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Benjamin Mugisha

Chief Underwriting Officer

African Trade Insurance Agency

June 22, 2021
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Ep 31: Benjamin Mugisha - Chief Underwriting Officer, African Trade Insurance Agency
00:00 / 01:04

Bret Kugelmass
We are here today with Benjamin Mugisha, who is the Chief Underwriting Officer at the African Trade Insurance Agency. Benjamin, welcome to Energy Impact.

Benjamin Mugisha
Thank you very much.

Bret Kugelmass
We're really excited to talk to you. Before we get into the work that you do today, we always like to learn a little bit about the guests themselves. Tell me, where did you grow up and how did you get into this industry?

Benjamin Mugisha
Thank you very much. I grew up in Kampala, the capital city of Uganda. I'm Ugandan by nationality, was born there. I started out my career, from the academic perspective, studying engineering and I was very keen to pursue a career in project development and execution. I studied civil engineering. I then proceeded to teach at the University of Kampala for a couple of years as I studied my post grad. And then I was very lucky. At that time, many of the DFIs had introduced a program known as a young professional program where they would take on board very recent graduates, they would train them, and then they would, if possible, either recruit them or release them into the job market. In Kampala, there was a DFI that was headquartered there, known as the East African Development Bank. So, at about 25 years of age, I was lucky enough to join, I think the second recruitment of young professionals for EADB. I was there under the terms that I would do a one year training program and then we would look at whether I stay on or whether I would return to the job market. It was so interesting, I was there for 10 years. I spent-

Bret Kugelmass
What kept you there? Tell me, what was it that kind of got you intellectually stimulated by going to work every day?

Benjamin Mugisha
I mean, DFIs are very different from your traditional financial institution that has a mixture of live deals that are commercial transactions, where it's purely risk that they can take on board because there is a real reputation or a real track record, as well as, of course, occasionally trade finance and a whole set of offerings to the market. A DFI tends to have transactions that are greenfield, if someone has come up with a brilliant commercial idea that they want support on or is actually looking to make a diversification of or expansion of existing project. What I really loved was, very often we would be looking at a piece of land. I worked on a grain-handling operation in Kenya, in a town called Nakuru, where, when we went there, they were actually shaping the piece of land, and to be able to take that greenfield literally, because it was a greenfield, and a few years later have farmers bring in produce to the plant, processing and value addition taking place, corporates buying the product. You see the impact on livelihoods, you see people coming in with small trucks, little pickups, you can see that this business has changed people's lives. That's the beauty of a DFI. We were working on hospitals, where you'd see equipment, you'd walk in and say, This is what we use the money for and these are the patients that you're helping to be able to access medical services. That's really the beauty of a DFI.

Bret Kugelmass
It's pretty amazing to see projects come to life. I really resonate with that that topic of greenfield projects. You go there, there's nothing there. You come back a few years later, and it's just humming with activity and you know that you are an essential part of that. But Africa is a different place. What are some of the unique challenges in getting some of these projects up and running that are unique to this region of the world?

Benjamin Mugisha
I think working in the greenfield DFI space, so, on project finance, there was the whole concept of project preparation. Very many of my clients needed a lot of help. If you looked at what they came in, they had a very good idea. They had done some work on it. But if you took that to one of your top financial institutions, they would really think No, this is not ready for financing, this is not bankable. So, that gap, where you actually have a transaction, you believe it's bankable, you work with a client to actually put in place the right set of plans and projections and partners for implementation, that's where I saw there was a real value add. I think, also, in terms of that balance between commercial financial benefit and economic return, very often we were working on transactions where there was a very significant economic return relative to what you'd expect on the financial return side. And that was, again, one of the big challenges. Where do you actually place your emphasis? Is it the IRR? Is it the ERR? Which one are you really focusing on? And in which circumstances? And then, of course, I have to say this, and it's still a real challenge, there's a real challenge around reliability of information. So, you had a client come to you with a set of documents, sometimes from running operations, and how much faith can you put in this documentation that they present to you? Off the top of my head, these are the three interesting challenges. I would say, technically, there was always a challenge of overruns. I don't recall working on many projects where eventually we didn't have a second conversation to discuss what has happened, because time was not properly estimated, the costs were not properly estimated, there were changes in procurement and delivery times, etc. So, it was always a dynamic iterative process working on those projects.

Bret Kugelmass
Yeah. The overruns are things that you find anywhere you go in the world.

Benjamin Mugisha
So then, after 10 years at the DFI, I moved on to ATIA, where I work now. I mean, it's also a DFI, but slightly different. We don't provide financing, we provide insurance and some guarantee products as well. It was really a follow on of my experience and exposure. The beauty was previously I was at a regional DFI, now I was working at an African DFI, so, covering more countries, experiencing different cultures, different dynamics in terms of how people look at transactions, how people look at transacting as well. And that's really where I've found a passion to be, working to support African governments, as well as investors and traders on the continent, opening up the markets to other sources of capital, because many people don't realize that insurers actually bring capital to these transactions. We do not fund, but we take a risk on side-by-side with lenders, and when there's a loss, we suffer the loss in equal shares, or in an agreed share. It was very interesting having that other aspect where I can work on the insurance side, or the guarantee side, as opposed to the direct lending.

Bret Kugelmass
Tell me a little bit more about the risks that this insurance is made to protect against. Is there a certain classification? Is it just the the project not working? Or the project needing more capital? Where does the insurance actually come in?

Benjamin Mugisha
I'd like to make a very simple analogy, and say, if you look at a transaction where you have a cross-border transaction, so you have either an investor, I have identified an opportunity to invest in a project, bring equity, and it's to a project or I am actually going to lend to an institution. So, I'm a lender, I'm going to lend to an institution, could be a commercial institution, or it could be a sovereign or public institution. So, I'm a lender and I'm the business, but this is my main objective on a transaction. Or I'm actually just a trader. I have a product or service that I'm selling and very often this is cross-border. At the back of my mind is a level of uncertainty that comes with dealing with these partners. For example, there's obviously the ability to pay a willingness, right? I'm lending or supplying goods to a government or a corporation and looking at how can I hedge that risk, the payment risk, but also the other country risks. There are always concerns around active expropriation; whether there will be nationalization of certain sectors or assets in a country; whether there will be war and civil commotion - yes, that that does happen - whether there will be an embargo between my country and the country that I'm trading with and how that will affect my business; whether this currency has availability - foreign currency, in that case - for me to be able to repatriate my profits or dividends, or even just when I exit the project, can I actually get foreign currency out of that country. But these are the kinds of risks that ATIA protects investors and traders against. I think I just wanted to mention one last thing that a lot of our clients are not doing this mainly because of the risk itself, but they're also doing it because they want to finance this transaction. So, I'm supplying goods to the Ministry of Health in our country. I need to purchase these goods, there's going to be a bank involved to finance this transaction, and maybe the only collateral I have is a contract. By insuring that contract, I actually have a better paper in front of the bank saying, Not only am I supplying these goods and have a valid contract that there will be a payment obligation on the side of the buyer, but I've actually insured this contract. If the buyer does not pay, then African Trade Insurance Agency will actually pay. I think the real value is always in the access to finance, but we help to facilitate, of course, sometimes on direct loans, but also for traders and investors.

Bret Kugelmass
Right. What you're saying is, in order for a project to get financing, in order for it to get capital from lenders from investors, those investors, those providers of capital, have certain stipulations and they have requirements. One of the requirements is that the project has insurance to be able to back up their revenue stream. That gives them peace of mind, and then they don't have to do all of the risk analyses, because they know that a reputable institution like yours has it covered in case any of these things happen.

Benjamin Mugisha
Hopefully, in an ideal world, we do the risk analysis together. They say, We really like this deal, but there are these A, B, C, D risks we hope someone else can cover. It's never really a risk transfer, where you say, as long as you bring insurance, I'll do the deal. Hopefully, you have to do the deal, because we exist in a world where it is much more than just the contract in front of you. There are KYC issues, there are money laundering issues, there are environmental and social issues. A proper partner is one who says, I addressed so many of these other risks, but then there are these other risks that I look at ATIA to support me, because insurance does not help the burning house. It helps protect you in case the house burns in the future. Hopefully, you take care of the tinder and the match box, and then we come in to say, Yeah, we will actually now take care of these other set of risks.

Bret Kugelmass
That's a very interesting analogy. Do you as the insurer then interact with the project developer, imposing certain requirements that help reduce the risks? So, for instance, in your analogy, get rid of the tinder, like you can't store tinder in your house, because we think that this will increase your risk. Do you have similar such provisions that say, Hey, you've got to work with a Tier A engineering firm if you want us to insure this. Does that come into play as well?

Benjamin Mugisha
Yes and no, and I'll start with the No. We are an African institution, so we contextualize the transactions in front of us. I give a very good example. Everyone is cognizant of the need to have a competitive process when you're tendering out for work. But we understand that in certain sectors, maybe the parties, especially the buyers, are not yet in a position to actually provide a framework for competitive tendering. We've seen an evolution, for example, in the energy space where, in order to get projects done, you have developers engaging directly with the government, and having transactions approved on an unsolicited bid, right. So, there was really no bid out to the market, it was just someone saying, I have a wind project, and you have demand for this. If you stuck rigidly to a certain set of rules, you'd find that the country's market ready. However, there are obviously some minimum standards and they don't drill down to the minutiae of who is the contractor. But, I mean, there are standards around KYC. So, when you're selecting partners, exactly what is the process when you are identifying projects and implementing them? What standards are you applying? Is it just your own standards, the national standards, is it international standards? At ATIA, we subscribe some of these international standards and we can actually insist that you have some alignment with them, but it's very exceptional. Many of our transactions are trade transactions where it's just a supply contract that you're looking just at the underlying or, if it's a financial institution, you're looking at the financial institution and you know it's regulated. So, you can take some comfort in the regulators in every country. We do contextualize the transaction. I think that's the real benefit of an Africa multilateral, the context in which you're operating does sometimes come into play. But yes, there are some standards that are a bare minimum.

Bret Kugelmass
And what type of transaction size are we talking about here? Are these transactions in the millions, tens of millions, hundreds of millions?

Benjamin Mugisha
I mean, right now we have a portfolio in excess of $6.2 billion. We do have the ability to underwrite rather large transactions. We have underwritten transactions in excess of $300 or 400 million per transaction. We also have looked at transactions where we have underwritten an individual for as little as $50,000. But it's all about structuring. For example, in our trade portfolio, we have clients who are actually insuring a portfolio of buyers. So, they come to us and say, I supply your whole portfolio of potential buyers in manufacturing, I provide the raw materials, etc. And for those, you could have everything from the small to the - I mean, in some cases, even the micro - you could have from the micro to the small and medium size enterprises in the portfolio of buyers. And hopefully, by supplying them on credit, they are then accessing directly supplier credit. So, it's a form of financing. But yes, transaction size is always going to be a challenge because of the administrative burden behind it. But with creative accounting, we can sometimes work as a wholesaler. We put together a transaction together with an institution that has that finger in so many pies, and we just hold the hands for them and say, Okay, you cover the portfolio, we provide insurance on our portfolio. But we have so many creative structures that we try to put in place to address the issue of transaction size. But I need to mention that the flip side of that is, we very often are bringing private capital from the private markets in the form of reinsurance to look at transactions. They never would simply because of the size involved with a market in which the risk is so its own. It's not only just about size, it's also about the market in which we operate and how successful we've been in leveraging our experience and our own balance sheet. mobilize private reinsurance behind us. Of the $6 billion plus of capacity I mentioned, we have as a gross exposure, we actually have about close to $1 billion only as net. That means 5 billion is trust that the private market has in ATIA, the ability we have to actually mobilize. That is, I think, a key part of our success story. Yeah,

Bret Kugelmass
That's amazing. And then where does that balance sheet come from? Does this come from premiums paid by the insured? Or is there a larger government backstop that's involved as well?

Benjamin Mugisha
Thank you. That's a very good question. So, ATIA, if I can go back to, we like to talk about the founding of ATIA and the story of who we are. ATIA was set up on the understanding that very often African markets are rather small and the inability of each market to create an institution that can operate as, let's say, an export credit agency or an EXIM, from a guaranteed perspective. So, the idea was, let's all come together as a continent, create a robust institution that can do this on behalf of the entire continent. By establishment, ATIA has to be at least 51% of the African governments currently we have as shareholders. We're looking to expand in the very near future to maybe four or five more members, and the long run objective is to be fully African member, so for everyone of all the countries on the continent to be members. And then we do have private sector and multilateral and financial institution shareholders. We have export credit agencies that are shareholders. We have, actually, the Indian government as a shareholder. So, as a non-African state, we have other multilaterals, including the African Development Bank, and the Trade and Development Bank, who are also shareholders. We pull all this capital together. That was why they wanted, that was where the idea was, pull all this together, create an institution that can actually also mobilize the rating. If we were a Kenyan institution we would be constrained by the rating of Kenya. As an African multilateral, we can actually have our own independent rating based on the pooled capital model and that's how-

Bret Kugelmass
And that creates some stability in case the dynamics of Kenya change due to whatever regional issues by having it spread across a larger base. All of a sudden you're not subject to those temporal distortions in the market.

Benjamin Mugisha
Absolutely. Similar to the World Bank, African Development Bank, or Afreximbank, all those other multilaterals, do exactly the same, except that we do not provide financing in the form of loans or debt. We actually, for that matter, we actually provide guarantees and insurance products.

Bret Kugelmass
What regions you operate in. I know you said it's across Africa, but I know the founding was on the eastern and southern area. Do you guys actually support projects in Western Africa? And maybe South Africa as well? Or is it mostly still in the eastern and southern regions?

Benjamin Mugisha
No, we've actually started to see a real balance between East and West Africa. I would say the only barrier would be the Sahara, so we are mainly Sub Saharan. We have members in West Africa, including Nigeria, Ghana, Nigen, Togo, Benin, save Cote d'Ivoire, a good number of our members are actually in West Africa. We do have others coming on board, the likes of Senegal and several other countries, we hope will be members in the near future. Many of them are actually in West Africa because of the value that they've seen in the new members. But we obviously were set up predominantly on the eastern side. It was actually a commercial project. Currently, on the eastern side, our membership runs from Madagascar in the south to Ethiopia and South Sudan in the in the north. Very many of those countries between South Sudan and Ethiopia and Madagascar are member states. We obviously want to have every African country as a member, South Africa, Botswana, DeSoto, Eswatini. All those are potentially members and we are working to have full African membership in the in the medium term.

Bret Kugelmass
What about Ghana and Nigeria? Are either of those members yet?

Benjamin Mugisha
Yes. In West Africa, we do have Ghana and Nigeria as members as well.

Bret Kugelmass
Great. And then tell me about project type. We focus a lot on energy. Have you guys come across energy projects that you've been involved in? Is that a big area of interest for yours?

Benjamin Mugisha
Yes. At ATIA, we started out on a case by case assessment of the needs of each country and of course, developers came to us with projects. We worked, for example, on the Lake Turkana wind project. We provided support to the equity developers on that project and we've worked on several other case by case projects. Then, we thought around how can we be innovative. One of the things that we saw as a real challenge was that, very often, when we looked at a transaction, we went into the market, and depending on which market we were looking at, and what the transaction looked at, there might have been capacity constraints. Maybe for that country there was a lot of capacity that had been used on sovereign loans, etc. and there was not that much capacity available in the energy space. So, working together with the European Investment Bank and Ministry, we came up with a structure where we have a billion dollars worth of capacity set aside just for renewables on the continent where we will provide our traditional breach of contract cover, but instead of going to the market case by case, this capacity has been structured and set aside simply to support renewables. Then, we also noticed that there was this trend where banks provided liquidity support on behalf of a utility. So, in project finance transactions, they found that, in addition to a debt service reserve account, there was a need for a standby LC to provide liquidity in case of delayed payments. We had an interesting idea that, what if we could actually one, increase comfort around the performance of these utilities by having a tool that shows the performance on payments, so people can have less need to max out maybe nine months of DSRA, or six months or whatever the case was, but also where we could actually identify if we could go long. So, instead of having annual LCs, we could provide this coverage to developers on a long term basis, we came up with something called the Regional Liquidity Support Facility. It's a bit of a mouthful, but RLSF in short, where we can provide long term LC or liquidity support facility for an IPP to go out and raise financing, make the project more bankable, because the idea that there might be delays that can affect debt repayment and OPEX has been mitigated in part by this facility. So, maybe six months of liquidity available to a project, we can draw on that to continue to operate, pay their debt, and then the utility hopefully comes out to normalize the situation. Remember, we also have embedded the transparency tools, so we will inform the market of the payment records. The whole idea was, in the long run, maybe this could affect the project financing of projects where someone says, you know what, in Country X, the track record over the last six years is that they pay on time, so there's no need to have so many restrictions. Maybe it could affect the obsession with guarantees on project and ultimately, maybe for investors, it could affect the tariffs, they could be more comfortable with a lower tariff because the risk has changed. There's a track record around it. This is how we don't just come in and say, these are the products we offer. We also look at the market. For this product, our initial feeling was this, obviously, special risk guarantee products in the market, but we felt that for medium sized and smaller projects, 15 megawatts and below, this was the kind of support that was lacking to get them across the line. I mean, for a 400 megawatt bilateral loan, you could find PRG products in some cases, but then in the smaller to medium sized space, there was really a lack of this protection. Based on our success, we are actually thinking to expand it to even larger projects, and we're looking at how we can tweak it, but it's definitely been one of our innovations. Beyond providing country risk cover and suppliers in the energy space, we actually do real work with developers to protect their investments where they are in the renewable space. That's really where we've seen some impact and we hope to continue.

Bret Kugelmass
I see. So, just to paraphrase what I learned there: you saw a need in the market, specifically, let's say around IPPs, which are Independent Power Producers, basically, energy companies that kind of want to come in, develop a power generating asset, not as a state-owned entity, but as a private entity. They're able to put together equity, they're able to get cash to put into the project, but they had trouble accessing debt. And one of the reasons that they had trouble accessing debt is because of certain risk around maybe the liquidity of a project, the debt service coverage ratio, the ability to have cash on hand to be able to pay down your debt when it's called, because you know what, with these projects sometimes, especially renewables, the money is not as predictable as to how it might come in. So, you guys saw this opportunity, and were able to come in with an insurance project that made sure that some of the concerns that the debt providers had were taken care of. All of a sudden, that enabled debt to come in, which now makes the projects more attractive for equity investors to come in, which makes projects more likely to happen, which means that all of these other things, like the guarantees that are put in place, because people are so afraid that the project won't happen, or are reduced, because more projects are happening. Basically, there was a problem in the market, you guys came in with a bandage, you wrapped it up, and now it's not just that that project can happen, but the whole system might function more effectively. Is that about right?

Benjamin Mugisha
You more or less nailed it, yes. Obviously, they might not be debt, so it might just be an investor who says, I want to go into Country X, but I'm not entirely sure my equity is safe, so even if I'm not going to borrow, I need to be more comfortable that I'll recover the equity or I have my OPEX costs covered.

Bret Kugelmass
I see, even jobs, equity exclusive projects, this model can help them as well.

Benjamin Mugisha
Absolutely. Both. But definitely the real long term value is in how much. If you look at the sector, especially in Sub Saharan Africa, it's predominantly been financed by your DFIs and your multilaterals, so how many private commercial banks can start to say, You know what, I can take a slice of this risk, because I'm starting to get comfortable with the risk mitigations that are in place. You're quite correct. In the long run, it's not just about, oh, you've applied the bandage. It's also, with these perceived risks starting to change, how does the appetite for the risks change? How does the capacity to do this business change? How much confidence is there in the economy to actually say, here is our track record, we're very transparent. You can see what we do, this is how we pay. This is how much comfort you can have in our ability to pay, financial statements aside. This is how much of a priority renewables add to our sector. So, it's our economy so that even more investment can flow in. You're totally right that it's a ripple effect that we hope to achieve in these countries.

Bret Kugelmass
That's amazing, especially because the need is so large, especially on the energy side. And I want to get to that in a second. But first, I think part of your story that we didn't get to is you came in as just an underwriter at the African Trade Insurance Agency, but now you're the Chief Underwriting Officer, you're the top dog. How did that happen? Was there a certain quality that you just exhibited consistently that allowed you to rise through the ranks?

Benjamin Mugisha
No, I think ATIA is a fantastic institution to work at. And it's not just me, I work with a team of very committed underwriters who all appreciate that there are challenges, we appreciate there are perceptions. We are working to bring real value to our stakeholders in terms of trade and investment. Yes, in terms of myself as an individual, I joined ATIA as an underwriter, actually now 11 years ago, I was initially at the head office for about three years, and then an opportunity arose for me to work in free markets. So, I actually had a very unusual experience where I had two offices in two different countries. I ran an office in Rwanda that we had a physical office with actually, at one point, only one member of staff and I also ran the physical office in Kampala, where again, in fact, at one point I it was just me. So, it was very interesting, because in both of these - in fact, I also was in charge of Burundi, but in Burundi, we had no physical office, so it was really by proxy with visits to the country, etc. - so, it was very interesting, because in both of these markets, there was obviously a lot of FDI coming out of foreign investment, whether it was debt to equity, but the local markets hadn't yet really tapped into our product. It was very interesting working in the local banks, getting them to appreciate how these products benefit more than international lenders, they can also help them do more business. We grew our portfolio, for example, in Uganda to a point where we were more or less pulling the business within the country. And it was from there that actually the Energy Initiative came up. About 2015, the idea was starting to grow around how we can structure these and I was very lucky to be part of that process, to introduce both of these products. I came back to the head office, which is in Nairobi, worked as a senior underwriter for a couple of- fact, for four years, and, again, I had the opportunity to become the Chief Underwriting Officer. I mean, I take credit together with my team, who trusted me with this.

Bret Kugelmass
Okay, you're too humble. You're too humble, but that doesn't answer my question. I actually want to know what is the characteristic of an individual - and you don't have to even say yourself - but an individual, what is necessary to be able to take on a position of real responsibility and real authority, what is the special characteristic?

Benjamin Mugisha
Thank you. First of all, you need to understand the stakeholders. What are you coming into this role to do? You have conflicting priorities and conflicting objectives among your stakeholders. Some are looking to push a product into the market, and some are looking to prioritize the product that you have for particular sectors, or particular areas of real need. So, I think for myself, and for someone sitting in this role, it's how you are actually able to provide that balance between the real needs that you see on the continent, the limited capital that can come into the continent, and the other opportunities that exist outside the traditional forms of capital, whether it's loans, or whether it's equity, and try and find that balance to satisfy emerging and changing needs. We give a very good example. With COVID on the on the continent, everyone realized the health sector had not been given the priority it needed and there was just not enough infrastructure in place to support countries through the pandemic, but to be able to find the right source of capital, the right stakeholders, or the funding side, right, implementers can work with the governments to prioritize the right project has been something that in the last 15 months we've done, so the first one would be that. I think, obviously, like any other DFI, it's very important to have integrity, both institutionally and as well as individuals. For us, that integrity comes in having a frank conversation, right? Being able to tell all the stakeholders, this is the reality, this is exactly where the challenge lies, this is where the real opportunity to think lies. But then not to prescribe it, to then listen to the feedback and take it on board and say, Okay, I hear your feedback, and I think this is where we can tweak these and this is how we can partner. The dialogue needs to be one of partners. And I think to have ATIA in the middle, having that conversation on both sides is very important, not just institutionally, but individually. Of course, we work with very challenging circumstances, in some cases where, for example, you're trying to find a balance between livelihood, so supporting a country's private sector to be able to provide the right environment for business to grow, but at the same time, there are these huge infrastructure needs and, from a payment perspective, if there was aggressive sovereign debt elevation, then suddenly, you'd start to have a crisis if there was any shock to the system. Again, to be able to pass on a transactional basis can really bring down the cost of financing or can enhance, make sure there's an appreciation of the credit risk being shifted with an insurance product, so that the pricing is affected. It's something that we are very keen to be a part of, but also, as an individual, to have that balance to say, there are a myriad of needs, you cannot individually solve all of these problems. So, one, find the right partners who can enhance what you offer as a product, work with other institutions that provide similar products to not stand alone in the in the gap, but have an institution supporting, but also work with the right kind of clients who are actually looking at sustainable long term relationship. But you can go back again and again. I think the combination of integrity and understanding of the markets and this real bit, this passion that I have, but I I know the institution also has to really promote the opportunities for trade and investment on the continent is what makes myself and the institution stand out on the continent.

Bret Kugelmass
Amazing. And that's really hard. A lot of the stuff that you mentioned, like really listening, really understanding stakeholders, that is hard.

Benjamin Mugisha
I agree. It's very hard. And I think you also have to recognize, people say, Oh, Africa is not one country, and you say, in some cases, one country is not one country, right? Looking at the projects in an eastern side of Country X is not the same as the kind of project in the western side of the same country, because there are certain particular dynamics in the country that make one area different from the other. So, that ability to also sometimes step away and say, even within the context of a country itself, where do we really want to work together, is one of the beauties and the challenges of working in this environment.

Bret Kugelmass
You said a bunch of things there that I want to double click on, but I also don't want to forget to come back to the energy space. The one thing that I did want to ask about that you said is trying to assess a partner to see if they've got this real sustainable long term credible partnership. What are the hallmark traits of an organization or an individual that gives you comfort that they're in it for long term sustainable partnership together?

Benjamin Mugisha
I mean, obviously, there's a long list, but I would summarize it in only one particular characteristic. We always used to say, when you look at your client, you ask yourself, why is this client buying insurance and does that reason aligned with why you're selling insurance? Don't sell insurance to a client who is buying it for the wrong reason. But more importantly, and the one characteristic I like to look for myself is to say, when things go wrong, what is your approach towards this transaction we are doing together? Is your approach to say, Hey, you know what, I'm out of the door. This was not what I bargained for, or is your initial instinct, at least to say, how do we solve this? That's I think, where- because let's not put our heads in the sand, sometimes they will be challenges. These markets can have- with the opportunities sometimes come unique challenges. And we're looking to see what happens when that one challenge comes across both of us? Are you looking to walk away, or are you looking to work with us to solve these challenges? I think that's how sustainability comes in. It takes recognition of the cyclical nature of the business, and the opportunities and works with you to ride the waves, so to speak, both in good times and bad times.

Bret Kugelmass
What drives the cyclical nature? Is it just the global economy, or is it more like political forces within Africa?

Benjamin Mugisha
It's a very interesting question, and it's not easy to answer. In very many countries, I'm not surprised when I sit across the table with someone and the person says, I'm interested in knowing when the next election is, because politics can be an important factor. We can't obviously step away from the fact that politics is a key factor. But then the nature of our economies are still industrialized, so we are heavily commodity driven, and therefore, totally hooked into the cyclic nature of those commodities. If it's copper prices, there are times when a country that is a copper producer will have tough times. And if it's oil and gas, I mean, the last two years were a very good lesson than that, because we are really commodity producers, we will be, until we are able to diversify, or actually value add, we will always be tied to the global economy in that sense. And then there are factors outside our control. There's a credit crunch, or there is a particular rise in interest rates in Country X that makes that market more attractive, that means that liquidity to Africa can be constrained. So, yes, the cyclic nature is partly within the context of what happens on the continent politically, but it's also linked to the global economy,

Bret Kugelmass
And specifically the capital, the equity for many of these infrastructure projects - and let's narrow it just to energy for a moment - is this mostly coming from within Africa? Or is this like foreign investment that comes into support any, let's say, power generating product?

Benjamin Mugisha
I haven't seen it, I think that's really a challenge to us on the continent. Most of this has actually been partners who are coming out of Africa. We have Scandinavian companies and English companies, American companies that have maybe maxed out the opportunities in those markets. I've seen how much potential there is on the continent and have come onto the market. Of course, the reason why they are not African institutions, I mean, there are so many reasons why including how much access there is to mobilize capital for energy and electricity, so there are many reasons, but yes, in reality, is almost always FDI to the continent from outside the continent.

Bret Kugelmass
Now, I might be biased, but we think energy drives everything and energy is the bottleneck for all sorts of growth in other sectors, too. Do you agree with that? And then do you see, what do you see in terms of, let's say, the next 5, 10 years in terms of new energy projects, let's say generating projects, coming to the continent?

Benjamin Mugisha
I am not surprised you mentioned generation at the end. I think the energy sector in most countries, or in many countries, has been an eye opener to how the private sector and the public sector can work together. From the context of PPPs, and how much more can be done to public-private-partnerships, I think the energy sector has held the torch up and say, This is what can be done. Obviously, energy is a key, key component in economic growth. I grew up in Uganda and there were years when we had loadshedding. And without power, or without energy to develop, how do you attract other forms of FDI? How does an investor come in to build a factory and work on six hours of energy a day>? Of course, if he does come into that market, he hedges that risk, and it affects the cost of product. So, you do have energy as a key, key, key component. We want to say that things like access to markets are important, so roads and rail and all the other sets of infrastructure are important. Obviously, health care has become more and more apparently important. But yes, I would say energy does stand out as one of the key areas. The only reason I would dare to say that maybe not the most important is mainly because of my recognition of what people on the continent do and people on the continent are predominantly in agriculture. That's where, from an infrastructure perspective, maybe there's a lot more that needs to be done in order to make this agriculture more sustainable, more economically viable. But absolutely, that aside, I would put energy at the top of the list.

Bret Kugelmass
Yeah, that makes a lot of sense to me as well. And then, I guess, narrowing in on that, do you see certain - there's something you said there about other industries kind of needing that stability and that makes perfect sense, like, are you going to really kind of build a plant if you can only operate it for six hours a day or something, probably not -do you see certain industries that would be ripe for growth in Africa specifically? I know Africa is a big place, but like steelmaking or something that's energy intensive, but that you could do locally if there was more energy access. Is there anything that you see, just a specific industry or two that's just constrained now and they're just dying for someone to come in and develop reliable energy sources?

Benjamin Mugisha
Yeah, I mean, as you said, it's very hard. I'm just trying to look at our key markets, think them through and say, the larger markets and say what are the main constraints there? So, I would say yes. Let's look at the industries where I see a lot of potential for growth in the value addition. So, if it's mining, how do you move from mining and maybe basic processing, to more advanced processing?

Bret Kugelmass
So, you're saying not just digging the ore out of the ground, but rolling the steel into plates?

Benjamin Mugisha
Absolutely. I think that's, that's where we see big energy needs would definitely help. More energy supply would get that across the road. I think also, in public infrastructure, things like rail, there are so many infrastructure projects, when in a country like Kenya, that are hinged on there being adequate power to actually power these projects that we have seen maybe a slowdown being affected by how much power comes on stream. It's a chicken and egg situation, sometimes it's the slowdown in economic growth that means that there's not much need for the power. And then, again, I wouldn't put aside things like agro processing, cement manufacturing. There are really all these opportunities where you see so much cross-border trade, when there was an opportunity for in-house capacity, so in-country capacity. If you look at cement producers in some parts of western Africa, you will see that there's a skew towards, there's a big market, but there's a skew towards importing. Very often, it's because there's not enough energy stability in that markets to actually in-country produce these particular commodities.

Bret Kugelmass
Yes. And over the next five or 10 years, what areas are you most excited about?

Benjamin Mugisha
As I say, in the last five years, ATIA has really been passionately happy with the progress that Africa or the continent has made towards renewables. For us, we do see that that will continue to be our main area of focus. We obviously are following very closely the discussion around supply and oversupply and how that is possible in a country where there's actually very low access to electricity and low penetration. That's something that we know is going to be an emerging discussion over the next five years, how do you balance economic growth with energy development. Making sure that generation actually does not lead to excess generation, and yet, at the same time, keeps in tandem with economic growth is always more than adequate power generation? And also, how does that then, we talked about the PPP frameworks, how do those PPP frameworks allow for investments in transmission, allow for investments in alternative sources, just to make sure that continues to be, I believe that will overconcentration, for lack of a better word, on generation. We need to see how we can roll this out into transmission and distribution and all the other aspects of getting energy to the meter box, right. So, how can the private sector participate in that? I also, obviously, we've seen technology helping in providing solutions for off-grid, mini grid, and rooftop solution. I believe we will continue to see the costs going down in that space and hopefully this helps everyone have increased access to power, regardless of their ability to consume, to have commercially viable consumption, even when it's at a very small scale, because the costs continue to go down. I think that's definitely going to be an area where we see growth. I'm in the business of trade and investments, so I'm hoping that we see more and more of the private sector lending into the energy sector, beyond the more traditional financials that we will see, more finance coming in, maybe going all the way to the discussion of green bonds, etc, etc. So, I'm really happy with the progress we've made. We were never that carbon heavy out of out of a few markets like South Africa. And it's good that we do have this opportunity. It comes with its challenges in terms of how you balance out your energy mix and make sure that you have reliable and consistent power supply and how do you make sure you have all the other downstream technical infrastructure in place, as I mentioned, in transmission and generation, but I think, for us at ATIA and many of our partners, we see this as a really big opportunity to support the sector. That's why this is the first sector where we provided outside of our trade finance and working with banks to support SMEs. This was the other sector where we put in this really bespoke products to make sure that we can support the continued emphasis on renewables.

Bret Kugelmass
Couldn't end on a better note than that. Benjamin Mugisha, thank you so much for joining us on the Energy Impact.

Benjamin Mugisha
Thank you. It's been a pleasure, Bret.

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