“Our exposure in West Africa is the highest among all regions “
Manuel Moses, the General Director of the African Trade and Investment Development Insurance (ATIDI), granted an interview to Financial Afrik regarding the positioning of this multilateral insurer, which contributes to covering various risk classes for partners, donors, investors, and suppliers. Leading ATIDI since 2020, this Zimbabwean executive, a former IFC member, brings 25 years of experience in finance, banking, insurance, and investment on an international scale, including 15 years at the IFC where he held the position of Country Manager for East Africa. He has also held senior positions at the Eastern and Southern Africa Trade and Development Bank (TDB), the Commercial Bank of Zimbabwe, and the Zimbabwe Development Bank. Mr. Moses has been actively involved in the agency’s rebranding and in expanding its coverage in several regions, notably in West Africa, an area of particular importance in the institution’s development.
Firstly, could you introduce us to your range of products in terms of risk reduction?
ATIDI offers a range of products aimed at mitigating commercial and political (investment) risks for investors doing business in Africa. We are based in Africa and primarily owned by African governments. Our range of products includes the following compartments:
-Sovereign or Sub-Sovereign Non-Honoring Obligations Coverage: This insurance protects against credit risks incurred by public buyers or borrowers. It provides coverage for cases where sovereign or sub-sovereign entities fail to honor their financial commitments. In doing so, it offers a safety net for lenders, investors, and suppliers, protecting them against losses resulting from defaults by these entities.
-Investment Insurance (Political Risks): ATIDI offers insurance against political risks to protect against non-commercial risks such as expropriation, contract breaches, transfer restrictions, currency inconvertibility, trade embargoes, to name a few. This insurance acts as a buffer for investors, shielding them against adverse political actions or inactions by member state governments that could result in financial losses or disruptions in business operations.
-Commercial Credit Insurance: Commercial credit insurance is a valuable tool for mitigating risks, especially by safeguarding against the risk of payment default. It provides an alternative to costly guarantees such as letters of credit, which banks typically require to secure loans or lines of credit.
-Guarantees: They play a crucial role in ensuring that government agencies and contracting businesses fulfill their obligations according to mutually agreed terms. ATIDI issues guarantees to project promoters or contracting companies and provides reinsurance to banks or insurance companies issuing the guarantees, thus offering protection for all parties involved.
-Energy Solutions: The Regional Liquidity Support Fund (RLSF) addresses liquidity challenges faced by Independent Power Producers (IPPs) by covering risks related to delayed payments from buyers, often state entities. In doing so, it enhances the bankability of energy projects, facilitates their financial closure, and contributes to regional energy solutions.
How do you work with banks and the African financial sector?
Banks, like other businesses, operate in a challenging national and global economic context today. They must recognize and manage future risks. ATIDI covers a range of banking risks either on a single transaction basis or on a portfolio basis. We provide coverage for banks and other lenders against a wide range of commercial and political risks with several tailored products designed to meet their specific needs. These include: Factoring is one area where ATIDI helps banks reduce their risks. Factoring is a practice carried out by banks and professional factors where they purchase businesses’ customer receivables for a discounted amount of the face value of an invoice.
In this activity, banks and factors may face the risk of non-payment of certain purchased invoices. ATIDI provides commercial credit insurance on the invoices, which will be protected against payment defaults with a recovery rate of up to 90% on each invoice. Invoice discounting is another potentially risky banking activity we cover. Companies often approach banks to discount their invoices as a means to raise necessary capital. In this case, the bank’s client issues invoices and collects payments as usual but in this arrangement, they can access up to 90% of the value of their invoices to finance their business activities. ATIDI covers the most common risk for banks – non-payment by buyers of the invoices they hold as collateral.
A letter of credit (L/C) is a promise of payment. It is a tool commonly used by banks to assure sellers that they will be paid as long as they do what they have agreed to do. LCs are often used in international trade transactions where, for example, importers and exporters would use them to protect against the potential risks of non-payment by their buyers. While popular, the L/C has a major downside for banks. The L/C requires collateral, which the bank may struggle to realize if the transaction is blocked and it needs to recover the loss. With a commercial credit insurance policy in place, the policy acts as collateral, removing the need for collateral.
The African Trade and Investment Development Insurance (ATIDI) is expanding its footprint in Africa. What is your strategy for West Africa?
In 2023, our exposure in West Africa stood at $4.4 billion, the highest among all regions. We currently have participation from the following countries in West Africa: Benin, Burkina Faso, Côte d’Ivoire, Ghana, Mali, Niger, Nigeria, Senegal, and Togo. Our footprint across the continent is expanding – with now 24 member states – as well as our shareholder base. And we aim to one day count all 55 African countries as member states. Imagine how much we will facilitate trade and investment then? West Africa is a priority for ATIDI and we seek to do more in this region. We want to bring all our solutions to increase our presence on the continent and enable more projects that will benefit Africa and its people. ATIDI’s unique risk mitigation solutions support projects that are aligned with a country’s development plan, and we work with the private sector and development partners to discuss more concretely how ATIDI can help attract more investment in a country. We want to bring such assets to more countries in West Africa. We are transformative facilitators of trade and investment on our continent. And with the advent of the African Continental Free Trade Area (AfCFTA), our role will become even more crucial in unlocking investments that will benefit nearly 1.5 billion African citizens and consumers.
What are your perspectives regarding the accession of new member states and institutions?
ATIDI is open to the accession of new member states and institutional shareholders, considering expansion as a means to promote economic development and integration across Africa. New shareholders offer an opportunity to strengthen our role as a leading development financing institution and to contribute significantly to the progress and prosperity of the continent. New member states will bolster ATIDI’s financial resources and capital base. As more countries and organizations join, our ability to mobilize resources for development projects and initiatives increases, enabling ATIDI to have a greater impact across the continent. New shareholders also expand our network of partnerships and enhance our ability to collaborate with a wide range of stakeholders, including governments, international organizations, and the private sector. This, in turn, can facilitate the implementation of more effective and inclusive development strategies and projects. Ultimately, our perspective on accession reflects ATIDI’s unwavering commitment to advancing the development agenda in Africa. By welcoming new members and institutions, we validate our belief in the collective efforts of African countries and organizations to achieve sustainable and inclusive growth on the continent.
More specifically, what can be said about your activities during the fiscal year 2023? What is the state of your equity and the volume of your commitments?
Despite significant geopolitical and economic challenges globally and particularly in Africa, 2023 was one of our best years to date from all perspectives – gross and net exposure, underwriting performance, financial performance, capital, and membership growth – with an expected overall net income increase of over 50%. This underscores the critical importance of our countercyclical role in supporting member states as they responsibly pursue their goals of commercial growth and investment even in the most challenging environment. We have strong capitalization and balance sheet positions (approximately $9.6 billion in gross exposure and $628 million in equity). ATIDI remains among the largest and most strategic DFIs in Africa and is well positioned to support countries in achieving their development objectives.
