Last week, Invest Africa hosted its annual flagship event, The Africa Debate, bringing together 1000+ thought leaders, industry experts and entrepreneurs to discuss how to best support Africa’s transformative recovery. Mikir Shah, CEO of Africa Specialty Risks joined the inaugural panel discussion featuring key financial African leaders on ways to develop local financial services and capital markets across Africa.
Moderator Yvonne Ike, Managing Director, Head of Sub-Saharan Africa at Bank of America.
Speakers Mikir Shah, CEO, Africa Specialty Risks Banji Fehintola, Head of Treasury & Financial Institutions, Africa Finance Corporation Ibukun Adebayo, Director, Africa & South Asia Strategy, Capital Markets, London Stock Exchange Ayo Salami, CIO, Emerging Markets Investment Management
Key takeaways from panel discussion
FX Risks
Attracting foreign capital is imperative to power growth across the African continent.
Risk mitigating insurance products such as political risk insurance and trade credit can protect against political change or FX inconvertibility, providing the confidence required to increase investment inflows into the Continent which is currently insufficient.
Initiatives such as Offshore Local Currency Financing shift the FX risk from the issuer to the international investor who may have tools to mitigate FX risks, thus reducing a country’s dependence on foreign currency while simultaneously helping investors tap directly into the local market.
Attracting Capital
Governments need to implement a track record of delivery and execution – running unsustainable deficits bears a cost, such as currency weakening resulting from high inflation.
DFIs’ such as the Africa Finance Corporation (AFC) work closely with governments through policy advisory to improve the operating environment, and with central banks by providing market liquidity in terms of swaps, local currency investments, etc. The AFC carries out a lot of work around product development and ensuring these are available to the market.
Governments needs to create local operating conditions to enable local businesses to flourish which will quickly attract international investors to participate in that success.
Democratising Investment Access
A natural pool of capital already exists that is comfortable with African risks, and that’s the diaspora remittances which equated to circa US$70 Bn dollars in 2020, albeit most of this money was for consumption versus investment. It is essential to create products to convert a proportion of this diaspora remittances into investments.
Fintech can provide Africans access to invest in foreign markets, and it can also support people outside Africa to invest into the Continent.
Perception vs Reality
African governments should implement an ongoing program of investor engagement to enable investors to be comfortable with the existing risks and current reality.
Information distribution needs to be centralised and scalable so that international investors also get access to data
Better risk understanding has a direct effect on the execution, cost, and ability to attract other international investors into a project.
Africa Specialty Risks (ASR) provides comprehensive risk transfer solutions through high quality underwriting to local and global customers across the African continent, giving them the confidence to grow their businesses sustainably. Our specialty lines include; Political Risk Insurance, Trade Credit, Construction, Energy, Liability, Property, Political Violence and Terrorism, and Parametric.