US­AID un­veils five-year fund­ing for Rwanda’s agri­cul­tural SMES

The East African - - MAR­KETS -

The US Agency for In­ter­na­tional Devel­op­ment has launched a $44 mil­lion fund to al­low farm­ers in Rwanda to ob­tain cap­i­tal for agri­cul­tural pro­duc­tion. The funds will be made avail­able un­der a five-year pro­ject aimed at in­creas­ing loans and in­vest­ments to small and medium busi­nesses in the agri­cul­tural sec­tor and is es­ti­mated to cre­ate 30,000 jobs. Ac­cord­ing to the East­ern Africa Crop Mon­i­tor Bul­letin, in­tra-eac trade de­clined in the sec­ond quar­ter (April-june), due to in­creased sup­plies of sta­ple grains from Rwanda, Tan­za­nia, Uganda and Bu­rundi. Ac­cord­ing to the bul­letin, im­proved out­put in coun­tries that har­vested within the sec­ond quar­ter led to re­duced de­mand for im­ports. For crops such as beans, the out­put was af­fected by wet con­di­tions and sup­plies in the third quar­ter (July-septem­ber) is ex­pected to be tight.

Pri­vate in­vestors im­ple­ment­ing Ethiopia’s largest geo­ther­mal power pro­ject have ap­plied for a risk guar­an­tee from the World Bank, cit­ing po­lit­i­cal un­cer­tainty in that coun­try.

The ap­pli­ca­tion by Tulu Moye Geo­ther­mal Op­er­a­tions (TMGO) Plc, who are build­ing a $2 bil­lion plant, comes at a time when the new ad­min­is­tra­tion of Prime Min­is­ter Abiy Ahmed is im­ple­ment­ing re­forms that have been cred­ited for rais­ing in­vestor con­fi­dence even as it deals with po­lit­i­cal and se­cu­rity chal­lenges.

TMGO sub­mit­ted an ap­pli­ca­tion to the Mul­ti­lat­eral In­vest­ment Guar­an­tee Agency (MIGA) for a risk cover of up to 15 years for its $58 mil­lion in­vest­ment in the first phase of the pro­ject. It is seek­ing a $52 mil­lion risk guar­an­tee for the pro­ject against un­fore­seen even­tu­al­i­ties such as breach of con­tract, ex­pro­pri­a­tion, war and civil dis­tur­bances.

MIGA, a mem­ber of the World Bank Group, of­fers po­lit­i­cal risk in­surance and credit en­hance­ment guar­an­tees that help in­vestors pro­tect in­vest­ments against po­lit­i­cal and non-com­mer­cial risks in de­vel­op­ing coun­tries.

TMGO is owned by Meridiam, a lead­ing global in­fra­struc­ture fund man­ager, and Reyk­javik Geo­ther­mal, a spe­cialised de­vel­oper with a long-stand­ing pres­ence in Ethiopia.

The pur­suit of po­lit­i­cal risk in­surance for the Tulu Moye pro­ject is an in­di­ca­tion of the jit­ters that of­ten en­gulf pri­vate in­vestors not only in Ethiopia but across most African coun­tries. Al­though in­vestors are flock­ing to Ethiopia, one of the fastest grow­ing economies in the world, Prime Min­is­ter Abiy is work­ing to re­store sta­bil­ity and re­newed op­ti­mism through wide­spread re­forms, but in­vestors re­main cau­tious.

“Ethiopia’s eco­nomic sit­u­a­tion re­mains dif­fi­cult and the fast pace of the re­cent re­forms risks op­po­si­tion,” said Jan-pi­eter Lale­man, risk an­a­lyst at Cre­dendo, one of Europe’s largest credit in­surance firms.

While the Tulu Moye pro­ject, which is to be im­ple­mented in eight years, is ex­pected to have a to­tal in­stalled ca­pac­ity of 520MW, the ap­pli­ca­tion to MIGA is for Phase I, which will have a ca­pac­ity of 50MW and is ex­pected to cost $250 mil­lion.

MIGA said in a dis­clo­sure state­ment that its board will meet on Novem­ber 1 to make a de­ci­sion on the ap­pli­ca­tion.

In East Africa, MIGA has also guar­an­teed the Bu­ja­gali hy­dropower pro­ject in Uganda with a gross to­tal ex­po­sure of $125 mil­lion. The cover is for a pe­riod of up to 20 years against the risk of breach of con­tract.

It is also in­volved in the new Buge­sera In­ter­na­tional Air­port in Rwanda, where it is of­fer­ing a guar­an­tee of $150 mil­lion against the risks of trans­fer re­stric­tion and in­con­vert­ibil­ity, ex­pro­pri­a­tion, breach of con­tract, and war and civil dis­tur­bance for a pe­riod of up to 15 years.

Geo­ther­mal wells at Olka­ria in Kenya, the only coun­try in the re­gion gen­er­at­ing elec­tric­ity from geo­ther­mal sources.

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