Kenyan investors can now comfortably invest in Ethiopia, one of the continent’s fastest-growing economies, after African Trade Insurance Agency (ATI) started insuring political risk in the country.
The announcement came after a year-long process supported by African Development Bank (AfDB) funding at a time the country is facing political unrest over official land grab to facilitate foreign investors.
“I believe our entry into Ethiopia, particularly at this time, sends a powerful message to investors. Our presence signals that Ethiopia is open for business because we are standing beside them as a credible and internationally respected insurer with an ‘A’ rating from S&P,” said ATI chief executive George Otieno.
ATI, now capitalised to the tune of $200 million, was founded in 2001 by the Common Market for Eastern and Southern Africa (Comesa) with Kenya being a significant shareholder.
Backed by the World Bank, it is intended to increase investments in the region by lowering investors’ political risk. In Ethiopia it will insure projects up to $1 billion.
As of December 2015, ATI volume of business support was $21.5 billion.
Under the political risk insurance, ATI protects against any unfair action or inaction by a government that would negatively affect business or investment.
Other products are trade credit insurance for non-payment or delayed payment to a supplier of goods or services by a public or private buyer or bank borrower.
“Under political violence, terrorism and sabotage insurance we protect investors against financial losses in the event of a political or terrorist-motivated event, as well as off-taker guarantees for energy projects where we insure against the non-honouring of sovereign obligations from a public utility,” said Mr Otieno.
Ethiopia with a population of nearly 100 million people offers a large internal market for consumer goods manufacturers.
Ethiopia’s Ambassador to Kenya Dina Mufti said: “We have put in place attractive investment opportunities and incentives including recent concluded bilateral investment and double taxation avoidance agreements with major countries in order to give the appropriate guarantees that meet international standards to our foreign investors… membership in ATI is an additional support and protection to the stakeholders involved in our economic growth,” said.
The AfDB regional director Gabriel Negatu said Ethiopia’s affiliation with the ATI will attract prospective investors with additional guarantees to participate in the priority areas of industry, powering and lighting.