NAIROBI, Kenya, September 4 2003 — Africa’s bid to stimulate private sector-led growth and increase cross-border trade received a major boost with today’s signing of a Memorandum of Understanding between the African Trade Insurance Agency (ATI)-the continent’s only pan-African, multilateral import and export credit and political risk agency-and the Multilateral Investment Guarantee Agency (MIGA), the political risk insurance arm of the World Bank Group. The agreement calls for the two agencies to jointly promote foreign investment within Africa.
ATI and MIGA will help each other in the areas of business development, marketing and knowledge-sharing, as well as engaging in risk-sharing arrangements through coinsurance and reinsurance projects. The partnership with MIGA will put ATI in a stronger position to offer political risk insurance for longer-term, equity-based foreign direct investments and to complement its products for war and terrorism physical damage and for debt-related project and trade transactions.
The partnership aims to further the development and growth of the private sector in Africa by providing the additional confidence needed by companies that see commercial opportunities in the region but where they or their financiers remain concerned about perceived political risks.
Bernie de Haldevang, Chief Executive and Managing Director of ATI, the first multilateral export credit and political risk agency in which its member countries directly assume financial liability for the political risk losses which could affect trade within their own countries, welcomed the announcement:
“Today heralds a major breakthrough in the bid to increase African private sector growth as a tool for reducing poverty. It will also serve to ensure that ATI can better fulfill its mandate to encourage and support new investments into and among African countries.”
“The expertise and resources of MIGA, with its proven ability to draw on the World Bank Group’s extensive resources, together with ATI’s engagement of the private market to support trade political risk, where ATI member states have put up their own funds as risk capital, is a compelling and persuasive proposition. With the support of governments, the private sector and multilaterals, Africa can start to fulfill its investment potential.”
We are already working on two significant joint deals and we expect many more to follow.”
Motomichi Ikawa, MIGA’s Executive Vice President, reinforced this:
“Africa is a priority area for MIGA, and the region now represents 19 percent of our gross portfolio, a number we hope to see grow over the next few years. MIGA and ATI can draw on each other’s strengths to bring even more FDI into Africa. Together, we offer an unrivalled partnership and a clear message – Africa is open for business.”
Highlights of the Memorandum of Understanding between ATI and MIGA include:
An agreement to refer potential clients to each other, where appropriate, and share information;
Underwriting assistance, where ATI and MIGA will support each other in filing applications, analyzing risk, conducting contract drafting negotiations, collecting premiums, and collecting all requested information for the determination of a claim;
Risk-sharing through co-insurance and reinsurance contracts, where either ATI or MIGA will provide investment guarantees or insurance within the parameters of ATI’s leveraging arrangements with private market underwriters; and
Selective joint missions for business development and marketing within Africa, especially in regard to small- and medium-sized business enterprises in Africa or those enterprises engaged in intra-African trade and/or investment.
In order to promote knowledge sharing, MIGA and ATI will also hold regular consultations in Washington, DC, and Nairobi to discuss the implementation of the partnership agreement, share ideas and information on political risk insurance, and discuss possibilities for further cooperation.
ATI has provided political risk cover in partnership with Lloyd’s of London, Zurich Emerging Markets Solutions (part of Zurich North America) and other commercial credit and political risk insurers, since the commencement of its commercial operations in April 2002. Beneficiaries include foreign firms exporting goods and/or services to participating African countries; foreign financial institutions financing exports; and African companies from participating countries, that are exporting goods or services.
The governments of ATI’s member countries have agreed to participate jointly with private sector underwriters as ultimate risk-takers, thus creating a strong incentive to prevent and mitigate claims. It is estimated that risks underwritten under ATI’s initial mandate could generate as much as $5 billion over ten years in additional trade for its member countries.
Note to Editors
ATI was established at the Common Market for Eastern and Southern Africa (COMESA) Summit of Heads of State in May 2000 and launched by President Museveni of Uganda in Kampala in August 2001 in the presence of ten Heads of State and Government. Start-up funds of $105 million were provided by the International Development Association (IDA), the concessional lending arm of the World Bank, through the Regional Trade Facilitation Project, which was approved in April 2001.
ATI has recently extended its product range to cover payment risks on public buyers, provide cover against terrorism physical damage risks, and is also investigating the possibility of launching a working capital finance guarantee facility to help reduce the cost to African exporters of raising funds for exports and imports. ATI recently announced that it was issuing a comprehensive reinsurance policy for a major European Export Credit Agency.
Current ATI member countries are Burundi, Eritrea, Kenya, Madagascar, Malawi, Rwanda, Tanzania, Uganda and Zambia. For information on eligibility and types of risks covered, visit www.ati-aca.com.
MIGA was formed in 1988 to encourage foreign direct investment into developing countries by providing on commercial risk insurance against such risks as transfer restriction, expropriation, breach of contract, and war and civil disturbance (including terrorism and sabotage). MIGA also offers investment marketing services to help developing member countries promote their own private investment opportunities more effectively. Since its inception, MIGA has issued 656 guarantees for projects in 85 developing countries. Total coverage issued exceeds $12 billion, bringing the estimated amount of FDI facilitated to $50 billion. As of June 2003, MIGA’s gross exposure totaled $5.1 billion. For more information on MIGA, visit www.miga.org.
