LUSAKA, 17 April 2012 – At a breakfast forum co-hosted by the Zambian Association of Manufacturers (ZAM), Jef Vincent, the Chief Underwriting Officer for the African Trade Insurance Agency (ATI) and Pizzaro Lukhanda, ATI’s Resident Underwriter based in Lusaka outlined the inherent risks facing local manufacturers, who may be interested in purchasing capital equipment or selling their products outside of Zambia.
Speaking from a background of over 20 years of credit insurance experience spent working in Asia, the Middle East and Europe, Jef Vincent, the Underwriting Head of ATI points out that “As a newly classified middle income country, Zambia has tremendous export possibilities that could be better realised with the help of credit risk insurance products.”
Insurance that protects against non-payment risks can offer a solution to common challenges faced by companies in Zambia. On the import side, Zambian companies may be told to pay up front because they are unable to negotiate credit terms with their foreign suppliers as a result of default risks.
And on the flip side, Zambian exporters continue to face non-payment and other risks as their clients in Europe and elsewhere default on payments. Trade Credit Insurance can cover these risks and allow Zambian companies to conduct business on credit terms that will not tie up their collateral or delay their production cycle.
Banks can also take advantage of these products, which although new to Africa, have been in existence in Europe and North America since the beginning of the last century. For banks, the product covers similar risks but it can be applied to, for instance financing/loan facilities or on their clients. In one transaction conducted in 2011, for example, ATI insured an African multilateral bank’s financing facility, which was set up to assist the Zambian government import fuel.
Demand for ATI’s credit risk insurance products has been growing over the past few years in Zambia.
ATI’s local Representative, Pizzaro Lukhanda notes “In 2011 alone ATI facilitated trade and investments into the Zambian economy valued at over $453 million. Of these, local companies benefited from the knock-on business opportunities and investments these deals brought into the country.”
2011 ATI Transactions in Zambia
|
Rating |
Product |
Value (US$000) |
|
Protection of a Business |
Political Violence, Terrorism & Sabotage |
13,500,000 |
|
Agricultural exports |
Credit Risk Insurance |
7,600,000 |
|
Equipment Purchase |
Credit Risk Insurance |
82,000 |
|
Purchase of transportation vehicles |
Credit Risk Insurance |
200,000 |
|
Supply of Copper Cathodes |
Credit Risk Insurance |
22,500,000 |
|
Supply of digital Microwave equipment |
Credit Risk Insurance |
8,700,000 |
|
Financing facility for mining operations |
Credit Risk Insurance |
50,000,000 |
|
Fuel Imports |
Political Risk Insurance |
350,000,000 |
|
Total |
452,582,000 |
