African Trade Insurance Agency Launches Rwanda OfficeA new organization opened its doors in Kigali this month. The African Trade Insurance Agency (ATI) stepped into Rwanda to fill an important gap in the insurance market. The company, unlike private insurers, has a development mandate to improve the business climate in COMESA (Common Market for Eastern and Southern Africa) member countries. Rwanda is one of the founding member countries and was involved in the initial assessment report that established ATI.
Toward the end of the last decade, several COMESA countries came together to look into the causes for the low rates of Foreign Direct Investment (FDI). Their report concluded that political risk was the main obstacle preventing investors from doing business in their countries. Using World Bank funding, they then pooled their resources to create an Export Credit Agency (ECA) – called ATI.
“ATI fills two objectives. We fill a void in the existing market by providing insurance protection to cover investors against political risks. We also provide protection against non-payment risks which impact banks, exporters, and virtually any company entering into a contract. Our second goal is to work with local insurance companies to help them increase their product range and capacity.” (Julius Karuga, the resident underwriter who is now based in Kigali).
US Ambassador to Rwanda, Donald Koran, was a featured speaker at the launch. Ambassador Koran highlighted the increased investor confidence that ATI’s trade insurance will bring to the region. He was joined by the evening’s chief guest, Rwanda’s Minister of Finance and Economic Planning, the Honorable John Rwanbomgwa. Minister Rwanbomgwa gave ATI an enthusiastic welcome noting that ATI has covered over $180 million in trade and investment into Rwanda and with the local office in place the figure may double or triple in one to two years. ATI’s presence is a win-win for the business community.
Since 2001, ATI has facilitated over $6 billion worth of trade and investments into COMESA member countries – including Rwanda which benefited from over an additional $185 million in inflows. The company employs a strategy aimed at attracting international partners from the private and public sectors. Insurance giants such as the Lloyd’s of London Insurance syndicates, Atradius, SACE and others have partnered with ATI on several projects.
“For international insurance companies, our local presence and our S&P ‘A’ rating makes a big difference. They have come to rely on our risk assessments rather than those coming from general news sources. Our aim is to help create a more balanced view to the outside world of African risk,” notes Mr. Karuga.
USAID COMPETE has been an important public sector partner for ATI’s regional expansion – since 2008, ATI has opened four offices in Rwanda, Tanzania, Uganda and Zambia (which also serves Malawi).
“USAID is pleased to support ATI as it expands its footprint in East Africa. It is a welcome addition to improving the business climate – a critical shared goal of both COMESA and the USG,” says Matthew Rees, USAID/East Africa, Regional Trade Adviser.
While investors looking for quick returns continue to flock to Africa, the issue of risk, particularly political risk continues to be their biggest concern. According to the World Bank's Multilateral Investment Guarantee Agency (MIGA) annual survey of global investors’ risk perceptions, developing countries attract two-fifths of global Foreign Direct Investment (FDI) but political risk remains a significant obstacle to investment in these countries.
For African countries, which still lag behind the world in terms of FDI figures – offering investors a solution to their political risk concerns will be key to boosting FDI inflows. Africa currently stands behind all regions with just 0.5% of inflows in contrast to other developing regions such as Asia, which stands at 11% and the Middle East at 19%.
Robert Bayigamba, President of the Private Sector Federation of Rwanda and also Rwanda’s representative on ATI’s Board of Directors played a pivotal role in the launch of ATI’s office in Kigali. “ATI is the closest thing African countries have to an ECA. In most developed countries, for nearly a century national ECA’s have provided insurance coverage to their exporters and investors. This helps countries to be globally competitive. With a local office in Kigali, Rwanda can now benefit from this service,” commented Mr. Bayigamba during the launch event held at the Serena hotel.
While ATI has been doing business in Rwanda over the past several years, they have not had a local presence. With a local office in place they hope to double the trade and investments they’ve already facilitated into Rwanda over the next year.
Hubert Ruzibiza, the Acting Head of Services Development for the Rwanda Development Board notes that for investors coming into Rwanda the ATI cover will provide more security.
“With ATI on the ground in Rwanda, now we can tell investors that when you come to Rwanda you are covered. Your investments are secure. This should provide a boost to investor confidence and hopefully our bottom line.”