ATI - Africa’s trade credit and investment risk insurer posted record profit in 2013, driven by demand for infrastructure development in member countries. CEO of the African Trade Insurance Agency George Otieno talks to United World.This year marks the 50th anniversary of the Republic of Kenya. As Ms. Lagarde (the Managing Director of the IMF) noted on her recent trip, “Kenya’s economic gains over the past few years have been nothing short of remarkable.” How has Kenya been able to achieve so much in such a short period of time?
Kenya has been able to achieve much in such a short period mainly because Kenyans are very hardworking people, they are quite receptive to new ideas, and they want the country to continue being an economic hub in this region so they are quite open to investors coming in. Kenya is truly going through an exciting time at the moment. At a time of global economic recession, Kenya has been one of the fastest growing economies in Africa, and is forecasted to boast a respectable growth of 6.2% in GDP for 2014, but what impact has this economic prosperity had on the insurance sector?
Growth in the Kenyan economy has been quite phenomenal in the last few years and it could have been much better were it not for the 2007 post-election. I believe what has made Kenya a place where everybody wants to do business is that there is peace and the conducive business environment. We have educated and skilled man power and we have an expanded middle class. At ATI, our income has grown tremendously in the last 3-4 years and in terms of profit, it has more than doubled.Arguably the most important element to any successful capital market is trust or confidence in the underlying economy. Considering the recent tragic events that have happened in Kenya, what do you think needs to be done to regain the trust and confidence of the international community in Kenya as a safe destination for investment?
The Westgate incident was a shock and unexpected but I don’t think it has affected investment because investors look at it as an isolated incident. Just like the US’s 9/11, these attacks can happen anywhere. What is important is that the Kenyan government is taking a very strong and proactive position; I believe that investments will still be coming in and ATI is there to provide comfort to investors by covering their risks.
Africa is rising and investors are getting good returns. Since Kenya is a regional hub, they can be confident that their investments will yield profitable margins. ATI was launched in 2001 with the financial and technical support of the World Bank and the backing of seven African countries. In just over a decade, ATI has supported $13 billion worth of trade and investments across the continent, but can you give us a bit of background information on your operations here in Kenya?
It has been a long journey because products we sell are quite niche and are not well known in this market, so it is only foreign investors who knew these products and they did not know much of ATI. In the last few years we have really been out to be well known in the market. That is why we have grown tremendously over a couple of years. Beyond World Bank, we have other partners who have seen that what we are doing is important to Africa. Key among them is the African Development Bank which has an equity investment of US$ 15 million and is also financing member states along with the World Bank. We also have a partnership with the European Investment Bank (EIB) on renewable energy. They gave us a grant of €2 million for capacity building. We signed a partnership deal in Brussels in April 2014, which was during the EU-Africa summit, to formalize the partnership. This grant will be used to help enhance our skills in energy related guarantees.One of the biggest headaches in doing business in Kenya is the cost of energy and electricity. Which is more viable, solar or wind?
Energy is one of the most expensive commodities in Kenya and in Africa at large. Kenya has taken a good step to reduce the cost of electricity; they are going on renewable and we see wind and geothermal investments increasing in dollar amounts. I believe in the next couple of years, Kenya should be able to significantly reduce the cost of energy which should help them to attract more investment. Renewable energy such as wind and solar are cheaper than fossil generated electricity. The rise of insecurity and terror is arguably the biggest threat to Kenya’s economy and growth. Can you outline some of the products that you provide and how you are playing a central role to mitigate these risks?
ATI is partnering with the Lloyds of London market to provide Terrorism and Sabotage covers. We were involved in the Westgate cover, which is going to be the biggest claim in the industry in dollar terms. Most conventional insurance companies exclude this risk from their offering. Do you think there is going to be sustainable growth in this type of insurance?
I believe so because I think terrorism risk is a cyclical and random. It is good to always keep your policy running because you never know when it is going to happen again.You’ve also recently entered into a partnership with NIC Bank to provide an innovative financial product aimed at growing SME trade within the region. Can you elaborate on this initiative?
One of our major products is political risk (investment insurance). These are risks which are not within the client’s control. The other major product is trade credit insurance, which protects businesses that trade on credit. Banks lend and we cover them against the risk of non-payment. What we have realized is that the biggest growth area in Africa is SMEs that are unable to access funds here in Africa because they are not well organized to attract credit facilities. We needed to do something to enable them to access funds so we partnered with NIC bank and we are also working with other banks to cover SMEs based on agreed parameters without them having to ask for full collaterals.You have mentioned that the last few years have seen impressive growth here at ATI. Mr. Olaka from the Kenya Bankers Association (KBA), also noted the enormous potential in the insurance sector and that at this time your industry is really set to increase dramatically. What are your growth strategies to capitalize on this ever increasing pool of insurance users and providers?
Kenya basically is under-insured (low penetration), but there are more opportunities. Luckily enough the population is growing, the middle class is getting larger and we have a younger population compared to the Western world. So it is a question of just ensuring that the product range is suitable for the market and the sky is the limit. Though Kenya compared to other markets in Africa is the most sophisticated after South Africa, there is still room for improvement.Because of the investment opportunities you have outlined we have seen a dramatic interest from American and international investors in the Kenyan economy. Why do you think ATI is the ideal partner for them when considering investments in Kenya?
ATI is the ideal partner because first of all we are based in Africa so this gives us close access to the risks and this enhances our ability to have a better understanding of most risks. Our African root also gives us access to governments and this has also helped to strengthen these relationships.
The other important factor is that we have gained the confidence of many international financial institutions through our S&P A/Stable rating, which we’ve managed to maintain since 2008. We are the 2nd highest rated financial institution in Africa after the AfDB. Furthermore, membership to respected organisations such as the Berne Union, where we are one of only two African insurers that have gained access, and our long-standing relationship with the largest provider of political risk insurance in the world – the Lloyd’s of London market. Are you trying actively to reach out to US investors to make them aware of your brand and all the years of experience you have here?
To be frank with you, we have not been able to reach out as much as we would have loved to but going forward this is part of our plan – and hopefully participating in these types of forums will also help to raise awareness to the American business community about our products and services. For now we are also trying to reach out to US investors already doing business in Africa. We definitely want to engage more in the US market and we are working closely with OPIC to realize this.Given you personally have over 30 years of insurance sector experience, what motivated you to enter the insurance field?
When I joined the industry, I was employed as a professional trainee and from there I fell in love with insurance and I became part of it. After 6 years in the Kenyan market, I went to Nigeria and worked there for 21 years. Though I wanted to be a doctor, I don’t regret joining this field. I have learned a lot and I have been lucky to have worked across all the sectors of insurance (direct & reinsurance) in Africa. I have been to virtually all cities in Africa.What advice would you give to other young professionals who aspire to have the same level of success as you?
To succeed means hard work combined with a bit of luck but you cannot reach there on just luck without your efforts and being focused. And we need each other (team work) to succeed.Do you have a final message to our millions of readers in America and all over the world?
Kenya is a very promising country. In the next 10-20 years it will be one of the highest sought out destination for investments. There are so many initiatives going on and for anybody planning to invest in the region, Kenya is the place to be.
As for ATI, this is a company that has a very promising future. Africa has a lot of challenges in trade and in attracting investments. Africa has only 10% of regional trade which is very low compared to 50% in Europe and 30% in Asia. With all the existing opportunities in Africa - with infrastructure development on the rise, it means that there is going to be a lot of trade. That 10% will likely increase to 20%, if not more, and that will create a lot of opportunities for ATI to be able to cover trade in the region. I also predict that in the next 5 years ATI will have an increase in the number of member countries from 10 to 20 with the entry of ECOWAS countries, which will be a game changer.