I'm in a unique position in MIGA, responsible for fielding initial investor inquiries about MIGA’s political risk guarantees. Over the last few years I have noticed a jump among investors considering MIGA cover in several countries. One of those countries is Sierra Leone.
MIGA works hard at promoting investment both into Africa and countries that have experienced conflict, so Sierra Leone is a natural target market for MIGA. However, the recent rise in investor interest goes far beyond what our marketing could accomplish. My view of the change in investor interest is based on MIGA application data and what I'm hearing by phone and email from potential investors.
MIGA requires a Preliminary Application (PA) for all projects. The PA only takes a few minutes to complete and allows MIGA to quickly assess a project's eligibility for a MIGA guarantee. PAs do not necessarily result in MIGA guarantees, but they offer some insight into investment trends and investor interest. In 1995 Sierra Leone joined MIGA and we received our first PA. From 1995 through 2007 MIGA received 44 PAs for Sierra Leone. But in the last 18 months alone MIGA has received another 23 PAs for Sierra Leone. In addition to PAs, I have received calls and emails from potential investors interested in Sierra Leone at an increasing rate. From where I sit, it looks like foreign investor interest in Sierra Leone is growing.
The PAs and supporting anecdotal evidence from email inquiries and phone calls also reveal a shift in the types of investments businesses are considering. Before 2008, 70 percent of MIGA's PAs came from the infrastructure and mining sectors. Since 2008 only about 15 percent are from those sectors while the dominate sectors have become agriculture, manufacturing, and services.
Infrastructure and mining projects can offer substantial returns for investors and bring many benefits to the host country, but they tend to be large and take a long time for investors to finance and implement, often years after MIGA receives a PA. The smaller nimble agriculture, manufacturing, and services projects often happen very quickly. Many of these projects are done under MIGA’s Small Investment Program which offers reduced premiums and streamlined processing. To see the kinds of projects MIGA has done recently in the country check out MIGA's page dedicated to Sierra Leone. So far MIGA has signed four guarantees, but our business pipeline is healthy and growing.
Although the civil war was declared over in early 2002 investment did not rush into Sierra Leone immediately. It took a while to get rolling. Today, we see small and medium-size businesses investing and succeeding in Sierra Leone and it’s worth noting all of this investor interest occurred while most of the rest of the world was in the middle of a financial crisis.