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Friday, 31 July 2015

Africa’s new trade zone needs insurance backing

Sun City, South Africa - The recently launched African free trade area can succeed only if it is backed by good credit insurance that covers payment risk as well as political and country risk.

This is according to Gregory Nosworthy, managing director of Euler Hermes, the credit trade insurer and subsidiary of German insurer Allianz that opened its South African office in May this year.

The Tripartite Free Trade Area (TFTA) was launched in Egypt in June this year by the Common Market for Eastern and Southern Africa, the East African Community and the Southern African Development Community. The three blocs bring together 26 countries with a population of around 625 million people and GDP of $1.6 trillion.

Nosworthy told a media briefing at the Insurance Conference: Africa Rising 2015, held at Sun City this week, that trade between African countries had increased by 300 percent over the past 10 years, albeit from a low base.

Euler Hermes underwrites $102 billion worth of trade between TFTA countries at present.

Nosworthy says the most important risk to underwrite is payment risk to ensure that an exporter of goods receives payment once the goods have reached a customer in another country.

The second risk to underwrite is country and political risk, which covers factors that could prevent a company from taking goods into or out of a country, most notably conflict or political upheaval, but also developments such as the outbreak of Ebola.

Euler Hermes currently underwrites 860 billion euros worth of global trade.

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