NAIROBI, 29 September 2011 – This has been a challenging few months for East Africa. Most of the problems can be linked to the severe drought that has crippled countries in the Horn of Africa causing death and economic hardship throughout the region. Economically, the crisis is predicted to impact the region’s growth by as much as 0.5 per cent of GDP according to the World Bank’s latest statistics. In Tanzania, where 12-hour power cuts have been enforced for the past two months, the crisis is severely impacting the power sector.
In a bid to put in place a quick solution, the government of Tanzania contracted a company to build two power plants that will operate as turn-key projects leaving Tanzania in control of their operation and maintenance. The project is seen as a win-win proposition because it will provide additional generation capacity in the existing grid and it will improve the grid’s reliability and the quality of is power supply.
The project is part of a public-private sector solution model that Tanzania has been credited for implementing to finance its long-term infrastructure needs. Under this deal, the Norwegian Export Credit Agency, GIEK, is providing insurance support to the lender on a credit facility valued at just over $100 million. GIEK approached the African Trade Insurance Agency (ATI) to reinsure the deal based on the strength of ATI’s preferred creditor status agreement with governments in the region such as Tanzania.
“Through this deal and others like it, Tanzania is proving that it is serious about developing its infrastructure – and ATI plans to remain a strong partner with them. So far this year, we’ve supported projects valued at close to $400 million that are directly impacting Tanzania’s water, energy and other infrastructure needs,” commented ATI’s resident underwriter in Tanzania, Albert Rweyemamu.
Launched in 2001 to act as the export credit agency for Africa, ATI has continued to decentralise its operations where it has local offices in Tanzania, Uganda and in Zambia, which also covers Malawi. Close proximity to its clients and stakeholders has led to increased confidence in ATI’s ability to accurately interpret on-the-ground risks in Africa from international partners such as GIEK of Norway, SACE of Italy and Atradius of Ireland.
“Increasingly international companies are approaching us to cover large deals that they themselves may not have as much information about as we are able to collect. We are also able to provide an extra measure of comfort that is often enough to tip the scales in favour of the project receiving the green light from these companies,” notes Rweyemamu.
In 2011, ATI has already recorded support of $575 million worth of infrastructure projects ranging from rehabilitation of ports, roads and water supply systems to installation of power plants in Burundi, Kenya, Tanzania, Uganda and Zambia.
