In a report on the state of Africa’s risk profile, youth are seen as the potential ‘game changers’ for the continent’s future

RoundtableInside

NAIROBI, 11 June, 2012 – The African Trade Insurance Agency (ATI) today released a report based on the discussions held during their 3rd annual Roundtable on the Impact of Political and Trade Credit Risks on Africa’s Trade and Investments. The report highlights the importance of addressing the concerns of a surging youth population, which now places Africa as one of the youngest continents on the planet. Convened by ATI, the event is a platform for African countries to begin managing and creating a more accurate risk profile that better reflects the progress and development found in many African countries.

In his opening address, Honourable Peter Kenneth, Kenya’s Assistant Minister of Planning, National Development and Vision 2030 noted that in Kenya, the growing youth population presented a particularly troubling situation as the country would be dealing with 11 million new job entrants into the market every year for the next decade. In order to turn the high youth population ratio into an asset, he stressed the need to court high level investments that can create sustainable jobs, and ensuring that the youth attain education and skills that meet market demand.

Globally, political risk insurers rate countries based on their regulatory, judicial and political environments. A country’s risk rating can impact on their ability to attract investments if the rating is deemed to be medium to high risk. Historically Africa, which is largely seen as one block, has consistently been rated as the riskiest continent in the world. This has had a profound impact on foreign direct investments and access to reasonably priced project financing.

Adding his voice to the high-level participants quoted in the report, Minister Kenneth reflected on the role of African leaders in improving the current business climate - “In a word, the political risks of the past have largely subsided. Furthermore, there is clear evidence that African leaders and regional institutions intend to keep things that way.”

He went on to cite as an example of Africa’s commitment to stability, the political successions in Malawi and Senegal, and the recent coup d’état in Mali, where ECOWAS countries moved fast to impose sanctions that eventually forced the army to retreat.

During the all day forum, expert panels discussed the impact of the shifting demograhics on Africa's risk profile in addition to two other key issues:

The impact and potential of economic, political and social contagion from the Arab Spring in Sub-Saharan Africa (SSA). Here the report concluded that there has been no significant impact on SSA due largely to the differing strategic interests and political regimes of the two regions. The report does however caution that before the uprising, few companies and projects were insured leading to massive long-term losses – this was deemed to be the critical lesson for SSA;
The impact of the Eurozone crisis on economies in Sub-Saharan Africa (SSA). The report cites the primarily negative impacts as a drag on African exports, decreased access to financing for SMEs and higher cost of financing for African banks due to the associated risks. The report offers recommendations that may help soften the impacts, which include a call to companies to protect themselves with credit risk insurance, to develop and implement a risk management culture and to diversify into alternative markets.

The report concluded with a list of eight recommendations aimed at improving Africa’s risk profile:

Fast-tracking infrastructure development;
Matching available opportunities with relevant skills;
More planning by governments needed to generate and create sufficient opportunities for the growing youth population;
Efficient harnessing of existing natural resources;
Improve accountability of leaders and building stronger institutions;
Enhance private sector participation by improving the business climate;
Use of the mainstream media and social media to aid development efforts; and
Better manage leadership issues in some countries and the issue of corruption.

Participating panellists and speakers included:

Andrew Mwenda, Journalist & Managing Director of the Independent in Uganda;
Anne Aliker, Head of Investment Banking, CFC Stanbic Bank
Asad Ahmed, Chief Executive Officer, Gulf African Bank;
Ayisi B. Makatiani, Managing Partner & CEO, Fanisi Capital Ltd;
Carole Kariuki, Chief Executive Officer of the Kenya Private Sector Alliance;
Elizabeth Lule, World Bank;
Felix Adahi Bikpo, Chief Executive Officer, African Guarantee Fund;
Jaindi Kisiero, Managing Editor, Investigations & Economic Affairs, Daily Nation;
Jetro Chitereka, Manager, Risk Management, African Export-Import Bank
Ken Manyala, General Manager, Kenya Investment Authority;
Mandisi Nkuhlu, Chief Operating Officer of South Africa’s Export Credit Insurance Corporation
Martin Schmerbach, Economic Research, Euler Hermes Kreditversicherungs-AG;
Nehemia Kyando Msechu, Director General of Tanzania’s Housing Corporation;
Neil Gosrani, Associate Director, Financial Institutions Ratings Division, Standard & Poor’s;
Dr. Ragnar Gudmundsson is currently the IMF Resident Representative in Kenya;
Stewart Kinloch, Initiative for Risk Mitigation in Africa, African Development Bank;
Toby Heppel, Divisional Director, Credit & Financial Risks, RFIB Group Limited; and
Uduak Amimo, Journalist and Presenter, Citizen TV.

ATI also released their 2011 results during their Annual General Meeting, held the previous day. The results showed a dramatic increase in ATI’sr main business line – a 112% increase in the Gross Written Premium which was seen as a result of an increased demand for political risk insurance and a staggering 682% increase in their credit risk insurance business, which underpins ATI’s increasing relevance in promoting and supporting trade and investments in Africa.

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