WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY

MIGA in Africa

A Continent on the Move thanks in part to investments from newly restrictions, expropriation, war and civil rising economies like China and . disturbance, and breach of contract. MIGA’s Sub-Saharan Africa is increasingly becoming coverage also provides comfort to lenders, a more attractive and hospitable destina- Democratic elections, economic stabil- who may be particularly concerned about tion for investors. Strong growth, improved ity, more peaceful relations, and regulatory cross-border risks. macroeconomic performance, and relative reforms have helped improve the region’s political stability helped the region’s GDP investment climate and led to increased MIGA has for many years been a leader in expand by 5.6 percent in 2006—surpassing FDI in recent years. But countries in sub- supporting FDI into sub-Saharan Africa. The the 5 percent mark for the third consecutive Saharan Africa still occupy 19 of the bottom agency has issued more than $2 billion in year. According to the World Bank, 13 sub- 25 places in ease of doing business. The guarantees in the region since 1988 and has Saharan African countries have attained World Bank Group’s Doing Business 2007: a current exposure of more than $900 mil- middle-income status and another five How to Reform report points out that lion. In fiscal year 2007, Africa accounted for countries are knocking or will soon knock on despite some progress, only a few countries 18 percent of MIGA’s outstanding portfolio. that door. More than a third of Africans now in the region are doing what is needed to live in the 15 countries that were projected, simplify business regulations, strengthen MIGA has provided political risk insurance for in 2007, to extend a decade-long median property rights, increase access to credit a wide range of projects in the region, ranging annual growth rate of 5.3 percent. Foreign and reduce the exorbitant costs of exporting from the rehabilitation of sugar plantations direct investment (FDI) has also increased and importing. The bottom line is that sub- to the establishment of broadband wireless noticeably, with the region attracting $13.8 Saharan Africa still has work to do to shed service. The agency specializes in supporting billion in 2005, and $18.5 billion in 2006, its image as a high-risk, high-cost place to investments in countries just emerging from do business. conflict, providing coverage where other insurers are often not willing to go, such as Angola, the Democratic Republic of Congo, MIGA, a member of the MIGA’s Role for Investors and Mozambique, and Sierra Leone. World Bank Group, mitigates Lenders noncommercial risks by insuring MIGA places no limit on the size of the projects investments against the risks of: For many investors and lenders, the finan- it supports—in fiscal year 2007, the agency cial consequences of doing business in issued $115 million in guarantee coverage for r Currency inconvertibility and politically vulnerable countries are often a hydropower project in , as well as a transfer restrictions greater than the rewards of entering a lucra- $600,000 guarantee for a hotel privatization r Expropriation tive market. As a result, Africa is receiving project in Guinea-Bissau. Indeed, MIGA’s r War, civil disturbance, only about 10 percent of total foreign direct Small Investment Program (www.miga.org/ terrorism, and sabotage investment to developing countries, while sip) supports investments considered to be investors are losing opportunities to cap- r Breach of contract quite small. The lower premium rates offered ture potential high yields from a vast, largely and the faster turnaround make it particularly untapped market. attractive to investors looking for coverage for MIGA provides dispute resolution less than $10 million. services for guaranteed investments MIGA is playing an important role to to prevent disputes from escalating. change this status quo. As a risk mitigator As a member of the World Bank Group, and promoter of foreign direct investment MIGA has the added value of deterring MIGA also provides free into developing countries, MIGA provides harmful government actions and resolving online information on invest- guarantees to protect the investments of disputes to prevent claims situations from ment opportunities. foreign investors against political or non- escalating and keep investments on track. To commercial risks. The agency’s guarantees date, MIGA has never paid a claim for any cover risks relating to currency transfer project it has covered in sub-Saharan Africa.

February 2008 page 1/4 MIGA’s Portfolio in Africa

Sugar Plant in MIGA’s Portfolio in Africa In 2007, MIGA issued $7 million in guar- antees to the Industrial Development With $964 million in gross exposure, Africa accounts for 18 percent of MIGA’s out- Corporation of Ltd. (IDC) for standing portfolio. MIGA has supported projects in every sector and in 27 African a sugar factory in Kenya. In 2006, MIGA countries—including many regional projects*+ ?d\hWijhkYjkh[ involving investors from South Africa, had issued a $6.2 million guarantee to IDC Senegal, and Mauritius. (' E_b"]WiWdZc_d_d] covering a non-shareholder loan for the '+ Jekh_icWdZi[hl_Y[i the same project, Kibos Sugar and Allied '& CWdk\WYjkh_d] Industries Limited. The new guarantee Guarantees issued in Africa up to January. 7]h_Xki_d[ii 2008, by sector, in percentage reflects an increase in the amount of the ' <_dWdY_Wb non-shareholder loan. The guarantee will cover the investments against the risks of *+ ?d\hWijhkYjkh[ expropriation, transfer restriction, and war (' E_b"]WiWdZc_d_d] and civil disturbance for a period of up to '+ Jekh_icWdZi[hl_Y[i eight years. The increased loan will fund an '& CWdk\WYjkh_d] expansion of the sugar plant’s production . 7]h_Xki_d[ii capacity. ' <_dWdY_Wb

Natural Gas in MOZAMBIQUE Outstanding Guarantees Portfolio from FY90-FY07, by region, in US$ M Since 2003, MIGA has issued a series of guarantees to South Africa’s Sasol Group and Standard Bank, totaling more than $235 '"*.) BWj_d7c[h_YWWdZj^[9Wh_XX[Wd million, for the Sasol gas pipeline project in  /,* IkX#IW^WhWd7\h_YW Mozambique. MIGA’s guarantees support  -+- ;khef[WdZ9[djhWb7i_W the development of the Temane and Pande  (.+ C_ZZb[;WijWdZDehj^7\h_YW gas fields and the construction of a 865 km  -+- 7i_W cross-border gas pipeline into South Africa. The project represents the first cross-border initiative in sub-Saharan Africa in developing '"*.) BWj_d7c[h_YWWdZj^[9Wh_XX[Wd regional natural gas markets and will gener- plant to expand production into three new /,* of IkX#IW^WhWd7\h_YW the largest foreign investments in Mali. ate many benefits for the local economy, product lines: galvanized corrugated steel -+-It ;khef[WdZ9[djhWb7i_W will spur the growth of several industries, including government revenues estimated sheets, aluminum sheets, and aluminum (.+ especially C_ZZb[;WijWdZDehj^7\h_YW small and medium size enter- to be in excess of $2 billion over the proj- alloy ingots. Galvanized corrugated steel -+- prises 7i_W (SMEs), many of which will provide ect’s 25-year lifetime. Contracts for local pur- sheets are the main roofing material for 90 phone services to those who cannot afford a chases of goods and services are estimated percent of Nigerians. Local procurement phone, and support technology in schools. at more than $1 million per year. of goods and services for the new plant in Consumers will benefit from the diversity of Ogun State is estimated at $8 million annu- service offerings and lower costs. The proj- The project is substantially adding to ally. Seventy percent of that would be spent ect is also generating government revenues, Mozambique’s infrastructure through the in Ogun, the rest in the north and east of including a $44 million license fee. development of roads, water supplies, and Nigeria. The project is expected to generate the removal of land mines. Environmentally, about $3 million in corporate tax revenue a the project will contribute to the reduction year and employ 118 locals, who will receive Agribusiness in BURKINA FASO, of harmful emissions by replacing heavy extensive training. MADAGASCAR* oils and sulfur-rich coal with clean-burning natural gas. Since 2005, MIGA has engaged in a strategic Telecoms in MALI partnership with France’s DAGRIS, which specializes in agribusiness investments Steel Manufacturing in NIGERIA In 2003, Senegal’s Sonatel benefited from in the developing world. MIGA has issued $44 million in MIGA guarantees for its $47.7 million in guarantees for DAGRIS’s In 2005, India’s Manaksia and State Bank of investment in Ikatel SA of Mali. The project projects in Burkina Faso and Madagascar, India, as well as ICICI Bank UK Ltd., received is providing various telecommunications ser- and also supported its investment in MIGA guarantees totaling $7 million for vices in one of the world’s poorest and low- Afghanistan. In Burkina Faso, DAGRIS is MINL in Nigeria. MINL manufactures and est teledensity countries. It also established acquiring and expanding cotton ginning sells bottle caps and sheet metal in Nigeria. the country’s first fully digital GSM cellular facilities in the east of the country, in line This investment is supporting the construc- network. Ikatel aims to reach 250,000 sub- with a government program, on which the tion and operation of a metal processing scribers over the next nine years and is one World Bank advised, to liberalize the cotton

WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY February 2008 page 2/4 Selected MIGA Projects in Sub-Saharan Africa

Guarantee Investor Host Guarantee Holder Country Country Sector Amount ($ M)

World Power Holdings Luxembourg S.à.r.l. Luxembourg Uganda Power 115 Société Nationale des Senegal Guinea-Bissau Telecommunications 67 Télécommunications du Sénégal Standard Bank of South Africa Ltd. South Africa Mozambique Oil & Gas 49.7 Office National des Telecommunications Tunisia Mauritania Telecommunications 41 Globeleq Holdings Bermuda Uganda Power 40 Rockland Steel Trading (P) India Nigeria Manufacturing 11.4 Ltd. State United Kingdom Industrial Development Corporation South Africa Kenya Agribusiness 7.0 of South Africa Ltd Barloworld UK Angola Services 3.1 DAGRIS, S.A. France Madagascar Agribusiness 2.94 Société Burkinabé de Promotion Hôtelière Mali Burkina Faso Tourism 2.86 Société de Promotion et de Participation France Ghana 1.33 pour la Coopération Economique Loita Capital Partners Mauritius Cameroon Financial 0.7 sector. The project also involves the promo- the construction and operation of a 250 water systems. The more accessible and reli- tion of local entrepreneurship through the megawatt, run-of-the-river hydropower plant able power is expected to foster economic financing of the acquisition of shares in the on the Victoria Nile. The plant is expected activity and generate fiscal revenues for the project enterprise by local cotton growers to increase supply to the national power government. and Burkinabé investors. It will strengthen grid at the lowest cost compared to other the country’s export-oriented growth and power generation expansion options under provide new seeding techniques and train- Uganda’s energy strategy, thereby reducing Banking in CAMEROON* ing on pesticide and fertilizer use that are outages and costs. MIGA’s guarantee was expected to improve yields and quality. considered essential to securing part of the In 2007, Mauritius’ Loita Capital Partners investment. International received a $1.77 million DAGRIS’s Madagascar project involves the guarantee from MIGA for its investment privatization of HASYMA, the state-owned In 2005 and 2007, MIGA also supported in the National Financial Credit Bank S.A. cotton monopoly. The project is enhancing the electricity distribution project of Cameroon, as well as a portion of its Madagascar’s cotton industry by modern- in Uganda with guarantees totaling $80.5 management fees. The project involves the izing and expanding the cotton ginning million, issued for Bermuda’s Globeleq creation of a newly licensed commercial capacity of HASYMA; and by providing and South Africa’s Eskom. Umeme will bank to provide microcredit and other technical advice, assistance, and incentives operate an electricity distribution conces- financial services to clients, including SMEs. to local producers and investors. HASYMA sion in Uganda for 20 years. Globeleq will The new bank will infuse critically needed will promote the production of cotton seed; bring commercial and financial expertise to funds into the local financial market, and purchase and gin seed cotton; and market the consortium, while Eskom will provide transfer skills and services from the investor cotton fiber, seeds, and by-products on the much of the technical expertise required to to the local institution. MIGA’s participation local and international markets. turn around the underlying business. The in the project supports improvements in distribution network consists of 13,000 km Cameroon’s financial sector and strengthens of overhead lines extending throughout the the government’s capacity to manage sector Energy in UGANDA country and will provide up to 60,000 new reform and privatization. connections, reduce losses, and improve In 2007, MIGA issued a $115 million collection rates within the first five years. guarantee for the Bujagali Hydropower Access to electricity will also expand for * Projects underwritten through MIGA’s Project in Uganda. The project consists of households, schools, clinics, hospitals, and Small Investment Program.

WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY February 2008 page 3/4 MIGA’s Value

MIGA provides a unique umbrella of deterrence against political risks and can offer comfort Partnerships to clients by improving projects’ risk-return profiles.

MIGA works with the following Investment Protection and Prompt Types of Coverage Offered key partners in the region to better Claims Payment support inward and outbound invest- Transfer restriction coverage protects ments: r Deterring harmful actions. MIGA’s against losses arising from an investor’s r The World Bank and IFC relationship with shareholder govern- inability to convert local currency into for- r The African Development Bank ments provides additional leverage in eign exchange for transfer outside the host r ATI – the African Trade protecting investments. country. The coverage also insures against Insurance Agency r Resolving disputes. As an honest bro- excessive foreign exchange delays caused by r BOAD – Banque Ouest ker, MIGA intervenes at the first sign of the host government’s actions. Africaine de Développement trouble to resolve potential investment disputes before they reach claim sta- Expropriation coverage offers protection tus, helping to maintain investments against loss of the insured investment as Online Services and keep revenues flowing. In almost a result of acts by the host government all cases, MIGA is able to resolve these that may reduce or eliminate ownership disputes. or control of the insured investment. This MIGA provides the following free r Ensuring prompt claims payment. policy also covers partial losses and “creep- online services for investors and In the event that a dispute cannot be ing expropriation,” a series of acts with an lenders mediated, MIGA ensures that valid expropriatory effect. r FDI.net(www.fdi.net)—A web claims are paid promptly. portal providing information War, civil disturbance, terrorism, and sabo- on foreign direct investment in tage coverage protects against loss due to emerging markets Improving Financial Terms and the destruction, disappearance, or physical r PRI-Center (www.pri-center. Conditions for Investors/Lenders damage to tangible assets caused by politi- com)— An information service cally motivated violence. It also extends to on political risk insurance for r Accessing funding. MIGA guarantees events that result in the total inability of the investors and practitioners help investors obtain project finance project enterprise to conduct operations from banks. essential to its overall financial viability. Environmental and Social Trust r Lowering borrowing costs. MIGA Fund for Africa guaranteed loans may help reduce the Breach of contract coverage protects against cost of capital. losses arising from the host government’s r Increasing tenors. MIGA can provide non-payment of an arbitral award in favor MIGA clients or prospective clients insurance coverage for up to 15 years (in of the investor, due to the government’s can request support to ensure that some cases 20), thereby increasing the breach or repudiation of a covered contrac- investments comply with MIGA’s tenor of loans available to investors. tual agreement with the investor. environmental and social policies. r Helping to structure project finan- cing. MIGA also ensures that risks are For information, Note: In almost all cases, by working with the allocated properly. contact Jill Shankleman, host governments and the covered investors, [email protected] MIGA is able to resolve potential claims situ- Country, Social and Environmental ations before they become claims. Expertise Contact

r Providing extensive country knowl- World Bank Group edge. MIGA applies the World Bank Multilateral Investment Group’s decades of experience, global Guarantee Agency reach, and knowledge of developing 1818 H Street, NW countries to each transaction. Washington, DC 20433 r Offering environmental and social t. 1.202.458.2538 expertise. MIGA helps investors and f. 1.202.522.0316 lenders ensure that projects comply [email protected] with what are considered to be the world’s best social and environmental www.miga.org safeguards.

WORLD BANK GROUP MULTILATERAL INVESTMENT GUARANTEE AGENCY February 2008 page 4/4