As countries in Sub-Saharan Africa (SSA) have managed to keep the COVID-19 virus under control with a relatively low number of cases, the pandemic continues to take a toll on the region's populations and economies. Economic activity is estimated to have contracted by 2% in 2020, leading to the first recession in SSA in over 25 years. This situation could also push up to 40 million people into extreme poverty, reversing the progress made in the region over the past two decades.
FDI inflows to SSA decreased by 11% to approximately $28 billion in 2020, according to UNCTAD.
MIGA has been stepping up its support to Sub-Saharan Africa and help promote sustainable development across the region. We focus on our strategic priority areas, including low-income (IDA) countries, fragile and conflict-affected situations (FCS), and climate change.
In FY20, MIGA supported 22 projects in the SSA region by issuing guarantees for $1.3 billion, nearly all of which supported one or more of our priority areas. Political Risk Insurance (PRI) guarantees issued in the region supported 14 Capital Optimization guarantees for $732 million, the development of two solar power plants and two wind power plants in South Africa, two solar power plants in Senegal and the expansion of a thermal power plant in Côte d’Ivoire. The Agency also issued a guarantee that is a new application of the existing Non-Honoring of Financial Obligations (NHFO) product to facilitate trade finance by a regional development bank to 22 countries in Africa.
EXAMPLES OF MIGA-SUPPORTED PROJECTS IN Sub-Saharan Africa
In June 2020, MIGA issued guarantees of up to US$235 million to a wholly-owned subsidiary of South Africa’s FirstRand Group, for a period of up to 15 years, covering the subsidiaries’ mandatory reserves held as per regulatory requirements in Botswana, Eswatini, Ghana, Lesotho, Mozambique, Nigeria and Zambia.
The guarantees will help unlock funding and liquidity, and support the economies of the host countries, which are being severely impacted by the COVID-19 pandemic, particularly in the commodities markets. Nearly 60% of the support provided by the MIGA guarantees will be directed to low-income (IDA) countries, and twelve percent will go to Nigeria, a country recently affected by conflict.
In 2018, MIGA issued a guarantee of €128.1 million in support of the construction of the first wind farm in Senegal, the Parc Eolien Taiba N’Diaye SA. The guarantee is issued for up to twenty years to Lekela Power Holdings against the risks of Expropriation, Transfer Restriction and Inconvertibility, Breach of Contract, and War and Civil Disturbance.
Inadequate electricity supply is among the key challenges confronting Senegal. The wind farm, made up of 46 turbines, provides 450,000 MWh of electricity per year to 2 million people, and saves over 300,000 tons of CO2e.
Working with over 35 local women’s associations, the project sponsor, Lekela Power, is helping to improve the lives of thousands of women through various initiatives. Two new marketplaces in the Taiba N’Diaye Commune are already up and running, and future projects include improvements to a local cereal mill and development of a women's literacy center that will run on solar power. As the brainchild of representatives of local women’s associations, the marketplaces offer over 100 new vending spaces and serve two villages in the area.
In 2019, MIGA issued $36 million in guarantees for the design, construction and operation of a facility in southern Sierra Leone that will cultivate, harvest and process pineapples and other tropical fruit for export. The Agency is providing protection from Expropriation and Breach of Contract for up to 10 years to Dole Asia Holdings, a subsidiary of ITOCHU Corporation, for its investments into Sierra Tropical Limited.
In addition to its own resources, MIGA uses the International Development Association’s (IDA) MIGA Guarantee Facility (MGF) to provide a first-loss layer in support of the project. Nippon Export and Investment Insurance (NEXI) reinsures a portion of MIGA’s exposure, in addition to providing its own insurance to Dole International.
Sierra Leone and Liberia
In December 2020, MIGA issued guarantees of up to US$25.6 million to Escotel Mauritius covering its investments in solar power generation in Sierra Leone and Liberia for a period of up to ten years. The guarantees will support the provision of electricity and logistical services to power existing and future cell phone towers (Telecommunication Network Sites or TNS) in the two countries.
MIGA’s support for these projects will yield significant climate mitigation benefits. It is expected that 600 TNS will be modernized by 2028 in Sierra Leone, resulting in an avoidance of more than 58,000 tons of CO2 equivalent (CO2e) emissions over the period. In Liberia, a fragile and conflict-affected situation (FCS), nearly 158,000 tons of CO2e emissions will be avoided by the modernization of 612 TNS over the same period.
MIGA 2020 Gender CEO Award: Women Driving Growth in Africa
Ms. Aïssata S. Béavogui, Director General at Guinea Alumina Corporation (GAC), is the recipient of the MIGA 2020 Gender CEO Award. She oversees the implementation and strategy for sustainable development in the largest greenfield investment in Guinea, providing a leading example of how the mining industry can operate throughout the region. Ms. Béavogui is also the first woman director of an international company in Guinea and she is determined to inspire and empower local women as well as support sustainable development of local communities.
Somalia joins MIGA
In March 2020, the Federal Government of Somalia became the 182nd member of MIGA, following normalization of its financial relationship with the World Bank Group. Against the backdrop of the COVID-19 pandemic, Somalia’s membership will afford it new opportunities for drawing foreign direct investment and fostering economic growth in the coming years.