The Chief Executive Officer of the African Trade Insurance Agency (ATI), John Lentaigne, has urged the government of Ghana to expedite the signing up of the Regional Liquidity Support Facility, RLSF, to help private investors access funds for their activities.
The facility, which is part of the benefits of the African Trade Insurance Agency agreement, is a fall back mechanism for Independent Power Producers (IPPs) in the event that their off-takers, usually governments, delay payment.
The call comes at a time that Ghana is seeking to diversify its energy mix to reduce over-reliance on hydro for its power needs.
Mr. Lentaigne, who spoke to Citi Business News at the launch of the African Trade Insurance Agency, said Ghana’s membership should scale up the processes to meet the renewable energy mix by 2030.
“One of the key challenges for most countries in the Power Sector is the perceived or real risk of the default off-taker, and that is a major concern for investors who want to make long-term institution investments into the power sector. The liquidity facility enables effectively an on-demand guarantee against the risks of the off-taker. It is unusual because you can’t get partial risks guarantees possibly from institutions like the African Development Bank and the World Bank, but this is a slightly different product which is very useful for users of small and mid-scale renewable energy projects with an installed capacity of up to 50 MW (and in exceptional cases up to 100 MW). So, we strongly encourage the Government of Ghana to sign up to it,” he said.
The Minister of Planning, Prof. George Gyan-Baffour, who acknowledged the initiative, is hopeful it will assist government in attaining the SDGs swiftly.
“The projects themselves must be well thought-through. They have to be very viable projects that have actually gone through all the necessary processes because they will not come and insure a project that will bring about difficulties. This actually gives a challenge to government to come out with projects that can stand the test of time and are very transparent in their development,” he said.
Ghana signs agreement with African Trade Insurance to improve credit ratings
The Government of Ghana became a full member of the African Trade Insurance Agency (ATI) in October 2019 with shareholding valued at US$17.6 million that was provided with the financial support of KfW through the German government.
Membership will help mitigate Ghana’s investment risks thereby unlocking additional investments as well as lowering its borrowing costs.
Now that Ghana is a full member, ATI expects to review, and potentially insure the current pipeline of projects valued at US$1.2 billion.
ATI plans to support Ghana in several key areas of its economy such as trade and the energy sector. Specifically, the institution can support Ghanaian banks by providing access to credit insurance that will act as much needed collateral.
This will, in turn, allow local banks to be able to lend more to local corporate enities and ultimately help generate more jobs in the economy while also strengthening the competitiveness of local banks and boosting private sector growth.
African Trade Insurance Agency
ATI is a multilateral and pan-African institution that provides insurance guarantees which helps its African member governments attract investments and spur trade with increased access to credit. In 2019, ATI insured transactions across Africa valued at US$6.4 billion, and expects to insure much of its current pipeline of transactions in Ghana valued at US$1.2 billion.
It provides a valuable tool for governments because its insurance is a well-rated security.
ATI’s insurance, strong international financial network, coupled with their investment-grade credit ratings have helped African governments create more sustainability within their economies.