Helping businesses navigate risks in the new COVID-19 landscape - African Trade Insurance Agency

Helping businesses navigate risks in the new COVID-19 landscape

ATI is well placed to provide an accurate analysis of prospective risks in Africa. In this section, we interview a key member of ATI’s operations to obtain insights into challenges and opportunities in African markets.

Toavina Ramamonjiarisoa, ATI’s Acting/Interim CEO, provides an update on the current situation and potential risk scenarios that companies may face in the region.

Q: From your perspective as Acting/Interim CEO of ATI, what are the most striking changes to the business environment in Africa in light of the ongoing pandemic?

The pandemic has profoundly changed the way companies across the world operate, the way they interact with their clients/stakeholders and I would say – without minimizing the adverse social and economic effects of the pandemic – not all of it has been negative.

We have witnessed real and large-scale business continuity tests. For the case of ATI, the working-from-home policy implemented since mid-March 2020, has worked quite well owing to the technologies available. We must recognize that we have even gained efficiency in some processes and certainly have some lessons to learn from this experience.

The continent has a role to play in terms of technology and innovation. Africa should seize this opportunity to enhance its technology sector. We should not forget the success of the mobile money platform created in one of ATI’s member countries, Kenya, which has since been largely replicated not only across the continent but also across the world.

But of course, technology cannot resolve everything. Some countries heavily relying on a single source of income – for instance, oil or tourism-dependent economies, could be more severely affected and could also need more time to recover from this crisis.

The pandemic also gives an opportunity to re-assess the resilience of our economies to external shocks and to re-think our models in favor of more diversified economies.

Q: What is your assessment of the impacts of COVID-19 on capital markets globally and, in turn, how will this impact Africa?

The pandemic has plunged most countries into recession, if not depression. Considering the severity of this crisis, all major central banks across the world are expected to maintain, for a while, very accommodative measures in order to support the economic recovery, which could take a couple of years.

As a result, there is a chance that market interest rates will remain extremely low in the short/medium term. This, I anticipate, will give incentive to fixed income investors hunting for yield to look for alternative assets, including private loans and debts. In recent years, we saw increased interest in non-traditional securities. This could be an opportunity for Africa.

Assuming that the global size of assets under management is about US$90 trillion and around 15% of this amount is invested in alternative assets, i.e. US$14 trillion – if only 1% of this can be channeled towards Africa, the annual infrastructure gap of the continent will be covered. Of course, Africa would need to attract these investors. With no doubt, there are more and more concerns about increase in default rates with the economic crisis and we therefore expect investors to be much more selective on credit.

Beyond, debt sustainability, investors are paying more attention to Environmental, Social and Corporate Governance (ESG). While ATI can help countries raise funds, governments also have to do their part and showcase that they can meet investors’ requirements.

Q: What risks and opportunities do you see emerging from the current COVID-19 environment – for African governments and for those doing business on the continent?

The lockdowns have created a negative demand shock affecting many sectors, specifically in the oil and tourism sectors in Africa. While recent statistics relating to the pandemic seem to be encouraging in many African countries, we can’t say that the pandemic is behind us. Depending on both the length of the crisis and the speed of the global economic recovery, some actors, which have so far shown resilience, might not survive. This means the possibility of an increase in default rates within the private sector cannot be excluded.

As far as the sovereign sector is concerned, before the pandemic, many African countries had increased their debt leverage ratio based on projected growth objectives. The absence of growth or even recession, at times aggravated by currency depreciation, could affect some sovereign countries’ ability to repay their debts. Having said that, we have seen various measures taken by the G20 (Debt Service Suspension Initiative) and various multilateral banks (new financing packages) to support the most fragile economies.

At ATI, we remain committed to working with regional development finance institutions in order to consolidate our efforts and provide more efficient support to the continent.

Q: What role does ATI hope to play in supporting investors, businesses and governments through the pandemic?

During the past three years, ATI has helped a number of countries raise funds from the private market by playing a triple role:

  1. giving member countries access to large international banks and investors;
  2. providing insurance covers to not only enhance the credit quality of the issues and make them more attractive to more risk-averse investors but also to optimize the cost of funding for the sovereign issuers, and
  3. attracting reinsurance capacity to enable a larger amount of issuances and to satisfy, as much as possible, the financial needs of countries.

With the current crisis, many countries needed more funding to limit the economic impact of the crisis and also to support recovery. While a number of development banks have announced their support, private sector funds are very much needed.

ATI is more than determined to pursue its key role and to go the extra mile by attracting other types of investors, helping develop blended finance or other structures that could catalyze investment flows into the continent.

Q: Where do you hope to see Africa and ATI five years from now and what does the landscape look like?

ATI’s member states currently represent one-third of African countries. ATI has certainly accelerated its membership growth pace in recent years and I hope it will be able to serve two-thirds of the continent as its members and support their key development projects five years from now.

ATI has also shown its capability to develop innovative solutions for its member countries. I sincerely hope that one of ATI’s next new products will help its members enhance the private sector and create more jobs to allow for more inclusive and sustainable growth. We have to keep in mind that Africa has quite a young and fast-growing population and needs labour-intensive growth plans for the younger generation.

It is also important for our continent to have more diversified economies to increase resilience to external shocks.

Toavina Ramamonjiarisoa was appointed CFO of ATI in 2011 and Acting CEO in August 2020. She has close to 20 years of experience in the insurance and finance industries. Prior to joining ATI, Toavina was the CFO, Chief Compliance Officer and member of the Board of Directors of a UK-based asset manager with €1.2 billion fixed-income assets. Previously, she was also the Group Financial Controller at Coface, and the Financial Auditor of Mazars, an international audit firm – both based in France.

 

 

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