West Africa: how businesses are coping with the crisis

A little wind of optimism or relief blew during the video conference on the theme, “What impact on corporate financing in the West African Economic and Monetary Union (Uemoa)”. Organized on June 6 by BPI France (the French Agency for Business Financing) in Abidjan, this webinar brought together stakeholders from the world of finance to assess the economic situation of Uemoa and how businesses were going through this period.

François Sporrer, head of the regional economic service for West Africa at the Directorate General of the French Treasury recalled that the pandemic has “relatively spared” Africa. For the region of Uemoa, the number of cases rises to 15,000 and 400 deaths, according to data from the American John Hopkins University. “It is important to underline that the continent is relatively preserved to understand the current challenges, namely to prevent the health crisis, finally limited, from becoming an economic and social crisis by an excess of protective measures or by the fact of transmission of the global economic slowdown, “he said.

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Quick reactions

The rapid reaction of the international community, but also of the countries concerned in the design of health and economic response plans has certainly helped to mitigate the effects of the pandemic. “The IMF acted very quickly and we must pay tribute to it, it disbursed in a few weeks almost $ 2 billion for the eight countries of the Uemoa zone, roughly half of their estimated additional budgetary needs. For Côte d’Ivoire, $ 886 million has been disbursed, ”explains François Sporrer. The World Bank, the European Union, but also the African Development Bank are also involved. All these support measures bring a breath of fresh air in the treasury of these countries. At the regional level, the institutions reacted quickly. The Central Bank of West African States (BCEAO) quickly took a series of measures to ensure access to liquidity for the banking system within the area.

“We can welcome the measures taken at the level of the Central Bank to remedy this liquidity risk and the credit risk through a specific arrangement,” notes Marc Guigni, deputy managing director at Société Générale Côte d’Ivoire, who explains also that this “softening of default rules will allow us to continue to support customers despite the difficulties”. The bank offers a reduction, or even free access, to certain banking services to enable businesses most in difficulty to reduce their charges.

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Measures in favor of companies

Measures of fiscal leniency (extension of deadlines on taxes and employer charges, cessation of tax audits, lifting of certain taxes) to reduce the cash flow of companies have been announced. “We are at the beginning of the application of these more direct measures for the formal and informal sector, the industrial sector, services and agriculture, with direct aid including subsidies for the smallest companies, mechanisms loan guarantees to encourage banks to reschedule or help their client companies, ”explains François Sporrer.

The support plan in Côte d’Ivoire is 1,700 billion FCFA (2.5 billion euros), which corresponds to 5% of Ivorian GDP. Several support funds have been created, including a fund for large companies which will essentially grant bank loan guarantees. For formal sector SMEs, a guarantee mechanism will be put in place as well as subsidies, and for the informal sector, a fund endowed with CFAF 100 billion is created and will provide aid in the form of donations. A fund for the agricultural sector, in order to maintain the supply of inputs and prepare the next harvest is also planned. All of these funds will be matched by the Ivorian government and donors.

“The vast majority of banks have reorganized their lending policy, with the idea of ​​being able to alleviate the difficulties encountered and to overcome this crisis for businesses. We have observed slowdowns in bank flows and cash flow tensions for certain customers, ”notes Marc Guigni. The bank must adapt its organization, focus on agility, speed and adopt a proactive approach towards its customers. “The injection of new funds has enabled some companies to get through the crisis,” he notes.

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Digitization

“We have continued to strengthen our digital strategy through innovations and the dematerialization of banking operations, but also the dematerialization of credit requests”, he continues. The requests are made online, the extension of deadlines, for the companies which request it, have been made. Each speaker noted the importance of digitalization to mitigate the crisis but also to position themselves in the future. “The digital revolution will continue, according to Laureen Kouassi Olsson, investment director for the Amethis fund in West Africa, who continues:” We are positioning ourselves to support it, particularly in the health sector which is a priority , but also in the distribution and education sector. “

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On the financial markets

The stock markets plunged and Africa was not spared. The decline was steepest for the most connected stock exchanges, such as that of Cairo, Lagos or Johannesburg. The regional stock exchange (BRVM), which lists 46 companies, did not get through the crisis. “In March, we lost 8.16% on the composite index, then we went back into the green in April, and we post a slight decrease in May. The good news is that our market remains less volatile compared to other African stock exchanges and to the rest of the world ”, analyzes Félix Edoh Kossi Amenounve, director general of the BRVM. He is also delighted with the performance of the bond market, which has remained very dynamic, with a 35% increase in bond issues. “Other good news: we have not registered any market defaults, all States, all institutions, all private sector companies have honored their commitments in terms of interest, repayment of their loans and payment of dividends. from listed companies, “he said.

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Resilience

“Overall, the impact is relatively limited, because the containment in Côte d’Ivoire was not total. Countries like Ghana and Nigeria, which have experienced tighter confinements and are highly dependent on oil (prices have fallen), have suffered significantly more, ”explains Laureen Kouassi Olsson. With a more diversified economy, “we are pretty optimistic,” she comments.

“According to the IMF, the growth of the UEMOA will be around 2.3% instead of the 6.3% expected before the crisis, which is nevertheless not bad, if we consider that for the whole of the ‘Africa, the IMF expects a contraction of 1.4% of GDP. What is even more interesting is the expected rebound. The countries that are the least impacted will rebound little and those that will be the most impacted will have a V-shaped curve. The most spectacular being that of Côte d’Ivoire, whose growth 2021 is expected at 8.7%. The highest growth in sub-Saharan Africa, ”explains François Sporrer. Even if uncertainties persist, the speakers generally displayed a certain form of optimism for the end of the crisis.

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