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politcal risk insurance

Vroom Vroom: Brazil leading the pack in infrastructure financing innovation for safer and more resilient transport

Cara Santos Pianesi's picture
Man looking at electricity meters in Bamako, Mali 
Pic: Aarthi Sivaraman/World Bank

“If there is one thing that could really help my business, it would be reliable power supply,” said David, a small business owner in Lagos, on my recent trip to Nigeria.
“I agree. If only …,” echoed another.

And not without reason.

Africa lags every other region in the world when it comes to electricity access for its people. Only one in three Sub-Saharan Africans has access to electricity. That’s less than half of the rate of access in South Asia, the region with the second-lowest access rate. If we were to measure access to “reliable” electricity, then those numbers would be even more dismal.

Worryingly, the rate of access has been increasing at a mere 5 percentage points every decade, against population growth of 29 percent. If something is not done to dramatically change this trend, Africa will not see universal access to electricity in the 21st century. This is a seriously worrying prospect as the world races toward a 2030 deadline of universal access to electricity.

The target of achieving universal access by 2030 by the U.N.’s Sustainable Energy for All initiative and the billions of dollars committed by the U.S. government’s Power Africa plan underline the urgency of the situation. As a reminder, more than 1 billion people around the world still live without access to electricity and 600 million of those live in Africa.

So, are Africa’s utilities financially equipped to respond to this call?

“When the Tide Goes Out, You See Who’s Naked”

Cara Santos Pianesi's picture

Said Martin Sandbu, the FT economics writer that moderated the FT-MIGA Summit, Managing Global Political Risk, last week in London.   
 
This is the fifth year that MIGA, the political risk insurance and credit enhancement arm of the World Bank, co-hosted the event to launch its World Investment and Political Risk report.  Undoubtedly, these have been heady years and most participants agreed that, while it is still strong, political risk has waned since the global financial crisis and the Arab Spring. This sentiment dovetails with the findings of the report, which show that macroeconomic stability won by just a hair over political risk as the factor that international investors fear most.
 
Also in line with these findings, the World Bank’s Andrew Burns cautioned that the world will soon be grappling with the next group of challenges brought about by the tide. What tide? Here, Sandbu meant the significant investment that has flowed to developing countries in search of yield over the past few years, quantitative easing that has kept economies afloat, and high commodity prices. All of these factors are now in flux.
 “When the Tide Goes Out, You See Who’s Naked
And now, the (potential) nudity. That is, as investment to emerging markets tapers, macreconomic tools are used less bluntly, and commodity prices normalize, will countries have laid enough strong economic foundations to weather the inevitable changes that will occur? And as this MIGA-sponsored conference deals with political risk, how will economic changes affect the destiny of leaders and, resultantly, citizens?
 
Tina Fordham of Citi Research emphasized that the structural determinants of political risk are still very present. She noted little improvement in unemployment and an increase in vox populi risk. By this she meant shifting and more volatile public opinion around the world—amplified by social media—has recently resulted in a proliferation of mass protests.  Panelists discussed several other risk factors, including increasing polarization in politics, pressure on central banks to keep the economic show on the road, reduced investment in infrastructure, and a reversal in living standards in some hard-hit countries.