ATI-ACA African Trade Insurance Agency “Lubricating the extractive industries with political risk coverage” Marrakech, Morocco April 2004 Bernard de Haldevang Chief Executive AFRICA’S MULTILATERAL IMPORT AND EXPORT CREDIT AGENCY NOT AN OFFICIAL UNCTAD RECORD

ATI-ACA How do we define a political risk? 4:A:4 POLITICAL RISKS ASSETSCONTRACTSPERSONNEL Political risks affect…

PR(&PD) CF(&CR) “Political Risks” defined in terms of Trade & Investment Risks POLITICAL RISKS ACTIONS & INACTIONS OF SOVEREIGN REGULATORS INVESTMENTS POLITICAL VIOLENCE PHYSICAL DAMAGE & ABANDONMENT MOBILE ASSETS POLITICAL FORCE MAJEURE FIXED ASSETS CURRENCY INCONVERTIBILITY CONTRACTUAL FAILURE TO PERFORM TRADE PUBLIC / PRIVATE BUYERS EXCHANGE TRANSFER UNFAIR CALLING OF BONDS PUBLIC / PRIVATE SUPPLIERS POLITICAL VIOLENCE - FRUSTRATION

ATI-ACA The African continent’s challenge Annually reducing aid flows Unsustainably high transaction costs Too many uncoordinated regional economic integration organisations and “initiatives”… >40 of 54 countries “involved” in conflicts or wars in the last dozen years Africa’s total external debt > 350% of exports Market gap in risk mitigating tools Risk: issue of perception v reality? FDI at 0.7% of global, annual World trade share 2.25%, 10-year ann. average Pop >750 mill of which >50% in agriculture - >70% in % of males >15years and 50% of all females illiterate …returns of up to 30% v 15% USA and 10% EU

LEVEL OF RISK INSOLVENCY (PERFORMANCE & PAYMENT) CONTRACTUAL (POLITICAL) CONTRACTUAL INVESTMENTS STOCKS / MOBILE ASSETS “WORKS” CATASTROPHE ATTRITIONAL POLITICAL RISK CONTRACT FRUSTRATION CREDIT RISK CEN EQUITY / PROJECT B.O.O.T/B.O.T IMPORT/ EXPORT EMBARGO BUYER CANCELLATION / TERMINATION / REPUDIATION PAYMENT DELIVERY CHAPTER II “SCHEME OF ARRANGEMENTS” WAR & PFM TERMINATION CENTRAL GOVT ACTION PROTRACTED DEFAULT POLITICAL VIOLENCE LEASED ASSET NON-REPOSSESSION PRE-EXPORT FINANCE INSOLVENCY                           A view of the inter-relationship between political, contract frustration, credit, and political violence risks

ATI-ACA A new type of multilateral What does ATI provide? Leverage with African governments, intergovernmental institutions, development agencies & multilaterals Proven ability to “connect” Africa to financial markets in developed nations Accountability of member governments PLUS 100% cash-collateralised security New public-private risk sharing concept Enhanced loss mitigation and recourse through sovereign treaties with the World Bank Capacity building for African institutions

Member countries Burundi, Djibouti *, Eritrea *, Kenya, Madagascar*, Malawi, Rwanda, Uganda, Tanzania and Zambia. ( * ATI Treaty to be ratified) ButBut …open to all AU member states & corporates… Interest from:Interest from: D.R. Congo, Ethiopia, Ghana, Libya, Mozambique, Nigeria, Senegal, Sudan, ++ Corporate members COMESA, PTA Bank, ZEP-RE, Atradius group. In discussions with others. ATI-ACA Membership

Objectives Charter:Charter: Facilitate private sector-led trade flows, investment and “productive activities” through the provision of insurance, coinsurance and reinsurance, financial instruments and related services. That means… :That means… : A term appointment… Mobilisation of public and private sector financial institutions through cooperation, not competition; an inclusive approach from day one Promotion of Intra - African trade & investment How:How: Using combination of private sector experience & capital and public sector clout and connections

ATI ATI-ACA Leveraging ATI Trust Account Government IDA Project Agreement Participation Agreement Initial Deposit (US$105mill) Security Trust agreement Insurance partners Insurance Facility Agreements Burundi Djibouti t.b.ratified. Eritrea t.b.r. Kenya Madagascar t.b.r. Malawi Rwanda Tanzania Uganda Zambia ATI’s capital IDA Funding; Members’ Contributions; Retained Premium and Interest

Syndication of 100% cash-collateralised ATI line plus the security of agreed insurance partners for their facultative coinsuring share Atradius balance sheet behind ATI credit insurance paper (until end 2004); ATI “own” capacity being developed ATI claims payments not subject to any regulatory or government interference Established under international treaty Registered under Article 102 of the UN Charter Supported by the World Bank and the EU ATI-ACA Security of ATI policies

ATI-ACA Covered risks Non-payment for public buyers War, Civil Disturbance, Embargo Transfer Restrictions Currency Inconvertibility Expropriation, Seizure of Goods (CEND, FA & FD) Contingent Political Force Majeure (3 rd party) Prevention of export Cancellation of import/export licenses Imposition of non-constitutional import duties Retroactive, discriminatory tax changes Transit and diversion risks Multi-buyer insolvency Terrorism, War and Business Interruption

Eligibility criteria: New cross-border transaction Productive activity Private or public buyer (no sovereign risk) Buyer in participating country Environmental clearance Examples of transactions: Confirmation of L/C Sale of goods on credit terms Financial/operating leases Trade & project finance loans (inc pre-export) Contractual bonds Physical assets against war and terrorism Foreign Direct Investments Tangible assets against expropriation Contingent Political Force Majeure for Project Loans ATI-ACA The political risk facility

Terms: Sight transactions up to 6 years cover No minimum transaction amount Minimum premium of $500 for non-African insureds; $250 for African insureds Up to 100% indemnity Competitive Pricing ATI-ACA The political risk facility

ATI-ACA Political Risk Waiting Period & Claims Processing Assessment period Claims filing period Claim determination Claim settlementArbitration Up to 45 days Up to 15 days Notice of potential loss

Develop credit information sources Act as recovery agents for past losses (insured or not) Establish credit database Assist in developing national insolvency legislation Develop insurance capacity in the domestic private market; “APRP” the African Political Risk Pool Comesa Customs Carnet Partnership agreements with credit reference bureaux and agencies Asset & receivables backed working capital export guarantee scheme ATI-ACA Future Developments

TRANSACTION: Buyer credit for import of plant & equipment for power project VALUE: US$ 40mill (3 rd party loan: $20m) RISK COUNTRIES: Rwanda; Belgium, Germany TENOR: 5 years + 1 year pre shipment INSURED: Financial institution ADDITIONAL SECURITY: Ministry of Finance guarantee BUYER: Rwandan utility COVER: Broad form Trade PRI for $25 mill INDEMNITY & W.P.: 100% & 105 days PREMIUM: 2.0% pa & pr on mthly exposed ATI-ACA Illustrative Case Study 1

TRANSACTION: Sales of food products RISK COUNTRIES: Europe & East Africa TENOR: one year with automatic renewal INSURED: East African Company BUYERS: Wholesalers COVER: PRI and CI INDEMNITY:CI - 60 to 90% PRI - 100% days PREMIUM:CI - 0.8% of turnover PRI – 0.5% ADDITIONAL: Loss payee arrangement with financing bank ATI-ACA Illustrative Case Study 2

TRANSACTION: Sale of telecom equipment worth US$ 20 million RISK COUNTRY: Tanzania TENOR: 6 years INSURED: European company REINSURED: European ECA BUYER: Government telephone utility COVER: Comprehensive Trade PR Cover INDEMNITY:100% PREMIUM:3.5% pa & pro rata (works out at about 9% on contract value) ALSO: Loss payee nominated as financing bank ATI-ACA Illustrative Case Study 3

TRANSACTION: Mining contract $75 mill RISK COUNTRY: Zambia INTEREST: Contractor’s plant and equipment TENOR: 4 years INSURED: European contractor EMPLOYER: Mining company COVER: Expropriation, Deprivation, Abandonment, War & Terrorism INDEMNITY:100% (above excess point) PREMIUM:0.775% pa & pro rata ATI-ACA Illustrative Case Study 4

AFRICA’S MULTILATERAL IMPORT AND EXPORT CREDIT AGENCY ATI-ACA Thank you How to contact ATI: Insurance brokers Tel: +254 (0) and