In anticipation of an extreme business environment brought about by the Coronavirus, various players in the African region are rolling out rescue plans for businesses. Economists have voiced their concerns of an extremely difficult economic situation and have urged players to brace for a rough 2020.
Heeding such calls is EquaLife Capital, the East African based fund managers which has announced plans to roll out a $20MM Africa Venture Debt Relief Fund by April 15th for venture businesses starting with a preliminary focus on the East African region.
“The Relief Fund is created and structured by entrepreneurs for entrepreneurs as we understand the need to act quickly to ensure businesses can survive, and then thrive again, minimizing impact and economic development opportunity lost to unforeseen business cycle pressures,” a statement calling for international venture capitalist read.
“The Relief Fund will provide short-term debt on concessional venture debt terms by utilizing our team’s deep experience of conducting thorough, but efficient due diligence and fast disbursement to support this African business ecosystem.
Loans will be structured using a template loan agreement with tenures of six to 24 months depending on the identified need(s) of the organization, with sizing ranging between US$200k to US$2MM.
Interest rates will be targeted between 5% and 10% annually. EquaLife Capital and its partners will make additional resources available ‘pro-bono’ to the invested portfolio companies to ensure that they are able to navigate the financial difficulties they are facing.”
The goal is to be able to set-up and prove to the market the effectiveness of this solution to either directly or indirectly support similar initiatives in other regions across the African continent in the coming months.
Equalife Capital has evolved over the years since inception, running a debt programme for East African businesses. The East Africa Venture Debt Fund provides short- to medium-term working capital, asset financing, and bridge financing to start-ups and innovative small and growing businesses (SGBs) operating in Eastern Africa, with a goal of expanding across Sub-Saharan Africa.
According to IMF chief Kristalina Georgieva, the world economy is facing “severe” economic damage from the Coronavirus pandemic that could be even more costly than the slowdown in 2009. The bank, she said is ready to deploy all our $1 trillion lending capacity.The global economy contracted by 0.6% in 2009 as a result of the 2008 global financial crisis.
A Saudi led conference on G20 economies is keen on developing modalities that will shield the economies of developing countries from the effects of the Coronavirus epidemic. While many governments are unveiling titanic spending packages against the Covid-19 pandemic, exceeding even the 2008 financial crisis, there has so far been no collective action plan from fora such as the G7 or G20.
COVID-19’s rapid transmission around the world, China’s deeply embedded role in global demand and supply chains, and the broader implications of international fiscal and monetary stimulus on Africa are critical in ascertaining possible scenarios facing Africa.
With the majority of African countries running fiscal deficits, their policy flexibility is limited and not enough can be done to counter the slowdown which appears to be approaching almost all sectors.