The African Trade Insurance Agency (ATI) is now supporting trade and investments equivalent to 1 – 2 % of the annual GDP flowing into its African member countries, and 2018 also saw a doubling of the company’s exposure from US$2.4 billion in 2017 to an estimated US$5 billion by year-end 2018. The dramatic increase is in part pegged to a number of large and strategic deals the company supported, which helped African governments raise competitively financed debt for infrastructure development. These transactions were notable for both their size and innovation: in many cases marking a first for Africa.
Uniquely, ATI is bringing together the private and public sectors with effective market solutions. As a result, ATI is helping countries better manage their debt burden, thereby helping mitigate a concern to donors, concessional and commercial lenders. For example, ATI, together with the International Development Association (IDA), helped the Government of Benin re-finance and re-profile it’s existing local currency debt with a EUR 260 million 12 year facility. The refinancing provided Benin with lower interest rates and helped stretch their debt repayment profile. This will undoubtedly give the country more fiscal breathing room while also providing a template for other governments to follow.
The Benin deal represented a first for Africa. It was the first time that a sub-investment grade rated sovereign (rated B+ by S&P) was able to tap the international markets for lending that crowded in new investors to African sovereign debt – UK/EU pension funds and insurance companies – at an unprecedented tenure of 12 years and at a competitive funding margin. This transaction is a prime example of how the private sector can support the public sector to find responsible solutions that help governments manage their existing debt.
ATI’s work with African development finance institutions, like the African Development Bank, also supported Africa’s growth in 2018. In a landmark deal, ATI insured US$500 million of the Banks’ non-sovereign lending portfolio allowing the bank to leverage its capital and enabling it to provide increased financing to meet its development agenda. In this way, African institutions are partnering in order to meet the growing demand for affordable financing from African countries, and ATI is increasingly at the forefront of this movement.
Governments and investors are taking note of these innovations. At an ATI-hosted event held in Abuja, Nigeria in November, Nigeria’s Minister of Finance, Hon. Zainab Ahmed commented on the government’s decision to join ATI “Nigeria, therefore feels justified with its decision to join this league of countries and international bodies as co-members in view of the expected value addition to the Nigerian economy. We believe that there could not have been a better time than now to subscribe to the agency considering that our economic challenges are easing” commented Ms. Ahmed.
Looking ahead, 2019 continues to bode well for the multilateral. Nigeria and Ghana, two of Africa’s largest economies, are expected to complete their membership process, which should further ATI’s ability to support new and even larger volumes of business.
John Lentaigne, ATI’s Chief Underwriting Officer and architect of many of the innovative solutions offered this year noted “2018 was a transformational year for ATI. We worked with reinsurance and financing partners from Europe, Africa, Latin America, Asia and North America – virtually every region of the world. This is a sign that ATI has achieved the confidence and trust of some of the most influential financial sector partners in the world. Ultimately, the major beneficiaries of the crowding in of global investors that ATI is facilitating will be ATI’s African member states. ATI is undoubtedly a major catalyst for Africa’s growth and development.”
George Otieno, ATI’s Chief Executive Officer added “ATI currently has 14 African member states and yet we’ve been able to support a significantly increased amount of trade and investment across 21 African countries last year. Next year we anticipate that Nigeria and Ghana will complete membership in ATI and we look forward to doing even more to support African growth.”