credit agency, UK Export Finance (UKEF). He’s just come back from Ghana to check out the progress on the new Kumasi Central Market.
Louis, welcome to Trade Finance TV,
Louis Taylor Thanks very much, Clarissa. It’s really good to be here.
Clarissa Dann How does the UK’s export credit agency decide which projects to support?
Louis Taylor So, Clarissa, we’re open to considering all projects for all exporters, but to actually get our support, they’re going to need to be viable projects so they can be credit worthy to some extent. And then there’s a few other characteristics they’ve got to have around environmental compliance, anti-bribery and corruption, all those things that your viewers, I’m sure, will be very familiar with, but fundamentally if it’s a good project and a good country and and we’re very willing to support it.
Clarissa Dann That’s really good to hear. How do you work with the private sector?
Louis Taylor So the private sector where we’re open for the buyers of British exports abroad or even domestically here for SMEs, and the bulk of our support for them is really by giving banks guarantees to induce them to give working capital to exporters. So if you’re a 20 million pound turnover SME, and the great news is you have five million pound order, but the bad news is you don’t have working capital and your bank won’t give it to you. So we can then work with the bank, give them up to 80% guarantee on the working capital, and you can, as an exporter, fulfill your order.
Clarissa Dann Has that changed a bit in recent years, because before we saw a lot of large corporations in that kind of facility, but less and less of the smaller ones?
Louis Taylor So we got back into, particularly that SME working capital business, domestically about 2011, so a bit after the financial crisis and we developed the product suite quite considerably. So its working capital. We can give guarantees against bond money that companies have to put up so they, again get a working capital benefit credit insurance, and our working capital is no longer just limited to individual export contracts. We can provide, as of last week from the Chancellor, a general working capital facility for an exporter, so that means that their overall working capital needs can be met if their bank can’t provide it.
Clarissa Dann So the important thing is the content that’s coming from the UK as part of the overall?
Louis Taylor Well, certainly that’s the case for overseas buyers of British exports and what we finance there. And so our minimum content requirement there is 20%, which is very competitive relative to other countries. And we recognize the industrial capability of the UK, that on some big projects we won’t produce everything, so 20% or something is better than 100% of nothing.
Clarissa Dann Exactly.
Louis Taylor And so we find ways to to get reinsured by others for the foreign content that we end up supporting.
Clarissa Dann I was looking on Twitter and I noticed that you’ve got very excited about this project of the Kumasi Market in Ghana, and you’ve just come back, haven’t you?
Louis Taylor Yeah, so just come back from Ghana, was not only in Accra, and met lots of senior government people who are actually really impressive people. Central Bank Governor Ex-Morgan Stanley, and very, very smart, chairman of the Securities Exchange Commission, a couple of the CEOs of the banks, but I also went up out of the sort of bubble of Accra to Kumasi. And my wife lived in Kumasi, actually, since she was six years old in the early 70s.
But we’re doing three projects there, including both Deutsche Bank and contractor as the builders of these projects. So the first critical one is the market in Kumasi. It’s the biggest uncovered market in West Africa at the moment with 8000 traders and half a million people a day going through this market. And it’s a regional market for Benin and Togo, as well as northern middle Ghana. So it’s hugely important. And we’re covering it over. We’re putting a good building in there that will allow the character of the market to flourish, but with running water, with refrigeration. And it’s going to be a really great project and will help generate lots of economic activity.
The second project we’re doing is extending the airport. So it’s going up from 250.000 people in a year to a million. So cargo and trade is suddenly opened up for the agricultural communities around.
And then the third project we’re looking at and hoping to do with both contractor and Deutsche Bank is a teaching hospital which will be focused on neonatal care and will half the infant mortality rate in the region. So three really great projects in one city without a penny of ODA money, overseas development aid. This is being done on a commercially financeable basis and hugely developmental, so it’s really exciting. We do a lot of projects that don’t have as much developmental impact, but when we can both support British exports and do something developmentally in the country, it’s a great combination and really what we would love to do more of.
Clarissa Dann Are there any other deals that you’re equally proud or is this sort of the jewel in the crown at the moment?
Louis Taylor I mean, there are many similar projects. So we’re building hospitals in Angola, in Zambia as well as Ghana and in Oman. We’re building airports not only in Ghana, there’s a second one, also in Ghana, but also one in Uganda, which is helping to develop the oil fields that Uganda’s just discovered. And a range of other projects around Africa, but not only Africa, elsewhere in the world as well, so we’re proud of them all to one extent or another. And even in hydrocarbons, you know, we’ve done a project in Ghana, an offshore oil and gas field, so the gas gets piped onshore and burned in a relatively clean way in power stations, certainly much cleaner than the hundreds, literally hundreds of diesel generators that no longer need to be used. So you’re replacing the dirty diesel with the cleaner gas as a transition towards fully clean energy, ultimately in Ghana in the decades to come.
Clarissa Dann So UKEF is actually helping Africa to add value in the continent rather than just exporting raw commodities?
Louis Taylor Absolutely, yeah. I mean, I was CEO for a different bank than Deutsche Bank, in Vietnam. And, you know, the expression for developing markets often is, ‘moving up the value chain,’ and it’s a well-worn expression. But what does it mean? It really means you’re not only producing coffee and rice in Vietnam, you’re processing it as well. You’re roasting the coffee, you’re freeze drying it, you’re packaging it up and you’re exporting it and capturing more value. So similar with Ghana, with a lot of its commodities, whether it’s bauxite or whether it’s gold or oil and gas or cashews or, you know, the whole range.
Clarissa Dann And moving from the sublime to the more near at home. How is the UKEF preparing for Brexit?
Louis Taylor So interestingly, we feel pretty ambivalent about Brexit. The mandate we have of filling in gaps in the private sector, provision of finance and insurance for exporters; that’s good in or out of the EU. And Brexit is not going to change the credit quality of the purchases of British exports, nor is it particularly going to change the liquidity of their financial providers. It may cause British exporters to be more ambitious in the jurisdictions they go to and we may get busier, but fundamentally, we’re here to be kind of a constant in an ever changing world.
Clarissa Dann Louis, thank you so much for coming in. It’s been great to hear all about that project and the wider exports you’ve been doing.
Louis Taylor Clarissa, thanks very much for having me. It’s been great to talk about my favorite subject.
Clarissa Dann I’d like to thank Louis Taylor for his insights into the 2019 global trade and export finance landscape and of course, to all of you for watching. To catch our monthly reports on other markets or to subscribe to our newsletter, go to TRADEFINANCETV.NET.