FDI flows to Africa threatened by global economic uncertainty – governments and investors gather to discuss possible solutions

NAIROBI, 10 May, 2017 – At a Roundtable event in Nairobi, Ministers from across Africa sat
together with investors and the private sector to determine how best to tackle the investment
and credit risk hurdles in order to make African risks bankable. Participants to the Roundtable
see the event as timely because it comes at time of geopolitical uncertainties which, according
to The World Bank, could lead to “higher borrowing costs or cut off capital flows to emerging
and frontier markets”.

For African governments part of what is at stake are much needed foreign direct investments
and access to affordable financing necessary to spur development and, specifically, to close the
estimated USD900 billion infrastructure gap. Equally, the private sector stands to lose billions of
dollars in lost opportunities if the requirements for a favourable investment environment are not
adequately addressed.

The half day forum, the 4th Roundtable to focus on Political and Credit Risks in Africa, took
place on the side lines of the African Trade Insurance Agency’s (ATI) Annual General Meetings.
The event opened with pointed remarks from H.E. Patrice Talon, President of Benin.

“Public-private partnerships are a response to the structural needs of investors in our countries.
This is necessary to break the persistent perception of the continent being high risk and Africa
as a problem region. In this context, credit and investment insurance is the perfect defence to
counter this challenge and to help propel the continent toward self-sustainability for the
betterment of the African people.”

Subsequent discussions focused on possible solutions to the challenges facing governments
from the private sector and export credit agencies from panellists such as:

  Hon. Patrick Chinamasa, Minister of Finance & Economic Development, Zimbabwe
  Hon. Romuald Wadagni, Minister of Economy & Finance, Benin
  Hon Felix Mutati, Minister of Finance, Zambia
  Chamsou Andjorin, Director Government Affairs & Market Development, Boeing Intl.
  Helen Mtshali, Syndication Lead – Sub-Saharan Africa, Industrial Finance Solutions, GE
  Nisrin Hala, Sr. Director, Global Trade Finance Bus. Devpt. Emerging Markets, SMBC

During the boom years of the last two decades, Africa was experiencing unprecedented GDP
growth rates but depressed commodity prices have seen growth in the sub-Saharan Africa
region slow to 1.5 percent rate in 2016. According to World Bank estimates, oil exporters
account for most of the slowdown owing to their two-thirds contribution to regional output.

Investors are not immune to political and social developments in emerging regions like Africa. In
fact, with reduced earnings – the benchmark emerging-market stock index has lost
approximately 4 percent annually since 2010 from a high of 22 percent annual return in the
preceding decade – investors are now focusing on more than the bottom line in these markets.

In a Bloomberg article published in March 2016, emerging market investors from some of the
most prominent companies noted the dramatic change in their investing tactics due to global
fragility, which they see as unveiling institutional weakness, corruption, poor governance and
efficiencies. In this current climate, investors are now keenly tracking social indicators such as
corruption rankings, gender parity and the extent that rule of law is respected within emerging
markets.

“Africa is in a period of realignment in this new global order but I don’t think anyone should bet
against its resilience. We are still home to some of the fastest growing economies in the world –
as of 2017, the World Economic Forum ranks Côte d’Ivoire, Tanzania and Senegal on the list of
the top ten fastest growing economies in the world,” notes George Otieno, ATI’s CEO.

In this climate, it is more imperative than ever for African governments to focus on economic
diversity to maintain growth while addressing risks to investors. As an internationally respected
African institution, the African Trade Insurance Agency (ATI) offers the ideal solution precisely
because the company has strong relationships with governments and because its risk
assessments and mitigation solutions are seen as credible by global financiers and investors.
With ATI involved in a transaction, governments are able to provide security to investors and
suppliers against a range of investment risks.

In 2016, ATI insured close to USD2 billion (KES202.8 billion) worth of trade and investments
and the company is increasingly supporting some of the continent’s most important transactions
such as Ethiopian Airline’s fleet expansion and a USD660 million investment in Lake Turkana,
Africa’s largest wind farm and, to date, the single largest investment in Kenya.

In this environment, ATI’s products are being seen as a valuable tool to enable lenders to take
sub-investment grade risk in Africa thus allowing governments and corporates to access more
affordable financing. Importantly, in its role as an investment insurer of last resort, ATI is also
providing the necessary comfort to support continued investments into the continent amidst a
period of uncertainty.

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