Zim set to join ATI Agency

Trade Insurance Agency (ATI).
In a statement, the Minister of Industry and Commerce Professor Welshman Ncube said the Government was close to “signing the Agreement establishing the African Trade Insurance Agency and the Participation Agreement.”

“This follows the approval by Cabinet on September 6, 2011. The signing of the agreement is the first step that will see Zimbabwe becoming a full member of the organisation given the immense benefits that will accrue,” said Minister Ncube.
The ATI (a Common Market for Eastern and Southern Africa Institution) is a multilateral financial institution that provides export credit insurance, political risk insurance, investment insurance and other financial products that help reduce the business risks and costs of doing business on the African continent.

The body also facilitates exports, foreign direct investment into and trade flows within the continent.
This is achieved by the provision of cost-effective use of underwriting capital, reduced over-head costs and the ability to encourage private sector insurers to assume risk in Africa.
It is anticipated that Zimbabwe will benefit from full membership of the organisation in respect of increasing investor confidence since the country’s risks of doing business with foreign firms will be reduced.

“Benefits accruing from membership of ATI include credit insurance protection to exporter against risk of insolvency or payment defaults, reduction of the cost doing business in Africa through the pooled approach. It also provides better credit terms to buyers to secure sales improving the competiveness of products as a result and enabling business to explore opportunities that are normally avoided for fear of non-payment which encourages the growth of businesses.

“More importantly, the regional scheme removes some investors’ perceptions of high levels of risk in doing business in Africa,” said Minister Ncube.
Zimbabwe has been suffering over the years from the negative effects of high risk of doing business perceptions as the latest World Economic Forum Global Competitiveness rankings show.
The country moved up six places to 132nd position in the WEF Global Competiveness Report 2011 to 2012, from 138th in the prior year rankings but this is still too low a ranking. Although the report indicates that the country has registered improvements in areas such as assessment of public institutions, ethics and corruption, and efficiency of Government, significant concerns around the political environment and the

resultant economic policies still remain.
Economist Mr Brains Muchemwa contends that foreign investors typically consider a stable political environment as a pre-requisite for determining where to invest.

“Most of the discord that is emitted by policymakers in the inclusive government is the major challenge that Zimbabwe faces more than anything. The competition for space and relevance has created more harm to the economy as most issues are distorted beyond the real issues on the ground.
“Indeed investors from outside can be forgiven to believe Zimbabwe is not investment grade,” he said.

This has had a negative impact on the country’s capacity for new foreign investment attraction.
For instance, the World Economic Report 2011 shows that Zimbabwe’s recorded FDI of US$105 million, compared to neighbouring Angola’s US$9 billion for the same period.

These figures are in the context of a US$55 billion FDI inflow for the African continent, reflecting the poor performance of the country in attracting new investment.
Notwithstanding the role that the ATI can play in mitigating risk, Zimbabwe can also benefit from direct investment from the regional grouping.

Minister Ncube noted that with regards to capital stock and shareholding the organisation has an open-ended capital stock based on an initial authorised nominal capital stock of US$1 billion.
This is made up of 10 000 shares with a value of US$100 000 each which is available for subscription by member states in accordance with the ATI Treaty.

“The size of the economy and the anticipated level of activity are the two main determinants of the appropriate level of capital investment for each member state,” he said.
ATI has 19 African member states including Benin, Burundi, Democratic Republic of Congo, Djibouti, Eritrea, Ghana, Gabon, Ivory Coast, Kenya, Liberia, Madagascar, Malawi, Rwanda, Sudan, Tanzania, Togo,

Zambia and Zimbabwe.
However, the body currently conducts business in Burundi, DRC, Kenya, Madagascar, Malawi, Rwanda, Tanzania, Uganda and Zambia as the balance are yet to sign and/or ratify and complete the membership process.