by David Ansara – Coordinator, African Loan Market Association
Africa is currently at the front of the pack of emerging markets with its high levels of economic growth and improved governance and stability. As major transactions and project financing opportunities emerge, domestic corporates and multinationals operating in Africa need access to debt to finance their operations.
In order to achieve this, the African Loan Market Association (ALMA) is serving to standardise the approach to syndicated loans in South Africa and several other African jurisdictions. Sharing the same structure and objectives of the Loan Market Association (LMA) in London, the standard-form legal documentation that the ALMA provides is a key component of syndicated finance in Africa.
Until recently, much of the syndicated or club lending in Sub-Saharan Africa (particularly in the below-USD 100m market) has taken place on a bespoke basis. In the past, banks would approach law firms to draft loan agreements, who in turn would use their own precedents and internal standards, creating inconsistency in the market. The presence of a regional association in Africa modelled on the LMA has helped to reverse this trend and align industry practice with international standards.
However, there is a common misconception that these loan documents are designed only for the benefit of banks and not the organisations seeking the capital: the borrowers. This is not the case. There are myriad advantages for corporate borrowers, who benefit from greater predictability, consistency and transparency of loan documentation, as well as the efficiency that standard documents can add to a financing transaction.