Zim requires US$25m to join insurance body

Business
ZIMBABWE has been accepted to join Africa Trade Insurance (ATI), a pan-African body that provides guarantee against the country’s risks, but would enjoy the benefits after making a contribution of US$25 million in capital.

ZIMBABWE has been accepted to join Africa Trade Insurance (ATI), a pan-African body that provides guarantee against the country’s risks, but would enjoy the benefits after making a contribution of US$25 million in capital.

REPORT BY NDAMU SANDU

ATI is a multilateral financial institution providing export credit insurance, political risk insurance, investment insurance and other financial products to help reduce the business risks and costs of doing business in Africa. It also facilitates exports, foreign direct investment into and trade flows within the continent.

Mike Bimha, deputy minister of Industry and Commerce told delegates attending the inaugural credit insurance meeting last week that Zimbabwe’s application to join ATI had been accepted.

He said the country has to make payments to the organisation, adding he had impressed upon Finance minister Tendai Biti who had showed interest in the project to support it, if funds were permitting.

For three years, Zimbabwe has been attending the ATI meeting of shareholders as an observer.

Bimha said joining ATI would provide cover against political risks adding that some investors had indicated that they could not risk their investments as the country was not a member of ATI.

“We are getting comments from countries such as China, that you are not a member of ATI therefore we are having problems in terms of investment in your country,” Bimha said.

Zimbabwe is on a crusade to lure investments and help rebuild the economy that would register the third consecutive annual growth this year after a decade of recession.

According to the Medium Term Plan launched last year, government wants investment to contribute 20% of the Gross Domestic Product (GDP) in 2015 from the current 4%.

Government is also working on investment protection legislation meant to lure investors.

However, analysts say the empowerment legislation that demands that locals should have a controlling shareholding in foreign-owned companies would stymie all efforts in place to lure foreign direct investment (FDI).

FDI inflows into Zimbabwe more than doubled last year to US$387 million, spurred by increased inflows into sub-Saharan Africa.

According to the World Investment Report 2012, FDI inflows into Zimbabwe had risen from the US$166 million recorded in 2010, signalling the interest of investors despite the uncertainty on the political front.

ATI currently conducts business in nine African countries—Burundi, Democratic Republic of Congo, Madagascar, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia.

ATI was launched in 2001 with the financial and technical support of the World Bank and the backing of seven African countries.

In less than a decade, it has supported over US$2,5 billion worth of trade and investments across the continent and secured an investment grade rating of “A” from Standard & Poor’s.

Sovereign governments buy shareholding in ATI and that money is used as collateral.

This means that if a country reneges on an earlier commitment, the concerned investor would be compensated with the country’s portion of capital in ATI.

Thus, becoming a member of ATI is an incentive to governments to honour the commitments.

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