Peter M. Jones at Joint Press Conference with the Kenyan Ministry of Trade and Commercial Bank Africa
Statement by Peter M. Jones, CEO - The African Trade Insurance Agency Joint Press Conference at the Inter-Continental Hotel
18 May, 2009, Nairobi, Kenya
Ladies and Gentlemen of the press, little is know about the ATI story. It is quite simple, really. Since 2001 we have been quietly pioneering the availability of Political and Credit Risk insurance products to African businesses and investments. These products are relatively new to Africa, in contrast to regions like Europe and North America, who have been providing their companies with export credit insurance since the 1920's. What this means for Africa as well as for international investors interested in doing business here, is that ATI will absorb their risk.
Why is this important? This brings us to the reason we are here today. The global financial downturn has highlighted the need for our products and services across Africa. This need is reflected in our rapidly expanding volume of business as well as the demand we are seeing from across Africa and from international investors. In 2008 we issued insurance polices covering political and commercial risks for transactions worth US$769 million and we are confident that in the near term our annual transaction values will increase to US$1 billion.
A decline in demand for exports, a decrease in access to finance and international foreign direct investment have combined to present Africa with a unique set of challenges. In Kenya, for instance, the Kenya Tea Development Agency announced in March that tea exports to the UK and Pakistani markets had been largely flat since 2007. For just under one decade, ATI has been filling a much needed gap in the export and investment area. One of our most popular solutions has been our short-term and Export Credit Insurance cover. In addition to the comfort that it gives exporters of guaranteed payment even when the buyer is unable to pay, the most important aspect of this ATI product to Kenyan and African exporters is the potential impact on their bottom line. This product allows exporters to sell directly to the end buyer rather than through auction houses. Where, traditionally exporters had no other alternative, with ATI coverage, they are now able to move up the value chain. When selling to the end buyer, it has been estimated that exporters can increase their selling price by up to 100%. This is a real value that exporters can literally take to the bank.
In addition to our Trade Credit product we also offer Political Risk insurance products that provide protection against situations where, for example, an investor or exporter may be unable to receive payment by the payor in a foreign currency; the investor or exporter is unable to remove their funds from the country; or due to war and civil disturbance an investor or exporter's goods may be damaged or their business interrupted. In all of these cases, ATI would be able to provide protection against these potential risks.
A very important aspect of our products is that we can offer tailor made solutions to fit our clients' individual situations. One example is in the flower growing sector, where the financial crisis is taking a toll. In countries like Kenya, Uganda and Zambia flower growers are closing because the demand for luxury goods in Europe and America has dropped off, and the decrease in price from buyers in these markets in some cases doesn't even cover the cost of shipping. ATI is able to lend support to this industry by offering them a guarantee of payment if the buyer goes bankrupt, delays payment or is unable to pay altogether. We are also able to run a credit assessment of the exporter's buyers. This is an added benefit because in many cases exporters do not have the means to credit check their buyers in foreign markets. Through ATI they will have access to a worldwide network of credit assessors.
In Uganda we are currently working with the Uganda Flower Exporters Association to launch a product later this year that will protect their industry against the impacts of the credit crunch.
While the current crisis may have increased the international community's perception that Africa is a high risk place to conduct business. What we have said all along and what we continue to say is that Africa is no more risky than the markets in the U.S. or Europe have proven to be over the past year.
The global financial crisis has taught us a crucial lesson. African trade and investments are capable of competing within international markets if they have the right products and partners. Apart from our flexible services and products, we are also leveraging our Standard & Poor's 'A' rating to bring to Africa private and public investment, credit insurers and commercial banks. These international financial institutions might otherwise not enter the region due to the myth that African markets are high risk. Our partners include Atradius, the second largest reinsurance company in the world, Lloyds of London, international Export Credit Agencies and commercial banks.
Tomorrow we will announce the full set of ATI's 2008 results at our 9th Annual General Meeting, which will be held here at the Inter-Continental hotel. I believe these results will underscore the unique story we have unfolded for you today.