Thursday 29 May 2014

Traders urged to use insurance cover funds

LOCAL entrepreneurs were challenged to effectively use insurance cover by the African Trade Insurance Agency (ATI), to access alternative sources of funding as they strive to expand their investments.

Vice-President Mohamed Gharib Bilal, opening the 14th ATI Annual General Meeting in Dar es Salaam, appreciated the key role that ATI has played in availing the public and private sectors with access to financing sources.

"With the rapid economic expansion and needs for large investments in infrastructure, donor funding is becoming insufficient to meet the massive investment needs, while domestic revenue is insufficient to cope with the financing requirements," said Dr Bilal.

Ten countries, including Tanzania created ATI in 2001 to fill a market gap in trade and investment risk mitigation in Africa, as well as address the misperception of most international lenders that the continent was unsafe for lending due to political and trade risks.

Other ATI founding countries are Benin, Uganda, Rwanda, Burundi, Kenya, Democratic Republic of Congo (DRC), Zambia, Malawi and Madagascar.

By providing insurance against non-honouring of sovereign obligations, the covers have given comfort to multilateral financial institutions, development and commercial banks as well as capital market vehicle enabling them to extend funding to a number of governments in ATI's member countries.

For example, ATI has in the last few years enabled governments to issue sovereign bonds and raise capital from bond markets and from private lending institutions in excess of one billion US dollars.

Similarly as the country was in great need for foreign direct investments (FDI), ATI has been addressing the risk perception that the continent was unsafe for lending through its risk mitigation solutions and with governments' initiatives, it has created conducive investment and business environment.

In Tanzania, for example, ATI has provided cover to a number of local and international lenders enabling them to extend a 225 million US dollars facility to Tanzania Electric supply Company (TANESCO) for financing capital expenditure for various power plants.

It has also facilitated the development of a 104 US dollars gas fired power at Ubungo and Nyakato in Mwanza.

ATI covered an international syndicate of lenders who extended 250 million US dollars to Tanzania for financing various infrastructure projects like roads and bridges.

The Deputy Minister for Finance and Economic Affairs, Mr Adam Malima, said ATI has tremendous impact into the country's financial services, where banks have been trying to find solution to the challenge of increasing lending to Small and Medium sized companies.

"Although SMEs are vital the country's economy, but they have been lacking the necessary collateral and experience that would normally be required to secure a traditional bank loan," he said.

The ATI Chairman of the Board of Directors, Mr Israel Kamuzora, said the agency has attained a high level of business growth.

Currently, the board is working with the World Bank and shareholders to review a number of internal limitations in a bid to safeguard capital and minimise losses.

"In 2013, ATI approved an initiative in which the European Investment Bank (EIB) will partner with the ATI to develop unique expertise in energy related transactions in African.

The agency will benefit from a grant of two million Euro in the form of technical assistance for capacity building," he said.

The ATI Chief Executive Officer, Mr George Otieno, said demand for infrastructure development in the ATI member countries is a reason behind 144 per cent increase of profits to 1.5 million US dollars (about 2.4bn/-) last year, compared to 0.6 million US dollars (about 960m/-) in 2012.

The increased demand for ATI's products thus is linked to a growing demand from capital intensive priorities, such as in the energy sector, in many of ATI's member countries and also by a combination of prudent financial management and stepped up marketing efforts



Source allAfrica



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