Founded in 2001 by African States to cover the trade and investment risks of companies doing business in Africa, ATI provides Political Risk, Surety Bonds, Trade Credit Insurance and Political Violence and Terrorism & Sabotage cover. As of 2016, ATI has supported USD35 billion in trade and investments across Africa in sectors such as agribusiness, energy, exports, housing, infrastructure manufacturing, mining and telecommunications. Its 2017 results show strong profitability and stronger balance sheet as the value of insured projects reaches USD10 billion. S&P Global Ratings revised its outlook from “negative” to “stable” on 16 March 2018. ATI is currently rated A/Stable and provides African countries an alternative to raising foreign currency debt as Catherine Muema writes.
African Trade Insurance (ATI) has announced its 6th consecutive year of profit to USD9.9 million in Net Profit for the year ending December 2017, as Gross Written Premiums and Equity reach USD44.8 million and USD242.2 million, respectively, on a steady business expansion.
Speaking at a press conference to unveil its 2017 results, Mr. George Otieno, African Trade Insurance’s Chief Executive Officer, said the repositioning of the Company to provide even more support to its member countries across Africa with a specific focus to help governments reduce their cost of borrowing and provides an alternative to raising foreign currency debt through bond markets or syndicated loans, had supported the company’s stronger performance.
“The continent is currently searching for African solutions to tackle development challenges such as affordable access to financing. As an African institution, ATI is poised to become a go-to option for African governments – we are pursuing a strategy to achieve this goal,” Mr. Otieno said.
ATI is expanding its presence in key markets to include office openings in the next year in Benin, which will operate as ATI’s West Africa hub, Côte d’Ivoire and Ethiopia. Importantly, ATI is also planning to undertake a rebrand in order to better reflect its new positioning as a strategic investment insurance partner to Africa and the world.
Sovereign risk mitigation
ATI is partnering with governments to provide a one-stop risk mitigation solution to lenders. This allows governments to negotiate more competitive rates that can reduce their cost of financing by as much as 100 bps per annum for example, on loans of USD250 million – USD350 million.
“In 2017, ATI took several steps to ensure its readiness to offer this level of support. First, the company is focusing on large strategic deals in order to support governments’ development priorities. For example, in 2017, ATI provided insurance cover on a USD159 million loan to Ethiopian Airlines to support the carrier’s fleet expansion. In this instance, ATI’s support ultimately furthers Africa’s development agenda – as the continent moves towards full implementation of a free trade zone, airlines such as Ethiopian will be key drivers facilitating the movement of goods and people across Africa,” said Mr. Otieno.
In 2017, ATI also strengthened its governance as another step to readying itself for an expanded role across Africa. By reconstituting its Board, which now ensures rotation, fair representation and infusion of new talent, the company can better accommodate expected growth in membership. This process led to the appointment of a new Board and Chairman. The new Chairman, Dr. Yohannes Ayalew Birru, is a high-ranking economist in the Government of Ethiopia, where he formerly held the position of Vice Governor and Chief Economist of the National Bank. He is also an Alternate Governor of the IMF.
“I am delighted to be nominated to this post. ATI is an African institution that is under-utilized by member governments at a time when ATI can be the most useful. Through high-level discussions, awareness raising and focused workshops, I believe we can show governments how to better leverage their partnership with ATI to help further their investment and trade objectives while also providing an alternative to costly financing,” Dr. Birru commented.
The recent restoration by S&P Global Ratings of ATI’s ‘A/Stable’ (positive outlook) rating is proof that ATI’s strategy is gaining traction. In 2016, S&P placed ATI on a negative watch prompting the company to step up efforts to recover payments on sovereign claims while also putting in place structures to avoid future payment delays by governments. In 2017, ATI successfully negotiated repayments on member government’s outstanding sovereign claims.
“As a signal of ATI’s growing relevance, governments reimbursed all but one claim that is pending review, and in its last assessment in March 2018, S&P also noted that ATI could qualify for an upgraded rating once its capital reaches USD250 million, which the institution is on track to achieve in the next year,” Mr. Otieno said.