The World Health Organization (WHO) declared a Public Health Emergency of International Concern on 30 January 2020 due to the fast spread of COVID-19. With the threat of a pandemic looming and noting the crumbling health infrastructure in Côte d’Ivoire, on 5 March 2020, Deutsche Bank and ICIEC signed a financing facility agreement to support Côte d’Ivoire’s health infrastructure through the construction of two new regional hospitals as well as five new medical units in five additional hospitals. The agreement was signed a few days before the WHO declared the pandemic on 11 March 2020; the same day, the first case of COVID-19 was detected in Côte d’Ivoire.
Mr Raphael Fofana, Underwriter in ICIEC’s Underwriting Department, Sovereign Risks Division, provided some insight on the Corporation’s involvement in this award-winning project.
Q: Could you please briefly introduce the overall project and financing structure?
RF: Of course. The government of Côte d’Ivoire mandated Deutsche Bank to mobilize financing of around 142 million Euros to fund the construction of two regional hospitals, with approximately 200 beds each. One of the hospitals is located in Adozpé (100 KM north of Abidjan) and Aboisso (100 KM east of Abidjan). The project also funded five new medical units in five additional hospitals located across the country.
Deutsche Bank sought insurance from ICIEC for capital relief to more comfortably finance the transaction given the size. ICIEC’s cover provides Deutsche Bank with increased security against the risk of default. If the bank were to fund such a transaction without ICIEC’s cover, the transaction would have been too expensive for the Government of Côte d’Ivoire to bear.
Q: Why was ICIEC sought as a partner over other insurers?
RF: ICIEC was the clear choice of insurer for this project from the start. Based on the considerable value of the transaction, few insurers would have the risk appetite for this project in the first place. As a long-standing partner and client of ICIEC, Deutsche Bank is familiar with the unique added value we offer as a multilateral institution. We have additional tools to make our clients more comfortable.
One such unique aspect of our coverage is ICIEC’s Preferred Creditor Status (PCS), which helps ICIEC mitigate the risk of default in transactions. When a government knows that ICIEC is involved in a project, they are less likely to default on payments. And, if for any reason they do default, and they only have a limited amount of funds available to pay us or any private banks involved, they would be required to pay us before other creditors.
Our clients also appreciate that we hold high standards and implement a rigorous due diligence process in terms of developmental impact and environmental and social issues. ICIEC brings a development lens to the transaction because we make sure that the projects we support are impactful and that the results of our transactions benefit a broader population of our Member Countries.
Q: What was the developmental rationale for ICIEC to get involved in this transaction, and how does it align with Côte d’Ivoire’s national development plans?
RF: Under Côte d’Ivoire’s President, Alassane Ouattara, who was elected in 2010, the construction and renovation of the country’s hospitals were highlighted in the country’s national development plan. An additional, and more specific, National Health Development Plan was also prepared with the clear objective to build and renovate hospitals with an estimated cost of EUR 1.5 billion. The two hospitals and five medical units covered in this project are part of this program.
When assessing the project, ICIEC recognized the priority placed by the government of Côte d’Ivoire on renovating the existing healthcare infrastructure and building new facilities. It was an easy choice for us to proceed. As a multilateral insurer, part of our role is to support the private sector in financing seminal Government projects and bolster investments in critical sectors. In addition to this project, we support Cote d’Ivoire in constructing a potable water plant and renovating the country’s education infrastructure.
Q: What was the development impact of this project on the healthcare sector?
RF: The state of healthcare infrastructure in Côte d’Ivoire before this project was less than ideal. Malaria, yellow fever, sleeping sickness, leprosy, trachoma, and meningitis are all endemic to the Member Country. While government programs exist to control these and other diseases, the healthcare sector suffered from insufficient and deteriorated infrastructure. Therefore, strides in the government’s National Health Development Plan, of which this project is a part, significantly impact citizens’ access to healthcare. The project created 400 new hospital beds in the two hospitals and brought in state-of-the-art equipment and facilities, enhancing access to and healthcare quality in the typically underserved regions. Additionally, five new medical units in five other hospitals have been built. By insuring the financing of this project, ICIEC is supporting better health and well-being for citizens of our Member Country.
Q: What was the development impact of this project beyond the healthcare sector? Are there any links to SDGs you can make?
RF: The development of basic infrastructure in the health sector is crucial to achieving sustainable development and empowering communities in Côte d’Ivoire and beyond. The two new hospitals contribute to job creation, employing around 600 local people and fostering a micro economy in the surrounding areas. The construction element of the project also facilitates the trade of services and human capital between Côte d’Ivoire and Morocco.
By insuring the financing for the hospitals and medical units, ICIEC contributes to the achievement of the United Nations’ Sustainable Development Goals (SDG), specifically to SDG3 – Ensure good health and well-being for all. However, the project contributes broader impacts to SDG1 – End poverty in all its forms everywhere; SDG9 – Build infrastructure, promote sustainable industrialization and foster innovation; and SDG10 – Reduce inequalities between social categories.
Q: What were some additional unique features of the project that piqued ICIEC’s interest?
RF: An extraordinary bonus feature of this project was that it is an intra Organisation of Islamic Cooperation (OIC) investment. The Engineering, Procurement, and Construction (EPC) contractor was Moroccan. As Côte d’Ivoire and Morocco are both OIC members, this makes the transaction eligible to be classified as an intra OIC investment. This is precisely the collaborative type of transactions that ICIEC seeks to encourage.
Another unique feature of this project was the sheer size of the transaction. It is the most significant direct cover for the healthcare sector in ICIEC’s history, and the largest transaction ICIEC has closed in Côte d’Ivoire.
Q: This project started right when the COVID-19 pandemic started. How has the project contributed to Côte d’Ivoire’s COVID-19 response?
RF: The COVID-19 pandemic is ongoing in Côte d’Ivoire, and the two new hospitals will naturally be used as part of the national response. They will be operational any day now and will, of course, receive and treat COVID-19 patients as necessary. There will also be some designated facilities for COVID-19 testing and treatment.
The five additional medical units have also been integrated into the national response since their respective operationalizations. In these critical times, any reinforcement to the healthcare system will significantly impact citizens.
Q: Were there any specific challenges or lessons learned you would like to reflect on?
RF: On the financing side, it was very straightforward. There is direct financing from a bank to the government, and ICIEC provides insurance against the government’s default. This is something we inherently do.
The main challenge was in the execution of the project, which took place in the middle of the COVID-19 pandemic. The construction was planned before the virus took the world by storm. While the crisis created a sense of urgency given the critical nature of the healthcare infrastructure being developed, there was a period of adjustment to ensure workers’ safety and mitigate any challenges to the logistics, such as access to materials.
Q: Finally, this project won the Islamic Finance News Sovereign & Multilateral Deal of the Year 2020; can you tell us about what made this project so notable?
RF: This reflects how dire the healthcare situation in Côte d’Ivoire was before the project and highlights just how impactful investments in critical sectors could be. The size of the transaction and the intra-OIC nature of the project also contributed to this becoming a high-profile and award-winning project. ICIEC is proving that there is a need for Shariah-compliant insurance solutions and demonstrating how impactful its involvement can be.
