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ATI-ACA

NOT AN OFFICIAL UNCTAD RECORD. African Trade Insurance Agency “Lubricating the extractive industries with political risk coverage” Marrakech, Morocco April 2004 Bernard de Haldevang Chief Executive AFRICA’S MULTILATERAL IMPORT AND EXPORT CREDIT AGENCY. ATI-ACA.

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ATI-ACA

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  1. NOT AN OFFICIAL UNCTAD RECORD African Trade Insurance Agency “Lubricating the extractive industries with political risk coverage” Marrakech, Morocco April 2004 Bernard de Haldevang Chief Executive AFRICA’S MULTILATERAL IMPORT AND EXPORT CREDIT AGENCY ATI-ACA

  2. How do we define a political risk? ATI-ACA Political risks affect… 4:A:4

  3. “Political Risks” defined in terms of Trade & Investment Risks CF(&CR) PR(&PD)

  4. The African continent’s challenge ATI-ACA Annually reducing aid flows Unsustainably high transaction costs Too many uncoordinated regional economic integration organisations and “initiatives”… >40 of 54 countries “involved” in conflicts or wars in the last dozen years Africa’s total external debt > 350% of exports Market gap in risk mitigating tools Risk: issue of perception v reality? FDI at 0.7% of global, annual World trade share 2.25%, 10-year ann. average Pop >750 mill of which >50% in agriculture ->70% in 1980 33% of males >15years and 50% of all females illiterate …returns of up to 30% v 15% USA and 10% EU

  5. POLITICAL VIOLENCE   A view of the inter-relationship between political, contract frustration, credit, and political violence risks CREDIT RISK POLITICAL RISK CONTRACT FRUSTRATION LEASED ASSET NON-REPOSSESSION PROTRACTED DEFAULT LEVEL OF RISK INSOLVENCY (PERFORMANCE & PAYMENT) CONTRACTUAL (POLITICAL) CONTRACTUAL INVESTMENTS STOCKS / MOBILE ASSETS “WORKS” WAR & PFM TERMINATION INSOLVENCY IMPORT/ EXPORT EMBARGO PRE-EXPORT FINANCE CEN EQUITY / PROJECT B.O.O.T/B.O.T CHAPTER II “SCHEME OF ARRANGEMENTS” BUYER CANCELLATION / TERMINATION / REPUDIATION PAYMENT DELIVERY CENTRAL GOVT ACTION CATASTROPHE ATTRITIONAL  

  6. A new type of multilateral ATI-ACA What does ATI provide? • Leverage with African governments, intergovernmental institutions, development agencies & multilaterals • Proven ability to “connect” Africa to financial markets in developed nations • Accountability of member governments PLUS 100% cash-collateralised security • New public-private risk sharing concept • Enhanced loss mitigation and recourse through sovereign treaties with the World Bank • Capacity building for African institutions

  7. Membership ATI-ACA Member countries • Burundi, Djibouti*, Eritrea*, Kenya, Madagascar*, Malawi, Rwanda, Uganda, Tanzania and Zambia. ( * ATI Treaty to be ratified) • But…open to all AU member states & corporates… • Interest from:D.R. Congo, Ethiopia, Ghana, Libya, Mozambique, Nigeria, Senegal, Sudan, ++ Corporate members COMESA, PTA Bank, ZEP-RE, Atradius group. In discussions with others.

  8. Objectives ATI-ACA • Charter:Facilitate private sector-led trade flows, investment and “productive activities” through the provision of insurance, coinsurance and reinsurance, financial instruments and related services. • That means… : • A term appointment… • Mobilisation of public and private sector financial institutions through cooperation, not competition; an inclusive approach from day one • Promotion of Intra - African trade & investment • How: • Using combination of • private sector experience & capital and • public sector clout and connections

  9. Burundi Djibouti t.b.ratified. Eritrea t.b.r. Kenya Madagascar t.b.r. Malawi Rwanda Tanzania Uganda Zambia Leveraging ATI ATI-ACA Initial Deposit (US$105mill) Government Trust Account IDA Project Agreement Participation Agreement Security Trust agreement ATI Insurance Facility Agreements ATI’s capital IDA Funding; Members’ Contributions; Retained Premium and Interest Insurance partners

  10. Security of ATI policies ATI-ACA Syndication of 100% cash-collateralised ATI line plus the security of agreed insurance partners for their facultative coinsuring share Atradius balance sheet behind ATI credit insurance paper (until end 2004); ATI “own” capacity being developed ATI claims payments not subject to any regulatory or government interference Established under international treaty Registered under Article 102 of the UN Charter Supported by the World Bank and the EU

  11. Covered risks ATI-ACA • Non-payment for public buyers • War, Civil Disturbance, Embargo • Transfer Restrictions • Currency Inconvertibility • Expropriation, Seizure of Goods (CEND, FA & FD) • Contingent Political Force Majeure (3rd party) • Prevention of export • Cancellation of import/export licenses • Imposition of non-constitutional import duties • Retroactive, discriminatory tax changes • Transit and diversion risks • Multi-buyer insolvency • Terrorism, War and Business Interruption

  12. The political risk facility ATI-ACA Eligibility criteria: • New cross-border transaction • Productive activity • Private or public buyer (no sovereign risk) • Buyer in participating country • Environmental clearance Examples of transactions: • Confirmation of L/C • Sale of goods on credit terms • Financial/operating leases • Trade & project finance loans (inc pre-export) • Contractual bonds • Physical assets against war and terrorism • Foreign Direct Investments • Tangible assets against expropriation • Contingent Political Force Majeure for Project Loans

  13. The political risk facility ATI-ACA Terms: • Sight transactions up to 6 years cover • No minimum transaction amount • Minimum premium of $500 for non-African insureds; $250 for African insureds • Up to 100% indemnity • Competitive Pricing

  14. Political Risk Waiting Period & Claims Processing ATI-ACA Notice of potential loss Up to 45 days Assessment period Claims filing period Up to 45 days Claim determination Up to 15 days Claim settlement Arbitration

  15. Future Developments ATI-ACA Develop credit information sources Act as recovery agents for past losses (insured or not) Establish credit database Assist in developing national insolvency legislation Develop insurance capacity in the domestic private market; “APRP” the African Political Risk Pool Comesa Customs Carnet Partnership agreements with credit reference bureaux and agencies Asset & receivables backed working capital export guarantee scheme

  16. Illustrative Case Study 1 ATI-ACA TRANSACTION: Buyer credit for import of plant & equipment for power project VALUE: US$ 40mill (3rd party loan: $20m) RISK COUNTRIES: Rwanda; Belgium, Germany TENOR: 5 years + 1 year pre shipment INSURED: Financial institution ADDITIONAL SECURITY: Ministry of Finance guarantee BUYER: Rwandan utility COVER: Broad form Trade PRI for $25 mill INDEMNITY & W.P.: 100% & 105 days PREMIUM: 2.0% pa & pr on mthly exposed

  17. Illustrative Case Study 2 ATI-ACA TRANSACTION: Sales of food products RISK COUNTRIES: Europe & East Africa TENOR: one year with automatic renewal INSURED: East African Company BUYERS: Wholesalers COVER: PRI and CI INDEMNITY:CI - 60 to 90% PRI - 100% days PREMIUM: CI - 0.8% of turnover PRI – 0.5% ADDITIONAL: Loss payee arrangement with financing bank

  18. Illustrative Case Study 3 ATI-ACA TRANSACTION: Sale of telecom equipment worth US$ 20 million RISK COUNTRY: Tanzania TENOR: 6 years INSURED: European company REINSURED: European ECA BUYER: Government telephone utility COVER: Comprehensive Trade PR Cover INDEMNITY:100% PREMIUM: 3.5% pa & pro rata (works out at about 9% on contract value) ALSO: Loss payee nominated as financing bank

  19. Illustrative Case Study 4 ATI-ACA TRANSACTION: Mining contract $75 mill RISK COUNTRY: Zambia INTEREST: Contractor’s plant and equipment TENOR: 4 years INSURED: European contractor EMPLOYER: Mining company COVER: Expropriation, Deprivation, Abandonment, War & Terrorism INDEMNITY:100% (above excess point) PREMIUM: 0.775% pa & pro rata

  20. ATI-ACA Thank you How to contact ATI: Insurance brokers www.ati-aca.com underwriting@ati–aca.com chiefexecoffice@ati–aca.com Tel: +254 (0) 20 271 9727 and 272 6999 AFRICA’S MULTILATERAL IMPORT AND EXPORT CREDIT AGENCY

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