With the lights now dimmed on 2013, we are looking with great anticipation to opportunities to help our member countries move towards their development targets while also growing our business in 2014. It may seem like a fine balance but we’ve been operating well in this unique space of development and private sector objectives for over a decade now where to date, we’ve helped our member countries attract over $13 billion worth of trade and investments. This resulted in job creation, increased access to power, water, sanitation, and other critical facilities for the populations we serve.
As we move into 2014, we expect to see many of the same trends in our African member countries that we’ve been seeing in the past few years recycle themselves with few exceptions.
The one underlying theme we’ve detected that is worth notingat the outset is that countries are taking a public-private approach to many of their projects. This is partially based on necessity as host countries of many donors focus on shoring-up their economies against further losses. This direction can be positive. It will bring some level of competition, with countries required to prove the feasibility of their proposals like never before as they go head-to-head with others seeking similar financing. This approach can yield an Africa that is more transparent, resilient, self-reliant and confident in its capabilities.
The first trend that we see continuing is infrastructure development. In fact, we can’t stress enough the importance of this sector, which covers everything from constructing power generators to repairing and constructing roads and buildings. This is at the heart of what the continent most needs in order to attract investments. I believe most countries have also reached this conclusion and are now working feverishly to create the type of environment that will be conducive to business.
The second trend that is directly related to the first deals with environmental sustainability. For decades developed countries have been preaching this to donor recipients, which many weren’t able to act upon in the first instance. This had more to do with competing priorities and limited capacity and resources. But the landscape is now shifting and there are real opportunities for countries to gain from the new technologies being proposed. There is real optimism that this time around, the message will stick partly because it boils down to good economics. Reducing harmful emissions can reduce the cost of lives, lost harvests, lost income from related illnesses such as asthma and pulmonary diseases, and in many more areas.
Over the past year, ATI has covered transactions that are contributing to an increase in greener technology imported from countries such as Italy, which are helping local manufacturers not only introduce efficiencies into their production lines, but also decreasing harmful levels of fossil fuel CO2 emission into the environment. In terms of electricity generation, here too, we have seen a shift in the approach of project owners to one that readily incorporates alternative options considered to be cleaner and more sustainable such as wind energy. The Lake Turkana Wind Power project in Northern Kenya, which is set to add 300 MW of clean power to the national grid in 2014, is another project that ATI insured and it’s also a perfect example of the different approach now being taken by some countries to satisfy their power needs in a more environmentally sustainable manner.
Agriculture is the third trend that remains a priority for most African countries. This makes perfect sense given that the sector contributes the most jobs, the lion’s share of countries’ Gross Domestic Product and, in many countries, the largest source of foreign exchange reserves. The challenge that countries are now trying to solve is how to modernize farming while also scaling up exports of agri-products in order to fetch more income. The natural resources sector is also related to this as countries now realize the importance of seeking out options to process these resources in order to lift themselves up toward middle-income status.
The last important trend to mention concerns the availability of financing – a factor that underpins all others. The retrenchment phase of international banks seeking cover from the global financial crisis that started to unravel in 2007 marked the beginning of a trend that has seen African banks and the African-based and African-focused banks step up in terms of arranging financing in some of the continent’s major projects. Add to this, the potential constraints caused by the newly implemented Basel III regulations on banks and there appears to be some serious obstacles in place.
To help banks overcome some of the challenges they currently face, we created a product that has the ability to cover a bank’s entire lending portfolio based on sector or other criteria. This was seen to be a more efficient way of meeting the demands laid out by the banks that represent one of our largest client groups. We expect to finalise our first deal in this product range with a large Kenyan bank in early 2014.
Combined, I predict that these growth sectors will help the continent pull together in a way that will see greater self-reliance. This will include increased cross-border trade, increased intra-regional investments and an approach to planning future strategy that increasingly seeks out the best and most viable commercial solutions to their development challenges.
Ultimately, these trends support efforts to deepen regional integration. Measures that are already underway in many regions will see a lowering of cross-border tariffs on goods, streamlining of the border entry process, shorter time required and less amount of regulations to set up a company – all leading to the freer movement of goods, services and people across borders. This will be an important aspect of not only increasing Africa’s attractiveness to internationals but perhaps even more significant, it will help make Africa more attractive for increased African investments and trade within.
By George Otieno, CEO
