Zimbabwe seeks political risk cover to lure timid capital

Zimbabwe seeks political risk cover to lure timid capital

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ATI CEO, George Otieno

By Farai Mabeza

ZIMBABWE hopes that its membership of the African Trade Insurance Agency (ATI) can help unlock desperately needed foreign direct investment by providing cover for political risk, the Minister of Industry and Commerce, Mike Bimha, has said.

ATI provides political risk insurance cover for its members and Zimbabwe hopes that this can finally help it overcome its long standing high risk, which has been caused by almost two decades of political instability.

Zimbabwe applied to join the ATI in September 2010, ratified the ATI agreement in 2015 and paid the required minimum capital contribution in September 2016.

ATI facilitates international and intra-regional trade and investment on behalf of African member states through the use of insurance, reinsurance, co-insurance, guarantees and other financial instruments.

“In the whole of Africa there are no other companies that cover political risk and ATI is doing that. So I think it’s something that has been long overdue.

“Other insurance companies were not able to cover big amounts in the area of trade and investment risk and there was no cover for political risk but ATI, because of its stature, is in a position to cover those risks,” Bimha told The Financial Gazette.

He said the foreign direct investment would drive the country’s industrialisation agenda and infrastructure development.

ATI’s resident underwriter for Zambia, Malawi and Zimbabwe, Pizzaro Lukhanda, said his organisation had already underwritten business worth $300 million in Zimbabwe since October 2016.

“Most of the time when people talk about political risk at the end of the day it’s just about perception. Especially if you are sitting outside Zimbabwe you have a different perception from (the one you get) when you come on the ground.

“Our mandate is to cover political risk that is the reason Zimbabwe subscribed to the ATI treaty so our mandate is to write political risk in Zimbabwe,” Lukhanda said.

Lukhanda explained that there were many foreigners who wanted to invest in Zimbabwe “but are worried (about) political risk, so they try to cover their investments. This is not unique to Zimbabwe, every other investor that wants to put money in Africa has the same type of fears”.

“We offer them cover against government action or inaction that can jeopardise an investment or a trade transaction. The other type of product we provide is credit insurance risk where either a bank lends money to a company or corporate and the bank is facing non-payment,” he added.

“Our mandate is to calm the fears of investors coming to put money in Africa. If more investors are comfortable to invest because we can say to them if you invest in Zimbabwe and you lose money through government inaction then we pay you then any other investor will take up insurance and come here to put their money,” he said. – Fingaz

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