How Social Bonds are Aiding Africa’s Economic Recovery from COVID-19

In a bid to help struggling economies in Africa following the COVID-19 outbreak, the African Development Bank (AfDB) has upped its sales of social bonds with the latest being a Kangaroo bond in Australia worth $463.9 million.

Whilst speaking on a previous social bond, the president of the AfDB Group, Akinwumi Adesina said, “These are critical times for Africa as it addresses the challenges resulting from the coronavirus. The African Development Bank is taking bold measures to support African countries”.

Quartz Africa reports that over 30 investors purchased the new bond, which will mature in five-and-a-half years. This marks the seventh social bond from the AfDB’s since it launched a program for the instrument in 2017, and its fourth during the pandemic.

The announcement comes just weeks after Ghana revealed its intention to issue a social bond. A move that is anticipated to spur other African governments to do the same.

Social bonds raise capital to fund projects that aim at improving society. However, it is a unique investment as investors receive neither a return nor repayment of principal, if the objectives are not achieved. In the past, the AfDB’s social bonds have been used to fund initiatives targeted at enhancing access to energy, water and sanitation.

According to a recent report by KangaNews, the African Development Bank had $1.75 billion of bonds mature from its 2015 benchmark deal and its most recent. Keith Werner, AfDB’s Manager of Capital Markets and Financial Operations, said the bank will issuing more of such bonds in Australia.

“In addition to the important contribution that socially responsible investors had to the success of this trade, it’s also gratifying to see such a large portion of the investors (41%) were domestic, which is an area where we haven’t seen strong support historically. We look forward to leveraging this momentum and continue evaluating opportunities in the future in this market”, Werner said.

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