Risk perception continues to cost Africa billions in trade & investment financing

Africa has long grappled with risk perception, a major hurdle contributing to the estimated $200 billion trade and investment financing gap on the continent. Recent data from a UNCTAD report pointed out a decline in Foreign Direct Investment (FDI) flows to Africa from $80 billion in 2021 to around $45 billion in 2022. CNBC Africa engaged in a conversation with Manuel Moses, the CEO of African Trade & Investment Development Insurance, who shed light on strategies to mitigate this challenge and attract more investment to Africa. Moses highlighted the importance of dispelling misconceptions about risk and showcasing the lucrative returns that investing in Africa can offer, surpassing those available elsewhere. He acknowledged that changing this perception would be a gradual process but emphasized the crucial role that institutions like his play in bridging the continental financing gap caused by risk perception. African Trade & Investment Development Insurance, striving to act as a neutral party between governments and investors, has garnered credibility over the years through its investment-grade ratings by S&P and Moody's. These ratings inform investors that their financial interests are safeguarded within the institution's guarantees and insurance protection. The CEO detailed the institution's significant accomplishments in de-risking trade and investments in Africa, with a cumulative support of $80 billion by 2022. Despite the challenges posed by the COVID-19 pandemic, the company posted favorable results in 2022, including gross exposures of $8 billion, net profits of $32 million, and an 8% growth in net assets. Additionally, a dividend of $8.2 million was declared, highlighting the institution's sustainability and profitability alongside its developmental role. Reflecting the dynamic economic landscape of Africa, the organization is rebranding to African Trade & Investment Development Insurance to better represent its focus on both trade and investment insurance. The new brand strategy aligns with the institution's pan-African vision, expanding its reach to cover a broader range of products and cater to a wide array of African countries. Manuel Moses expressed optimism regarding the gradual change in perceptions about Africa's risk profile, as echoed by other stakeholders like the African Development Bank and the World Bank. The collective efforts aim to attract more investors by assuring them of growth opportunities in the continent. The ultimate goal is to make investment insurance unnecessary in Africa, signaling a significant reduction or elimination of the trade gap caused by risk perception. While the journey towards debunking risk perceptions may be ongoing, the concerted efforts of various institutions and stakeholders signal a positive shift in the investment landscape of Africa.