‘Africa’s exposure for political risk triples’

Kampala, Uganda | ISAAC KHISA | Last June, multilateral insurer, African Trade and Insurance Agency, paid its first dividend worth US$2.5 million to 14 shareholder governments including Uganda. The firms CEO George Otieno spoke to The Independent’s Isaac Khisa about the firm’s future prospects.

What is your management philosophy?

I really value my staff and the management team. The successful teamwork we have has made ATI the remarkable company that it is presently. To encourage this, I have an open door policy and I encourage staff to share their thoughts, concerns and strategies so that everyone’s ideas are included in our day-to-day functioning and in our longer-term strategic focus. This is important because ultimately, the company belongs to staff. Taking this philosophy forward, staff then understand that it is their company, which creates a sense of ownership that has a positive effect in every aspect of the business. Lastly, through incentive programs we are able to incentivize employees to improve their performance and to work toward the overall success of their company. I take the same approach with shareholders, focusing on fairness and equity in my dealings with them to grow a sustainable and strong company capable of standing the test of time.

What makes ATI a unique firm compared with the rest of insurance firms in Africa?

ATI is unique because we are the only African institution underwriting investment and commercial risks, which ensures that the continent is able to attract more investments, trade confidently with each other across borders and boost the international credibility and attractiveness of African risks. ATI is majority-owned by African countries and other corporate shareholders which include African Development Bank, COMESA and government owned export credit agencies – ECGC (India), SACE (Italian Export Credit Agency) and UK Export Finance. We have both a commercial and developmental mandate to support member countries by providing investors and traders with insurance options that will then trigger their financiers to fund projects and transactions that benefit our member countries. In this way, ATI goes where the purely commercial providers of similar insurance products will not go thereby helping countries attract capital for sustainable economic growth. As ATI we do not compete with local insurers – in fact, our mandate is to provide complementarily by helping these companies increase their capacity and to become more competitive.

Who are your target clients?

Financiers are our main clientele. As governments continue to spend on improving infrastructure across the continent, investors and companies are following. Historically, developed countries have benefited from the presence of export credit insurers and multilateral guarantors to spur growth. Unfortunately, African countries have been unable to leverage this kind of support to stimulate their economies largely due to their sub-investment grade sovereign ratings. This is the space that ATI fills. Because we have an investment-grade rating of ‘A/Stable’ we are able to provide risk mitigation support to international banks, which is a requirement in most international financing. We also play a critical role in improving the perception of risk in our member states because a good track record with ATI can help countries to attract a much broader range of international investors. For example, Banks are operating today in a challenging domestic and global economic climate with increasingly more stringent regulatory requirements. They must therefore recognise and manage future risks. ATI covers lenders against a broad range of commercial and political risks with tailored products designed to meet their specific needs. We also support contractors, distributors & suppliers, export credit agencies, exporters, importers, manufacturers and companies trading on credit.

ATI is known for offering political and trade credit risk insurance products on the continent. What is your assessment on the uptake of these products?

In the past five years, the gross exposure for political risk has tripled while exposure for credit risk has grown by eight-fold. The uptake is in part due to growing demand from investors as the continent continues to position itself as an attractive destination for investors. Africa’s drive to increase trade within its borders is also fuelling ATI’s success, hence the eight-fold increase in uptake of our trade credit insurance product.

Since ATI’s establishment 18 years ago, it is only this year that it paid dividends to its shareholders. Why did it take this long?

ATI has only been profitable for the last six years. We considered the dividend policy two years ago on the back of continued profitability and a strategic drive to grow further and also attract new shareholders. We wanted to wait till ATI was on a sustainable growth path and in a position to ensure long-term dividend pay outs. We feel that we’ve now reached that goal post.

To start, we will be distributing US$2.5 million to our 14 member governments and other shareholders. Our intention is to continue showing value to our stakeholders, while providing non-member countries and institutional investors an incentive to join.

What do you think of African government’s commitment to improving the level of trade and investment? What can be done to improve this situation?

Increasingly, we are working with our member countries directly at the ministry of finance level, rather than participating silently in the background. With this strategy, the governments have really been cooperative as they now better understand ATI’s value.

They also understand the importance of mitigating investor risks effectively. And in just five years, we have had five new member countries and our equity has also increased by 60%.These results show that governments are in fact prioritizing the growth of investments and trade in their economies.

What are some of the challenges, if any, that the firm faces in carrying out its business?

Governments are understandably bureaucratic in their need to follow procedures so the membership process takes long. At times, we make progress with a Government and at the tail end, a new Government comes in or there is a cabinet shuffle requiring us to start from the beginning. We are now to fast track the process so that it only takes up to three years to bring a new country on board. On the business end, we see in a number of countries negatively impacted by the commodity price slow down (although the scenario brightened in 2017) and the resultant large budgetary deficits. With rising debt levels remaining a concern, the picture in Sub-Saharan Africa is mixed though many countries should be able to stabilise debt burdens if they better mobilize revenues. In this regard, one of our key messages to countries is that ATI can be a strong partner in helping them secure investments to diversify their economies and scale-up exports so they are not held hostage to the unpredictability of commodity markets.

Two months ago, you held an Annual General Meeting in Abidjan, Ivory Coast. What resolutions di you make going forward?

The biggest news we had at the meeting in Abidjan was the payment of dividends to shareholders. Also, Nigeria and India’s application to membership were also formally approved. Nigeria is expected to bring in US$50 million and the government of India, which will be represented by India’s export credit agency, ECGC, is expected to bring in US$10 million. And lastly, the Kenyan government allocated land for us to build a head quarter in Nairobi.

What is the projected profit growth this year compared with theUS$10million registered in 2017? What factors are likely to contribute to the projected revenue growth?

In the FY 2018, we expect an 11% increase in profits. It’s lower than what we have achieved in the past years due to the fact that costs have increased since we are in the process of implementing an organisational restructuring, which entails hiring new staff – and we are also rebranding. On the business front, the gross written premium is expected to increase by at least 16%.

Where do you see ATI in the next five years?

We are entering a new and exciting phase of growth that will undoubtedly make ATI a force across the continent. Our ultimate vision is to become the first stop for any investor or company doing business in Africa. We hope to increase our membership footprint throughout Africa, in particular to West Africa, through ECOWAS. Consequently, ATI will be the go-to pan-African investment insurance facilitator. Coupled with the growth in membership and thus ATI’s equity base, we will increasingly become a critically important strategic partner for African governments and for stakeholders investing in Africa. Increasing visibility will be another area of focus in the coming years. For this purpose, ATI is undertaking a rebrand with the aim of positioning itself more competitively as it enters new and larger markets.