Letter of credit (L/C) transactions within a group of Africa's most conflict-prone countries may now be eligible for insurance from a unique new World Bank supported multilateral export credit agency. This follows the official launch of the African Trade Insurance Agency (ATIA).

As well as L/C confirmation, other transactions eligible for cover include sale of goods on credit terms, lease finance and the import and export of capital equipment for use by an insured firm in the course of its business. Cover will also be available for loans by foreign and domestic lenders as well as contract and performance bonds.

Unique multilateral agency

ATIA is headquartered in the Kenyan capital, Nairobi, but it is a multilateral agency that aims to provide political risk insurance and other financial instruments to support trade and investment in Africa.

Bernie de Haldevang, chief executive of ATIA said the initiative "is unique as it is the first multilateral export credit and political risk agency in which its own member countries assume financial liability for the political risks affecting trade within their own countries."

Speaking at the ATIA launch in Kampala during the August meeting of the Global 2001 Smart Partnership Dialogue, Uganda's president Yoweri Museveni said investors should no longer worry about the political risks in Africa "because we shall insure you."

Risks insured

The regional export credit agency aims to insure trade and investment in Africa's most war-prone regions against political risk, poor business practices and unfriendly macroeconomic policies.

Cover may be extended for a variety of risks, including embargo, expropriation, government interference, conversion or transfer of currency, the imposition or increase of discriminatory import or export taxes, interference with the transportation of goods, prevention of sales, prevention of exports and war or civil disturbance.

Strategic aims

ATIA was established at the Common Market for Eastern and Southern Africa summit in May 2000. Uganda, Kenya, Tanzania, Rwanda, Burundi, Zambia and Malawi have already signed participation agreements to formally join the agency.

The agency has four key aims:

- To cushion business from political risks in Africa;

- To attract trade and investment;

- To cover commercial risks threatening business, and

- To increase membership of the agency and improve business practices.

World Bank support

The agency is autonomous says it is financially and administratively independent. It also claims that because it is free from political control, its operations will take only commercial considerations into account.

The International Development Association, the concessional lending arm of the World Bank, has funded the project to the value of US$105 million held in an offshore account over the next 10 years.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.