Political risk insurance uptake rises as election time nears
Voters cast their ballots. Due to uncertainity during the election period, investors are said to be insuring their businesses. FILE PHOTO
What you need to know:
Factors. Inflation, high interest rates and a weak Shilling, are among the current risk factors.
Kampala. Election period, especially in Africa, is a period of uncertainty for investors and often, they look at countries as risky destinations.
According to Africa Trade Insurance Agency (ATI), an insurance firm, there has been an increase in the political risk uptake in Uganda.
This, the company attributes, to the fact that investors are protecting investments as the country goes into election period.
Speaking at a media briefing in Kampala on how to sensitise the public on the impact of elections to the economy on Tuesday, ATI senior Underwriter Benjamin Mugisha said the companies taking insurance cover against risks that may arise out of the elections have increased.
“What we have noted is an increase in companies taking the insurance cover to create a sense of normalcy and calm the fears of anyone doing business in the country during an election cycle,” he said.
He added: “Election cycles are a challenge for most African economies. Banks often peg their lending to election cycles, reducing lending as elections draw near.”
Currently, inflation is at 9.1 per cent, interest rates are rising, economic growth rate is expected to slow down to 5 per cent instead of the projected 5.8 per cent and the Uganda Shilling remains in a weak position against the US dollar.
Speaking at the same event, Padre Pio Insurance Brokers Ltd chief executive officer Irene Kego Oloya said: “ATI has changed the game by rewriting the story of African risk as something that is more realistic and tenable than what is often misrepresented in the international media.”
This, she said has helped Uganda and many other countries to continue attracting investments and supporting increased trade with countries within Africa and abroad.”
In its 2014 annual report, ATI says it has provided insurance against political violence worth $88m (Shs293b) to various investors in Uganda.
Since its first transaction in 2004, ATI says it has helped Uganda attract over US$3billion (Shs9.5 trillion) in trade and investments.
And in the first half of 2015, the company says it has facilitated transactions worth over $30m (Shs99b) in the country.
The company has also paid claims in excess of $1m (Shs3b).
The cost
Election violence in neighbouring countries has in the past cost Ugandan traders millions of shillings. For example, Ugandan traders, according to Everist Kayondo, the chairman Kampala City Traders Association, lost goods amounting to $5m (Shs16.6b) during the post-election violence of 2008. To date, he said some of the traders have not been compensated for that loss.
