2009 Press Releases
30th October 2002
African Trade Insurance Agency (ATI) Announces Madagascar as 8th Member Country and PTA Bank as 3rd Corporate Shareholder
NAIROBI, Kenya, 31 October 2002: The African Trade Insurance Agency (ATI), the continent's only pan-African, multilateral export credit and political risk agency, today announced that Madagascar is to become its 8th member country and that The Eastern and Southern African Trade and Development Bank (PTA Bank) is set to become a shareholder in ATI, making it the third corporate shareholder in the Agency, following Gerling-NCM and the Common Market for Eastern and Southern Africa (COMESA). The PTA Bank is the multilateral development bank for COMESA.
Both announcements are major milestones in the growth of ATI in its efforts to support trade and investment throughout all of Africa through a comprehensive portfolio of political risk insurance and other financial instruments. ATI helps boost the confidence of companies that see commercial opportunities in Africa but are worried about the political risks, by providing insurance solutions to mitigate risk.
The joining of Madagascar is a much needed boost for Madagascar's economy following recent events and will enable companies trading with Madagascar to protect their balance sheets against political risks as well as Madagascar-based companies to offset risks in their trade with other African member countries of ATI, and with trading partners outside the continent.
At a ceremony held in the capital, Antananarivo, Madagascar's President, His Excellency Marc Ravalomanana signed the Agreement, establishing the African Trade Insurance Agency on behalf of Madagascar. The Minister of Finance, the Minister of Foreign Affairs, the Minister of Private Sector Development, Industrialization and Handicrafts and a representative of the World Bank office in Madagascar were also present.
It is hoped that the agreement will be ratified by the parliament of Madagascar by January 2003 and is scheduled to be ratified by ATI's General Assembly in April 2003 when Madagascar will join Burundi, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia as ATI member countries. The governments of these countries have agreed to participate jointly with private sector underwriters as ultimate risk takers, thus creating a strong incentive to prevent and mitigate claims.
It is estimated that risks underwritten under ATI's initial mandate could generate as much as $5 billion over ten years in additional trade for these member countries. With more countries, such as Madagascar joining, this figure is likely to increase significantly.
Bernie de Haldevang, ATI's Chief Executive and Managing Director, welcomed the news:
"Despite the fact that Madagascar has, until more recently, seen impressive GDP growth rates over the last few years at an average of 4.1 per cent and successive governments have undertaken widespread economic reforms, which has seen bank restructuring, the opening up of key sectors, such as transport and telecommunications and a reduction in commodity subsidies, trade with other regions of Africa and further afield still remains low1."
"We believe that membership of ATI will act as a crucial spur for economic growth in Madagascar through the provision of credible political risk insurance mechanisms for private sector companies trading into and out of the country."
In another important move, ATI also announced that The Eastern and Southern African Trade and Development Bank (PTA Bank), has agreed to become a shareholder and a major player in ATI and will work together with ATI and its clients to provide financing for projects and trade contracts across ATI's member countries.
PTA Bank President, Dr Michael Gondwe, said:
"One of the main missions of PTA Bank is to act as a catalyst in attracting investment into Eastern and Southern Africa through various modes of financing such as co-financing, joint ventures and direct lending. We see ATI as an important tool in promoting private-sector led growth across the region and are delighted to be becoming partners. This development will facilitate our ability to provide finance for more projects as it addresses the political risk concerns of some of our partner banks in developed nations."
"Africa's development is dependent upon its capacity to trade with the rest of the world, for our African nations to trade with each other and the rest of the world to trade with us. The PTA Bank is proud to be associated with ATI, an organization with such a critical role to play in Africa's development."
His comments were backed up by Mr Cyprien Sakubu, ATI's Chief Investor Relations Manager, who commented:
"Today's announcements are an important step in reinforcing the message that 'Africa is Open for Business'. We look forward to continuing to work with PTA Bank in encouraging the private sector to make the most of the tremendous opportunities and resources that exist in Africa and we hope to see Madagascar leading the way."
ATI was established at the Common Market for Eastern and Southern Africa (COMESA) Summit of Heads of State in May 2000. Start-up funds of $105 million were provided by the International Development Association (IDA), the concessional lending arm of the World Bank, through the Regional Trade Facilitation Project, which was approved in April 2001.
World Bank funds are placed in off-shore trust accounts and are leveraged by private insurers to providing additional insurance capacity. The leverage ratio currently varies from 1:2 to 1:5. ATI became operational in April 2002 when the first 25% tranches of the IDA funds were disbursed.
With the objective of becoming a pan-African agency, ATI brings together countries willing to address the market's perception by setting up a credible insurance mechanism against losses caused by political risks, with ATI's member countries assuming financial liability for the political risks affecting trade within their own countries.
Beneficiaries will include foreign firms exporting goods and/or services to participating African countries; foreign financial institutions financing exports; and African companies from participating countries, that are exporting goods or services.
Risks eligible for cover include financial losses due to Embargos; Expropriation; Government interference with entities owing insured obligations; Inability to convert or transfer currency; Imposition or increase of import or export taxes of a discriminatory nature; Interference with the transportation of goods; Seizure of Goods, Prevention of Sale, or Prevention of Export; and War or Civil Disturbance.
Eligible transactions to be insured include: Sale of goods, usually on credit terms; Letter of credit confirmation; Financial lease; Operational lease; Import/export of capital equipment for use by an insured in carrying on its business; Loans by foreign lenders; Loans by local lenders; Contract/performance bonds; Import/export of goods to stock for sale; Import/export of goods for processing; and Services.