The lack of risk mitigation is one of the major impediments to project investment. In response to this, the Italian government has taken steps to provide funds to assist with this perceived gap of risk mitigation. Governments, private sector and even the African Development Bank Group will draw from this fund in order to assist with risk mitigation issues.
Overcoming private sector uncertainty
“If the risk mitigation profile is better, financing will be better and member countries will benefit as a result,” explains Keith Martin, Initiative for Risk Mitigation in Africa, African Development Bank Group, who spoke to Engerati at the Africa Energy Forum. He adds, “We act as a catalyst since we don’t offer insurance ourselves. We have partial credit and risk guarantees but part of our role within the trust fund is to ensure that all the parties are aware of all the options available to them.” For instance, we provide assurance when government letters are not provided. “We help where we can to overcome private sector uncertainty since many governments are no longer giving guarantees.”
Tools to reduce risk
In essence, project managers and stakeholders are given the tools to reduce risk in a project. The African Development Bank works closely with project teams to ensure that everything is done to make a project more bankable. Martin says, “We also work closely with governments in our member countries to show them how to build in risk mitigation tools so as to reduce project costs. We give them the skill set and knowledge to structure projects and make them more bankable.”
The African Development Bank is currently working on 10 projects where risk mitigation is in progress.