Foreign Agricultural Service

1. AGRIFICA CONFERENCE: FACILITATING TRADE WITH AFRICA Foreign Agricultural Service UNITED STATES DEPARTMENT OF AGRICULTURE Financing Options and Solutions for the Value Added Chain Michele Kennedy Kouadio, Planning and Analysis

2. U.S. Department of Agriculture (USDA) Foreign Agricultural Service (FAS) represents a broad range of activities offered by 113,000 employees in many USDA agencies including: Agricultural Research Service (ARS); Natural Resource and Conservation Service (NRCS); Animal Plant Health and Inspection Service (APHIS); Farm Service Agency (FSA) FAS is the lead international agency for USDA with 1,300 employees located globally in U.S. Embassies or Agricultural Trade Officer FAS staff responsible for helping people in the AME region are located in U.S. Embassies in the in: Amman, Dubai, Cairo, Dakar, Lagos, Nairobi, Pretoria, Rabat, Riyadh USDA FOREIGN AGRICULTURAL SERVICE

3. PRESIDENT OBAMA’S NATIONAL EXPORT INITIATIVE (NEI) GOAL Double U.S. Exports In A Few Years…this means: • Opportunities for African entrepreneurs and their partners/suppliers • Working with Small, Medium Sized Enterprises (SMEs) in Africa and the United States • Better coordination among U.S. government international agencies to better serves its African collaborators and partners. Some agencies include: • theCommercial Service • State Department • Agency for International Development • U.S. Export Import Bank • Overseas Private Investment Corporation • Small Business Administration, and others • Working strategically with organizations such as the Corporate Council on Africa (CCA)

4. THE QUESTION IS HOW, NOT WHEN • Comparing financing programs across agencies to be able to appropriately refer and guide African businesses or their U.S. partners to the right agency, and program that can help • Listening closely to the needs of the African business community and their partners • Educating banks in the U.S. and Africa about the details and benefits of financial programs that can improve the disbursement loan rates for agribusiness • Streamlining our programs to make them more understandable and inclusive of African businesses

5. NOTE U.S. EXPORTS AND IMPORTS CLIMBING OPPORTUNITIES FOR AFRICA

6. Market Access, Foreign Market Development, Technical Assistance for Specialty Crops, Quality Samples and Emerging Markets http://www.fas.usda.gov/programs.asp Trade Events http://www.fas.usda.gov/agx/trade_events/trade_events.asp Lists U.S. Food Distribution Companies http://www.fas.usda.gov/agx/buying_us/directory_food_distribution.asp OFFICE OF TRADE PROGRAMS HELPS DEVELOP NEW MARKETS IN AFRICA

7. U.S. SUPPLIERS LIST • http://fas1.agexportservices.org/Apps/StoreFronts/search.asp

8. Some examples of agricultural trade organizations… American Soybean Association U.S. Poultry and Egg Export Council U.S. Grains Council U.S. Apple Export Council National Sunflower Association U.S. Potato Promotion Board National Confectioners Association U.S. Dairy Export Council State Regional Associations http://www.fas.usda.gov/pcd/PartnersSearch.aspx USDA’s NETWORK CAN HELP AFRICAN BUYERS FIND U.S. SUPPLIERS

9. State Departments of Agriculture State Regional Trade Groups --Food Export USA- Northeast Commodity & Industry Organizations Other U.S. Government Trade Agencies Farm Organizations Banks & Local Business Organizations Colleges & Universities EXTENSIVE USDA NETWORK TO HELP AFRICAN AGRIBUSINESSES

10. USDA AGENCIES OFFER VALUABLE KNOWLEDGE AND SERVICES Animal Plant Health and Inspection Service (APHIS) http://www.aphis.usda.gov/import_export/index.shtml Agricultural Research Service (ARS) http://www.ars.usda.gov/Business/Business.htm Natural Resource and Conservation Service (NRCS) http://www.nrcs.usda.gov/partners/ Farm Service Agency (FSA) http://www.fsa.usda.gov/FSA/webapp?area=home&subject=coop&topic=was FSA State Offices http://www.fsa.usda.gov/FSA/stateOffices?area=stoffice&subject=landing&topic=landing

11. Guarantees loans extended by U.S. Exporters or assignee U.S. banks to USDA approved foreign banks in the AME region On a firm contract between the U.S. exporter and the African buyer, covers up to 98 percent of principal and a portion of interest in the event of a payment default by a bank in the AME region to the U.S. bank or exporter Credit terms covered by the guarantee can range from 30 days up to 2 ½ years (depending on country risk and other factors); and there is no minimum or maximum sale (limitation is the approved allocation or bank limit approved) U.S. bank and issuing bank in the Africa Middle East (AME) region negotiate specific terms consistent with the GSM-102 payment guarantee GSM-102 EXPORT CREDIT GUARANTEE PROGRAM

12. GSM-102 EXPORT CREDIT GUARANTEE PROGRAM • Letter of credit can be issued by any USDA approved bank in any bank-eligible country in the AME region for shipments to any country in the AME region Example: shipments Middle East, and SubSaharan Africa financed from South Africa • Risk based fee paid by the exporter before the guarantee issued (based on tenor negotiated between banks; not tenor extended to importer) http://www.fas.usda.gov/excredits/gsm102fees.html

13. GSM-102 DOES NOT COVER RISKS OF THE BANK IN THE AME REGION MAKING THE LOAN TO THE AFRICAN ENTREPRENEUR Banks in the AME region may have some of their risks covered by programs offered by: • International Finance Corporation (IFC) http://www.ifc.org/ifcext/about.nsf/Content/Structured_Finance • African Development Bank (ADB) http://www.afdb.org/en/topics-and-sectors/initiatives-partnerships/african-financing-partnership/ • Africa Export Import Bank (Afrexim) http://www.afreximbank.com/afrexim/en/Programmesfacilities/ProgrammesFacilities/AfricanTradeExpansionDiversificationScheme.aspx

14. GSM-102 ONLY COVERS AGRICULTURAL/FOOD PRODUCTS PRODUCED IN THE U.S. – WIDE VARIETY

15. Coverage Of 97 Percent On Principal For Repayment Periods Up To 12 Months Guarantee Fees For These Transactions Are The Same As Those Announced On The FAS Website For Comparable Risk Categories And Credit Periods Requests For Coverage On Non-interest Bearing Obligations Must Be Indicated In Or On Gsm-102 Guarantee Application Increases Flexibility To Meet African Buyers’ Specific Financing Needs Where The Repayment Arrangement Provides For Deferred Payment Of A Principal Amount Only, Without Provisions For Separate Interest Charges For The Latest Updates On FAS Programs And Activities, Go To The Fas Web Page At Http://Www.Fas.Usda.Gov NON-INTEREST BEARING DEBT OBLIGATION: USANCE LETTERS OF CREDIT

16. Review Current List Of Approved Banks In The Africa Middle East (AME) Region, Or Identify A Bank In A Bank Eligible Country Where The Importer May Have A Banking Relationship Http://Www.Fas.Usda.Gov/Excredits/Foreignbanks.Html Contact the appropriate FAS Agricultural Officer in the U.S. Embassy or Trade Office in your country or region To Discuss GSM-102 Program Importer Approaches Approved Bank In The AME Region; Requests A Letter Of Credit (L/C) Be Opened In Favor Of The Exporter under the GSM-102 Program The USDA Approved Bank in the AME region Will Perform Due Diligence On The Importer (Review Of Financials ,Cash Flow Etc) To Determine Loan Terms That This Bank Will Offer To The Importer (USDA does not dictate terms) The USDA Approved Bank In The AME Region Will Negotiate Terms Of The Trade Credit (Under The GSM-102 Program) With The U.S. Correspondent Bank (U.S. Exporter Applies For The Guarantee But Usually Assigns To A U.S. Bank) Importer Requests Exporter To Apply For The GSM-102 Program; first Time GSM Exporter (Approved By USDA) Must Submit Signed Contract To Program Operations IMPORTER APPROACH TO GSM-102

17. In FY 2011, $700 million programmed; a new allocation announced after October 1, 2011 (fiscal year 2012 in U.S. government) Approximately $500 million remaining for AME region – no specific allocation by country (first come first served basis) Approximately $200 million registered for shipments to AngolaEgypt, Iraq, Ghana, Nigeria, South Africa, Kenya, Morocco, Saudi Arabia Sales registered for soybeans, wheat, corn, soybean oil, poultry The exporter can register GSM-102 sales until Sept 30, 2011 (over $500 million still available) Can ship 4 months from the GSM-102 guarantee date (includes one month grace period) GSM-102 AFRICA MIDDLE EAST REGION

18. EXPLORE FINANCE OPTIONS GSM-102 APPROVED BANKS IN THE AME REGION U.S. BANKS OR EXPORTERS TEND TO EXTEND GSM-102 TRADE CREDITS where …. BETTER COUNTRY RISK GRADES AND BUSINESS PROSPECTS 2010 and 2011 – Banks using GSM-102 located in South Africa, United Arab Emirates, Africa Export Import Bank (multilateral bank located in Egypt) U.S. Banks generally extend trade credits where overall risk is reduced, where they have existing correspondent relations, or where U.S. Clients intend to expand exports (poultry, wheat, grains, consumer-oriented products)

19. Angola, Benin, Burundi, Central African Republic, Chad, Comoros, Cote d’Ivoire, Republic of the Congo, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Liberia, Libya, Madagascar, Mali, Mauritania, Niger, Rwanda, Seychelles, Sierra Leone, Tanzania, Togo, Zambia, Zimbabwe SHIPMENT ONLY COUNTRIES SUB SAHARAN AFRICA: Must Use Bank In Bank Eligible Country

20. SUBSAHARAN AFRICA COUNTRIES WHERE BANKS CAN BE APPROVED NORTH AFRICA MIDDLE EAST Algeria, Bahrain, Egypt, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Pakistan, Qatar, Saudi Arabia, Tunisia, United Arab Emirates Botswana, Burkina Faso, Cameroon, Cape Verde, Gabon, Ghana, Kenya, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Nigeria, Senegal, South Africa, Swaziland, Uganda

21. SUBSAHARAN AFRICA APPROVED BANKS IN AME REGION NORTH AFRICA MIDDLE EAST Egypt: African Export-Import Bank (multilateral) Commercial International Bank (CIB) Jordan: Arab Bank PLC Jordan Kuwait Bank The Housing Bank for Finance & Trade United Arab Emirates (UAE): Commercial Bank International PSC Credit Europe Bank (Dubai) Ltd. Mashreqbank PSC National Bank of Ras Al-Khaimah PSC (Rakbank) Stay current on changes Nigeria: Diamond Bank PLC Ecobank Nigeria PLC United Bank for Africa South Africa: ABSA Bank Limited FirstRand Bank Limited Investec Bank Limited Nedbank Limited

22. WITH GSM-102 COMPARISON WITHOUT GSM-102 U.S. exporter reluctant to ship to African importer without cash in advance Bank in the Africa Middle East region may be unwilling to provide a loan to import agricultural products Any financing to African importer likely to be short in tenor and high in costs U.S. suppliers/exporters more likely to ship to Africa on terms; paid when they assign GSM-102 guarantee to U.S. bank, ship and present documents to assignee U.S. bank U.S. banks with existing correspondent banking relations with banks in the AME region can leverage their credit limits to those banks as their risk is reduced with the GSM-102 payment guarantee Importer in Africa now in better position to negotiate loan terms (tenor, interest rates, etc) with an approved bank in the AME region that has a trade credit (U.S. $) extended by the U.S. bank Note: Outside of GSM, a bank in a non-eligible banking country may provide GSM approved bank in the AME region a guarantee or introduction for the importer

23. AFRICAN IMPORTER BENEFITS • U.S. exporter interest in Africa grows because the U.S. bank pays them when they ship goods to the African importer • Importers may be able to negotiate attractive loan terms with USDA approved banks in the AME region because of the trade credit provided by the U.S. exporter or more likely the assignee U.S. bank • Approved banks in the AME region can negotiate credit terms with existing correspondent U.S. banks or attract relations with new U.S. banks

24. Agribusiness Value Chain (Courtesy of IFC) Fertilizers and other Chemicals Project/Corporate Finance CIT – Access to Markets Land Infrastructure/Logistics Financial Institutions Market Infrastructure Pre-Harvest Finance Trade Finance Risk Sharing Facilities

25. Demand continues to grow for potatoes; hotels and restaurants, french fries Importer wishes to construct a warehouse to hold locally produced and imported potatoes Importer approaches U.S. exporter to purchase U.S. seeds U.S. exporter approaches USDA for GSM-102 Export Credit Guarantee Program If exporter wishes to purchases trucks, scales or services, or project finance for the warehouse, contact: U.S. Export Import Bank (Exim) Overseas Private Investment Corporation (OPIC) International Finance Corporation World Bank (MIGA) VALUE ADDED CHAIN: ONE EXAMPLE

26. GSM-102: MUST BE A BENEFIT FOR EXPORTER, IMPORTER AND BANKS TO BE SUCCESSFUL • Shared risk • Favorable terms • New markets for U.S. agricultural exports • Diversifies product origin for importers • Enhanced food security managed through sustainable, commercial practices • Expanded business opportunities and investment in overseas markets

27. U.S. AGRIBUSINESSES LOOK FOR PROSPECTS WITH AFRICAN ENTREPRENEURS

28. USDA FOREIGN AGRICULTURAL STAFF Michele Kennedy-Kouadio Team Lead, GSM-102 Working Group Africa and the Middle East Region (202) 720-5151 Michele.Kouadio@fas.usda.gov Ross Kreamer, Agricultural Counselor Corey Pickelsimer, Agricultural Attache Pretoria, South Africa agpretoria@fas.usda.gov Link for other FAS Representatives in the AME region: Amman, Cairo, Dakar, Lagos, Nairobi, ATO Office Riyadh (covers most countries on the continent) http://www.fas.usda.gov/ofso/overseas_post_directory/ovs_directory_search.asp