German, African insurers in trade pact

August 23, 2011

, NAIROBI, Kenya, Aug 23 – German and African insurance bodies have formalised an agreement to strengthen trade ties, just weeks following a visit by Chancellor Angela Merkel to the Continent.

The African Trade Insurance Agency (ATI), German-based trade credit insurer Euler Hermes Kreditversicherungs-AG (Euler Hermes) and PricewatehouseCoopers-AG(PwC), on Tuesday, embarked on a partnership that will enable German exporters sell to their African counterparts on credit terms.

A key feature under the agreement will be risk sharing on joint transactions and exchange of credit information on international buyers, which ATI CEO George Otieno said is lacking in Africa and further hindering open account trading in the Continent.

“Without credit information on international buyers it is virtually impossible for companies like ATI to provide insurance. This partnership will help ATI access information on German companies and enable African exporters to increase access to German markets,” he said.
Germany is the second largest export destination for Kenyan goods particularly in coffee and horticultural products.

Managing Director of Euler Hermes Andreas Klasen said the partnership exemplifies German exporters’ strategy to intensify engagement with Africa on multiple levels.

“Global interest in Africa has risen significantly over the past years. There is a visible shift of focus from aid to trade. Germany has much to offer to spur progress and development in African countries,” he said.

While total German exports have grown by seven percent since 2006, Mr Klasen said exports to sub-Saharan Africa have increased by more than twice that amount.

“A substantial part (6.3 percent) of these export transactions are protected under Hermes Cover against bad debt losses. During the first six months of 2011 the German government granted cover for exports to sub-Saharan Africa worth almost $650 million.”

Kenya imports an estimated $13 billion annually of German oil and other goods.

However, with China posing stiff competition in the African market trade volumes between Germany and Kenya have diminished.

According to the Economic Survey 2011, Kenya’s imports from China quadrupled to Sh120.6 billion last year from Sh29.7 billion in 2006.

“The Chinese have come and taken a big slice of trade volumes. Euler Hermes has taken the initiative to sign this partnership because they believe Africa is a growth area for them. They want to regain whatever they’ve lost to the Chinese companies,” Mr Otieno said.

He further added that the agreement is also to transition African countries from being aid dependent to becoming trade enabled.

“The agreement supports what ATI has been witnessing for the past decade – aid without trade is not sustainable. Although trade with Africa accounts for just one percent of Germany’s total trade volumes this is equivalent to 15 times the volume of Germany’s bilateral aid to Africa.”

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