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Thursday, October 1, 2009
Italian initiative

SACE plans to expand its commitment towards Sub-Saharan Africa, from its Johannesburg regional office, which was established five years ago. SACE is an Italian government-backed export credit management company that insures commercial and financial transactions in more than 150 countries. It has outstanding commitments of more than Є46-billion.

Raoul Ascari, SACE’s chief operating officer, underlined the role that a financially sound global player such as SACE can play in enhancing access to credit for companies and banks alike. SACE is a strategic partner, active on all major international markets and keen to see the rapid growth of its presence in Sub-Saharan Africa.
Since launching the ‘Africa Programme’ SACE offers cover in 29 countries in the Region and has issued guarantees in 12 countries for a total commitment of €847,6-million. In 2008 Sub-Saharan Africa has absorbed 4,5% of all new commitments (40% increase from 2007) and the number of transactions has more than doubled. South Africa is the key market with 64% of total Sub-Saharan African transactions, followed by Nigeria (15%) and Angola (14%).
The company has also announced a $10-million investment in the African Trade Insurance Agency (ATI), which provides a range of customised credit and political risk insurance products to support African investments and trade.
ECAs were taking steps to enter lending markets because of the lack of project funding from traditional lenders in the wake of the financial crisis, he said. With the severe lack of funding worldwide, export credit agencies (ECAs) such as SACE have almost overnight seen a huge increase in the demand for their services. Balance sheet impairment has caused banks to reduce new lending, especially for non-key clients and for large project financing. The financial strength of private risk insurers is also deteriorating. The net impact on ECAs is that they are being approached at the inception of any new project to play a catalytic role in raising funding. ECAs are covering higher amounts and a higher share of the risk, now up to 100%, said Ascari.


Ascari said ECAs have generally been limited in the type of projects and products they guarantee. Most ECAs only provide guarantees on exports or projects involving their specific countries. He said SACE intended to be able to offer complete lending and insurance facilities.
“The market is changing and today no major contract around the world can be completed without an ECA’s involvement.”
SACE has moved away from only providing guarantees on Italian-based exports. “We have now become more flexible and have untied our lines of credit,” said Ascari. “We now cover wider markets and have become one of only a few global ECA players able to operate in almost any market as well as in local currency. This offers major forex benefits. But we will continue to work with banks and not in competition to them.
“SACE is entering the last step in the evolution of an ECA,” said Ascari, “from providing pure cover to lending. This involves direct lending from ECAs to the final user or intermediaries. It also involves refinancing of outstanding export credits, from central bank facilities to ad–hoc schemes.”
SACE’s investment in ATI is aimed at promoting economic growth in Sub-Saharan Africa. ATI is an African-owned international development financial institution, founded in 2001 by African states with the financial and technical support of The World Bank Group. It provides a range of customised credit and political risk insurance products to support African investments and trade. Awarded a long term ‘A Stable’ rating for both financial strength and counterparty credit by Standard & Poor’s, ATI is the second highest rated institution in Africa.
The equity investment in ATI aims to reinforce the respective companies’ missions in Africa. SACE’s investment will support ATI in fostering sustainable growth in Africa and ATI will reinforce SACE’s support to Italian exporters and investors.
By teaming up with ATI, SACE will access ATI’s expansive network in Sub-Saharan Africa, its preferential creditor status (“De Jure”) for political risk coverage in its member states and risk sharing/participation to support export credit transactions that provide cover for Italian companies.
“This investment,” said Ascari, “is another step forward to reinforce our presence in Sub-Saharan Africa, where we are already strongly committed through the Africa Programme and a direct office presence in Johannesburg.
“The partnership with ATI will allow SACE to develop new business and provide a valuable risk-sharing platform. Our objective to support the presence of Italian companies in the continent through sustainable transactions which will be greatly enhanced as a result.”
Stewart Kinloch, acting chief executive officer of ATI, said Italian companies play an important role on the African continent and this historic milestone reflects the will of both SACE and the Italian Government to further strengthen and support these investments and trade flows.

Ø Italian exports to Sub-Saharan Africa increased consistently over the past five years, with a growth of 3.4% from 2007 to 2008.
Ø South Africa and Nigeria account for a total of €2,195,8-million, representing nearly 46% of total Italian exports to the Region.



Total Italian exports towards Sub-Saharan Africa amounted to €4,786-million (2008).
Italian exports consist mainly of mechanical machinery, electronics, vehicles and metal products.
Sectors of major interest include mining, infrastructure, tourism, oil and gas, banking, food and beverages and telecommunications.
SACE supports transactions within the limitations on sovereign risk imposed by the International Monetary Fund and in the framework of responsible lending agreed by the G-7.


 

In 2008, SACE issued 21 new guarantees in Sub-Saharan Africa. The Region accounts for 2.6% of SACE’s new guarantees.
During the first semester of 2009, SACE concluded new projects amounting for €175-million. Other transactions for a total value of €59,2-million are under negotiation.
South Africa represents the major destination for SACE’s operations, with 64% of total Sub Saharan Africa transactions, followed by Nigeria (15%), and Angola (14%).
 

Copyright © Insurance Times and Investments® Vol:22.10 1st October, 2009
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