The Overseas Private Investment Corporation (OPIC), an independent US government agency, and the Multilateral Investment Guarantee Agency (MIGA) are hoping to encourage private equity investment into emerging agriculture markets such as Africa by providing political risk insurance facilities.
MIGA recently provided a $350 million PRI facility to the Silverlands Fund, managed by SilverStreet Capital, an African agribusiness private equity firm.
OPIC is the primary provider of political risk coverage for each investment made by the fund and MIGA takes on 60 percent of the risk as reinsurer. OPIC helped capitalise the fund’s first close in 2011.
“MIGA’s support of this project is expected to have strong demonstration effects for other private equity funds,” said Nkem Onwuamaegbu, senior underwriter at MIGA. “The sub-Saharan Africa region has lagged behind the world in private equity penetration. The new capital is expected to have multiplier effects throughout the regional economy by allowing companies to expand operations and provide more goods and services to customers.”
MIGA’s clients, which include private equity funds, start to engage MIGA early on in the project development cycle to discuss ways of mitigating their risks, according to Onwuamaegbu.
“MIGA’s unique product line provides a potential investor with options for structuring risk mitigation customised to suit their needs,” she told Agri Investor.
Political risk insurance facilities are also flexible to investor’s expansion plans: “In the case of private equity funds, the Master Contract structure has been developed to provide capacity across multiple countries and a pipeline of investments,” said Onwuamaegbu. “Once ready to proceed, private equity funds have to go through MIGA’s application process, which includes certain fees.”
And MIGA is already beginning to see a rise in interest from the investment community. “MIGA’s Master Contract structure is now at the stage where it is becoming more attractive to private equity funds and interest has grown exponentially,” she added. “MIGA is currently underwriting a number of projects with this structure, and is in discussions with potential private equity funds and other portfolio companies on structuring PRI coverage using the structure”.