Export financing: IGN FI to digitise Ivory Coast’s land administration system thanks to a buyer credit from Bpifrance

Export financing: IGN FI to digitise Ivory Coast’s land administration system thanks to a buyer credit from Bpifrance

This ground-breaking operation will serve as a new model in the field of export credit: Bpifrance has just granted its first export credit of 2021, amounting to 23 million euros, to the Ivory Coast’s Ministry of Construction, Housing and Urban Development (MCLU) for an ambitious project to modernise the urban land administration system, with the first phase to cover greater Abidjan at a total cost of 27 million euros. It is also the first time this type of financing has been used, both for the Ivorian ministry and for the French contracting party IGN FI, a subsidiary of the Geofit Group and an expert in the management and utilisation of geospatial data. Moci is the first to reveal the details.

The project itself addresses a thorny issue that affects the whole of the African continent: the land administration system and how to modernise it.

The project aims to digitise and simplify the entire land administration system of Ivory Coast’s economic capital, greater Abidjan to be precise, from Jacqueville to Dabou, together with Assinie. This represents a small technological revolution that will affect both the paper archives and the procedures, management and storage of documents, and especially property titles.

The project involves building a digital platform with a common foundation of forms and paperless procedures for all government agencies in the country involved with land administration. In due course it will enable users to carry out various formalities online as well as being able to check and obtain documents.

The final goal of the Ivorian authorities is to make property titles secure while at the same time simplifying the procedures. And greater Abidjan will be the first phase before the project is rolled out across the country.

Obtaining private funding to finance a cost-effective reform.

It’s an innovative project on several levels: it involves delivering the digital transformation of government agencies and seeking private financing to fund it because this type of reform can’t be financed out of the State budget”, Mbow Nassirou, Director in charge of modernisation, information technology, simplification and the securing of titles at the Ivory Coast’s MCLU told the Moci.

Everything in this area has been done on paper since 1906”, the senior civil servant explained during a videoconference organised by Geofit and IGN FI for the Moci. The procedures for delivering property titles are very lengthy – 200 days on average – and fraud and scams are widespread: 80% of cases coming before the Supreme Court in Ivory Coast relate to property, according to this senior Ivorian civil servant.

In addition, the fact that property titles are currently unreliable is an obstacle to investment and bank financing of property. “Banks will only provide finance of up to 10% of property acquisition because of this lack of confidence in property titles”, says Mbow Nassirou.

And at the same time, the Ivory Coast government is missing out on a significant amount of potential tax revenue every year due both to fraud and to the slowness of the administrative processes, which are serving as a brake on the production of property titles. The project is betting precisely on this potential for increasing the rate of production of administrative documents to make it ultimately self-financing.

The Ivorians singled out IGN FI thanks to projects it had carried out in Uganda and Tanzania.

When he became Prime Minister in 2017, Amadou Gon Coulibaly made modernisation of the land administration system a priority for his government. The MCLU launched a benchmarking study across the continent to see how other African states were addressing the problem. During this study Mbow Nassirou’s department discovered that promising projects for digitising land administration were already under way in Uganda and Tanzania, two English-speaking countries in East Africa. And they were surprised to learn that a French firm, IGN FI, was carrying them out.

We were surprised to see that it was a French company implementing a scheme in these English-speaking African countries, and it was a relief for us to come across a French-speaking player,” Mbow Nassirou recalls. English is not widely spoken in this Ivorian government department.

IGN FI carried out a feasibility study in 2018 at the request of the MCLU. And the question of funding soon arose, because the cost of the project was going to be almost 30 million euros.

The buyer credit: a direct loan guaranteed by the French government.

The Ivory Coast authorities were anxious to commission the execution of the project to the French firm who had carried out the study and already possessed the solid experience of working in Africa to enable it to deliver. And IGN FI was keen to see the project through to the end. So what kinds of funding could be envisioned?

Funding out of the Ivory Coast government budget was ruled out in view of the difficulties facing the country’s public finances. And there are no private sources of funding for this type of project. Funding from international donor agencies involves long and cumbersome administrative procedures culminating in an international call for tenders. A different solution had to be found.

In the course of discussions with the Bpifrance teams, IGN FI’s management learned about the possibilities of putting the funding together via a type of export credit arrangement, in the form of a buyer credit guaranteed by the French government.

So why not look at a direct loan to the MCLU from the French state-owned bank, guaranteed by Bpifrance assurance export, the French export credit agency, so as to enable the Ministry to honour the payment commitments set out in the commercial agreement? IGN FI for its part would be sure of receiving payment. The additional tax revenues to be generated by modernisation of the land administration system would enable the Ivorian Ministry to meet its repayment obligations to Bpifrance.

Active involvement of the Bpifrance teams.

The MCLU agreed to try out this audacious solution, in a first for the Ministry. Work on structuring the financial engineering for the project took almost three years, with the Bpifrance teams heavily involved in helping the partners put the package together.

In particular, a business plan had to be drawn up to demonstrate that the project was viable and that it would lead to tax revenues from the income generated by the project, which would be used to repay the Bpifrance loan.

The most innovative part of this project is the financing and the implementation of the business plan,” says Mbow Nassirou. “We established that it would be 200% profitable from year 3 due to the increase in tax revenues. At that point we would have increased from 15,000 titles per year to between 50,000 and 100,000 per year.” These titles mean fees and taxes paid by users which go into the State’s coffers.

For Bpifrance the project ticks all the boxes: on the one hand it was pursued by a French intermediate-sized enterprise with cutting-edge expertise, while on the other it fitted with the strategy of support for innovative and sustainable projects in Africa, as explained by Pedro Novo, Executive Director of Bpifrance Export: “The problem of property title security exists throughout Africa and there will certainly be opportunities arising in other African countries in the future. Our priority is to ensure that a project like this doesn’t fall by the wayside and can be delivered with appropriate financing solutions. Banks may be reluctant to grant export credits for projects below 25 million euros on the grounds that the risk-return ratio is not sufficiently favourable. Bpifrance has set up this offer to make the result of this financial craftsmanship accessible to SMEs and intermediate-sized enterprises that are engaged in export.

A project to give French engineering firms food for thought.

The commercial agreement was signed by Bruno Nabagné Koné, Minister for Construction, Housing and Urban Development, and Eric Thalgott, Chairman and CEO of Geofit, in December 2019 when a delegation from Ivory Coast visited Paris (see photo). The arrival of the Covid 19 pandemic held up the process, but the financial package, amounting to 27 million euros, was finally completed and signed in April 2021.

Aliénor Daugreilh, Head of Export Finance at Bpifrance, gives a summary of the main details: “The Ivory Coast Ministry of Construction, Housing and Urban Development was seeking financing for the entire project amounting to 27 million euros: we put together a structure which involves a buyer credit covering 85% of the total amount,” she explains.  “To complete the financing plan there is a commercial loan for the local portion plus a deposit. The financing is over a period of 10 years with an implementation period of 24 months.  It’s the result of three years of discussion with the Ivorian authorities and a great example of support for an SME throughout the various stages of the process involved in this type of financing structure.”

Aliénor Daugreilh believes this project should also serve as an inspiration for French companies in the engineering sector in search of innovative funding solutions for their clients: “another aspect that is specific to this operation is that in addition to the purchase of physical goods the financing covers a large component of intangible services,” she points out. “It’s unusual for these types of services to be covered by the export credits we finance. Businesses should use them more often as a catapult for French excellence in engineering.

A springboard for French firms in Africa.

Since this project has become a reality the MCLU has received many plaudits in Ivory Coast for the innovative nature of its approach and the solution found.  It has also been asked by other African countries such as Mali and Cameroon to present its scheme to government agencies who are also in search of solutions to enable them to modernise their land administration systems.

For IGN FI and its parent company Geofit, a group whose turnover is about 80 million euros of which 15% comes from international activities, the Ivory Coast project may be just a beginning. “It’s a springboard, because this project is taking place in a French-speaking country in West Africa, where we hadn’t succeeded in putting this type of project together in such a comprehensive way before”, says Christophe Dekeyne, Managing Director of IGN FI.

Eric Thalgott reaffirms the group’s international ambitions: “Our aim is to facilitate the dawn of a new age thanks to digitisation,” he says. “We are one of the leading French firms in our area: there are international opportunities in project markets that we are structuring with IGN FI. We are also planning to deploy the Geofit model internationally, and we are in the process of positioning ourselves in some countries.

For a group whose core activity is the gathering and processing of geographic and spatial data in order to model all sorts of urban planning, infrastructure and networks, Africa presents immense project opportunities but financing them is very difficult. Export credit is a new tool for this sector that is worth knowing about.

At Bpifrance, they hope to be able to capitalise on this operation as Africa represents fertile ground for developing export credits. “This deal fits in with a strong dynamic in our export finance activity towards Africa: 70% of our export credits are in support of French companies’ projects in Africa. The aggregate value has reached a billion euros since the initiative was launched in 2015,” concludes Pedro Novo.

Christine Gilguy – LE MOCI – 21/04/2021

Read the French online version: https://www.lemoci.com/financement-export-ign-fi-va-numeriser-le-foncier-ivoirien-grace-a-un-credit-acheteur-de-bpifrance/