MIGA guarantees South African bamboo plantation

The World Bank's political risk and credit insurance arm has insured EcoPlanet Bamboo South Africa for $8.6m.

The Multilateral Investment Guarantee Agency (MIGA), the political risk insurance and credit enhancement arm of the World Bank, has issued a $8.6 million guarantee to a South African sustainable agriculture development in the Eastern Cape region.

EcoPlanet Bamboo Group, a global bamboo plantation company based in the US, has bought degraded land in a poor area to convert into bamboo plantations through its subsidiary EcoPlanet Bamboo South Africa. The bamboo will be used to produce activated carbon and bio-charcoal that will be sold to local and export markets, according to a press release. And MIGA is covering the project for up to 10 years against the risks of transfer restriction, expropriation, and war and civil disturbance.

The investment is part of an international expansion plan by EcoPlanet Bamboo “that aims to effectively replace the global deforestation of our planets natural forest with a sustainably grown alternative fibre and green technology solutions across multiple industries”, according to a press release.

“The investor is very savvy on development, they are trying to maximise the positive impact on local community and bring in jobs,” Nabil Fawaz, sector manager for agribusiness and general services at MIGA, told Agri Investor. “EcoPlanet is the only large player in the region in this industry and that’s also part of what it makes it attractive to MIGA, as we expect the impact to be significant.”

Fawaz noted that MIGA had already witnessed successful outcomes from EcoPlanet projects in other developing countries and this project in South Africa “is of just the same model”, he said.

MIGA is considering a 15-year $23.4 million guarantee for EcoPlanet’s project in Nicaragua against the risk of expropriation, and war and civil disturbance. The proposal will be discussed by the MIGA board on March 26, according to its website. And a decision will be made in a couple of months, according to Gloriana Echeverria, an underwriter at the World Bank. If approved, this guarantee will be an expansion of the $27 million guarantee MIGA provided EcoPlanet’s Bamboo Nicaragua in November 2012.

Agribusiness is a relatively small portion of MIGA’s portfolio at just 2 percent. Manufacturing and services account for about 11 percent, infrastructure projects take up the largest portion of the portfolio at 44 percent, the financial sector accounts for 32 percent and oil, gas and mining is currently 11 percent of the portfolio.

But the agency currently has $250 million to $300 million worth of projects in its agribusiness pipeline and is still very active in the sector, according to Fawaz.

“Agribusiness deals tend to be small in dollar amount compared to other sectors we insure like infrastructure or extractives, but this doesn’t mean we don’t insure many agribusiness projects,” added Echeverria.

MIGA has issued more than $28 billion in political risk insurance for projects in a wide variety of sectors since its inception in 1988, according to its website. As of 2014, MIGA issued a total of $3.2 billion in guarantees for projects in developing member countries, up from $2.8 billion in fiscal year of 2013, according to its 2014 annual report.

“MIGA’s investment insurance has been fundamental in helping us manage risk while realising our vision of deploying conscious capital to generate triple bottom line results—financial, social, and environmental,” said Troy Weisman, EcoPlanet Bamboo’schief executive, in a statement.

After the 10-year insured period, “investors will either choose to self-insure or they may extend the guarantee and we will conduct due diligence with them to evaluate where they are with the projects”, said Fawaz.

EcoPlanet Bamboo South Africa plans to sell all of its production to its affiliate, EcoPlanet CoreCarbon, which will sell the end product to the local and export markets.