African trade experts confident in the region’s resilience: Press Conference
NAIROBI, 18 May, 2009
The African Trade Insurance Agency (ATI), along with Kenya's Ministry of Trade and the Commercial Bank of Africa announced in a joint press conference today that African companies and investments were mobilizing domestic resources to protect against the global financial crisis. The officials were speaking in advance of ATI's Annual General Meeting, to be held tomorrow on the 19 May, 2009. ATI's 2008 financial results, to be announced at the annual general meeting, will support statements made at the press conference regarding the upsurge in demand for ATI's political and credit risk insurance products from the African private sector and international investors. This increasing demand is believed to reflect positive signals that African companies are adjusting in ways that may help them effectively weather the global financial crisis.
ATI's CEO Peter Jones commented "African exporters and investors are mobilizing domestic resources to shore up their businesses. In our industry we are seeing this in terms of a surge in demand for credit and investment insurance products. These are very encouraging signs that Africa is proactively seeking ways to protect itself against the aftershocks of the global financial crisis." Mr. Jones's comments were directed at the region's exporters, who have seen demand for their products in foreign markets come under pressure, along with increasing occurrences of buyer non-payment and strong pressure to cut the prices of their goods and services.
The African commercial banking sector has also received a boost from ATI, according to Isaac Awuondo, head of the Commercial Bank of Africa (CBA). Higher rates from international financial houses, has increased the cost of doing business for African banks. When ATI backs an export receivables bank loan with non-payment credit insurance, this turns it into an A rated secured loan, which helps reduce the cost of the loan, in terms of interest rates. This security, according to Awuondo, is particularly important to the industry in this unstable economic climate. To support what it sees as a positive trend, CBA plans to partner with ATI on some US$49 million worth of projects.
Kenyan companies are expected to continue benefiting from this upsurge as the domestic demand for infrastructure development and imported capital goods and services increases while their access to capital decreases. In his comments Permanent Secretary, Dr. Cyrus Njeru noted that Kenyan Small and Medium Sized Enterprises, particularly agricultural exporters, were benefiting from ATI's Trade Credit Insurance, to the tune of some US $604 million in total transaction value in 2008. For exporters an added benefit is that ATI is able to credit check their buyers in foreign markets. Prior to the arrival of ATI, exporters were often supplying to buyers without any knowledge of their viability or ability to pay.
ATI uses a flexible mix of political risk, credit risk and export credit insurance products to mitigate risks against such situations as a buyer who fails to pay for goods received from a Kenyan exporter, or adverse impacts of government action or inaction on a company's investments. To prove its flexibility, in 2008, ATI launched a groundbreaking product together with local Kenyan insurers that protects individual property against the risk of political violence, civil disturbance, terrorism & sabotage.
Since issuing its first policy in Kenya less than a decade ago, ATI has written policies with a transaction value of more than US$865 million. Specifically, it continues to provide protection to some of Kenya's most important export sectors including horticulture and agribusiness, where the total transaction value of ATI's export credit policies have been over US$85 million. In the energy sector, ATI has concluded projects with transaction values worth some US$88 million, and over US$37 million in ICT sector.
Headquartered in Nairobi, Kenya, the African Trade Insurance Agency (ATI) is an African owned International Financial Institution. Founded in 2001 by African States with the financial and technical support of The World Bank Group, ATI provides a range of customised, innovative and competitively priced Credit and Political Risk Insurance Products to support African investments and trade. Since writing its first policy in 2003, ATI has supported US$1.2 billion in trade and investments across Africa.
In 2008, ATI issued insurance policies covering political and commercial risks for transactions worth over US$769 million. The Agency also supported exports worth US$95 million from its African Member States. The sectors supported include; telecommunications, manufacturing, agribusiness, education, export, services, hotels, mining and residential housing. Beneficiaries include manufacturers/exporters of goods/services located in Member States, regional and international banks who are providing financial support to regional businesses, investors investing in the region, and the overall business community in ATI's Member States.
ATI offers Political Risk Insurance for Trade & Investment, Political Violence, Terrorism & Sabotage Cover, Comprehensive Non-payment Cover, Inter & Intra-Regional and Domestic Whole Turnover Credit Insurance, Project Loan Cover, Unfair Calling of Bonds Insurance and Mobile Assets Insurance.
The Agency's paid in capital is US$86 million, with US$54 million in additional committed capital.
Awarded a Stable Long Term 'A Stable' rating for Financial Strength and Counterparty Credit by Standard & Poor's in 2008, ATI is on track to continue providing effective cover to Africa.