African ministers gather in Kinshasa to discuss the impact of risk on foreign direct investments and trade
KINSHASA, 18 May, 2010 - Finance and Trade Ministers from all regions of Africa together with heads of financial institutions met today to discuss the impact, specifically of political risk on trade and foreign direct investments into Africa. Against a backdrop of global economic recovery, where much of Africa is recording stellar growth, delegates pointed to political risk as a significant challenge to the continent's full recovery.
The Roundtable on the Impact of Risk on Trade and Investments in Africa is the first in what its host, the African Trade Insurance Agency (ATI), hopes will be an annual event. The event was held ahead of ATI's 10th Annual General Meeting in Kinshasa, Democratic Republic of Congo (DRC). His Excellency Adolphe Muzito, Prime Minister and the Honourable Matata Ponyo, Minister of Finance, DRC presided over the event.
"Africa's recovery is backed by strong growth. However, the continent cannot rest on its laurels. The international business community still sees Africa as one of the riskiest places to do business, and this fact inevitably prevents some investors from doing business here. Without stronger investments, the sustainability of Africa's growth may be in jeopardy," noted Stewart Kinloch, Acting Chief Executive Officer of ATI.
Experts, such as the International Monetary Fund, have cited 2010 growth rates for Sub-Saharan Africa as high as 4.7 percent, which is double the pace of 2009. This contrasts to global growth rates, which contracted in 2009 and are projected to only reach between 2.7 and 3.2 percent in 2010. Africa's positive growth projections however, mask a flip side which is less positive. In 2009, Africa attracted less than 1 percent of global foreign direct investment with the sharpest decrease coming from banks.
Risk plays a major role in the decision by banks and investors to do business in a particular country. In Africa in particular, political risk is highlighted as one of the major factors blocking investments. In the next two years, several African countries will face national elections. As delegates noted, the Roundtable discussion comes at a crucial moment that will hopefully provide ample time for countries to access insurance and other financial tools needed to cover a majority of these risks.
ATI will announce its record-breaking financial results during their General Meeting tomorrow. The Agency is expected to announce dramatically increased growth rates for the third consecutive year. As an African institution, ATI provides risk insurance in order to protect investors and exporters - with the ultimate objective of attracting more investments into Africa and supporting increased trade. To date ATI has covered investments and trade worth over $2 billion. ATI is ranked as the second highest rated institution in Africa holding an 'A' Stable rating from Standard & Poor's. This standing gives investors the confidence they may need to put their money into Africa.