TanzaniaInvest had the pleasure of interviewing John Lentaigne, Chief Underwriting Officer of the African Trade Insurance Agency (ATI).
ATI was launched in 2001 as a multilateral financial institution providing insurance products to support African investments and trade.
ATI addresses the concerns of investors by insuring their transactions against a range of investment risks such as payment default by the Government or a Government agency.
Mr. Lentaigne discusses the role of ATI in facilitating investments and trade in Tanzania, as well as the opportunities and challenges ahead.
TanzaniaInvest (TI): How would you assess Tanzania’s investment risks?
John Lentaigne (JL): From the perspective of an international investor, Tanzania bears political and economic risks.
For example, the country has no external credit rating from any of the major rating agencies and even if it had, it would likely be in the single B region.
Therefore, for any international bank lending to the Tanzanian government or companies within Tanzania, the capital charges for such lending will be high.
ATI’s ‘A’ rating from Standard & Poor’s allows the investor to substitute the sub-investment grade rating of Tanzania for ATI’s rating, which can substantially lower the cost of financing.
Similarly for an equity investor, utilizing ATI’s insurance to mitigate investment risks can enable the investor to lower their return hurdles, thereby making the investment proposition more viable.
TI: You recently hosted a conference in Dar Es Salaam on “Unlocking Investments to Maximize Tanzania’s Energy Potential”.
What are the investment challenges in Tanzania’s energy sector?
JL: International investors are aware of the well-publicized cases of international arbitration and the historically poor payment track record of the Tanzania Electric Supply Company (TANESCO).
This is discouraging to potential investors, despite the evident need for more private sector involvement in Tanzania’s power sector.
To address these issues, TANESCO is moving towards a sustainable tariff and a number of smaller independent projects are not experiencing payment delays.
Furthermore, Tanzania is currently not reliant upon expensive emergency power producers, so there are investment opportunities in low-cost gas-fired and renewable power.
Aside from power, other sectors of interest include agriculture, finance, infrastructure and oil & gas.
Overall, Tanzania has high investment appetite since it has the the 10th largest GDP in Africa.
TI: At the conference, you mentioned that ATI “can make a transformational investment proposition for Tanzania.” How?
Projects often fail to reach financial close due to lack of political and credit risk insurance cover.
The reason that ATI can be transformational is that by using ATI’s insurance, investors are able to make investment decisions that would not be possible in the absence of that insurance.
Accordingly, ATI can help Tanzania unlock hundreds of millions of dollars of investments.
With broader acknowledgment of our role by the Government of Tanzania, ATI will be able to significantly increase its risk coverage in Tanzania.
TI: What does Tanzania represent in the portfolio of countries ATI covers?
JL: Tanzania is a founding member of ATI and historically ATI has supported hundreds of millions of dollars of investment into Tanzania.
The country represents about 7% of ATI’s current portfolio of exposures, yet it is our third largest current member country by GDP (behind Ethiopia and Kenya).
As such, we think Tanzania has large trade and investment potential that we can support.
However, there is a lack of understanding as to the importance of institutions like ATI.
So, we came to Dar es Salaam to increase awareness of our functions among investors and the Government.
TI: You joined ATI on September 30th, 2016 to further enhance the company’s growth.
What is your overall strategy to achieve that and what are the challenges ahead?
JL: Many African economies are struggling due to increased debt burdens.
Moreover, depressed copper and oil prices are negatively affecting sovereign revenues and the economies of some countries.
Governance and transparency meanwhile remain ongoing issues and there are a myriad of other challenges to face.
ATI’s mission is to facilitate trade and investment in our member countries, so the challenge is how to do this at a time of increased risk.
One of our key priorities is to continue to increase the number of ATI’s member countries.
Recently, for example, Ethiopia and Zimbabwe have joined in late 2016.
One of my aspirations is to see ATI become a truly pan-African institution.
Finally, we need to boost our profile within our member countries, in particular at the Governmental level, because for far too long we supported investments in silence behind the scenes.
We feel that with increased awareness of ATI, we will be able to better serve the full range of underwriting enquires we see within our member countries.