Monday, June 09, 2014
The U.S. Overseas Private Investment Corporation (OPIC) and the Multilateral Investment Guarantee Agency (MIGA) announced today a $350 million political risk facility to support agribusiness investments in countries throughout sub-Saharan Africa, contributing to improved food security and self-sustainability for agricultural production in the region. Under the facility, OPIC will serve as primary provider of the political risk coverage that will protect each of the investments made by the Silverlands Fund, a private equity fund focusing on agribusinesses in several countries in Sub-Saharan Africa, particularly in Southern and East Africa. MIGA as reinsurer will take on 60 percent of the risk of each investment. OPIC originally helped capitalize this fund in 2011.
This joint OPIC and MIGA effort is a significant new development in the political risk insurance marketplace. The two institutions are cooperating effectively to catalyze investment by private equity funds in high-priority regions and sectors, by reserving significant amounts of capacity to offer coverage for all of a fund’s planned investments. Such coverage is offered on pre-agreed general terms and conditions and is then tailored as project-specific coverage when the fund makes its investments. The facilities are expected to help attract capital for private equity investment funds in emerging and frontier markets by providing fund managers with an effective instrument to mitigate losses resulting from political violence, expropriation and currency inconvertibility.
The Silverlands Fund plans to reach 500,000 small farmers over the next 10 years, leading to an estimated increase in total food production of over 1 million tons per year. The fund aims to accomplish this by investing across the agricultural value chain in sub-Saharan Africa in a variety of segments including fruit, grains, soya, sugar, poultry, and livestock. It will adopt a “hub-outgrowers” model, which involves close cooperation between neighboring local small-scale farmers and the Fund’s commercial agribusiness. The commercial businesses will become hubs and provide a market for local farmers as well as education, technical assistance, and compensation for their harvest.
“We’re very excited about this partnership with OPIC that allows us to further our support to sustainable investments in sub-Saharan Africa’s agricultural sector—an area that is essential for the region’s prosperity and food security,” says MIGA Executive Vice President Keiko Honda. “Cooperation with development finance institutions such as OPIC is part of MIGA’s mandate and allows us to maximize efficiencies and contribute to increased flows of foreign investment that improve lives around the world.”
“This project represents the best of what OPIC has to offer private capital looking to grow their investments in emerging markets,” said John Moran, OPIC’s Vice President for Insurance. “Silverlands is a highly developmental fund supporting a key sector in one of OPIC’s priority regions. By offering OPIC’s political risk insurance coverage in this innovative partnership with MIGA, we are helping Silverlands to mobilize and deploy critically-needed new private investment in Sub-Saharan Africa’s agricultural sector. OPIC appreciates the opportunity to team with such a like-minded institution on this and future projects.”
MIGA was created in 1988 as a member of the World Bank Group to promote foreign direct investment into emerging economies to support economic growth, reduce poverty, and improve people’s lives. MIGA fulfills this mandate by offering political risk insurance and credit enhancement to investors and lenders.
OPIC is the U.S. Government’s development finance institution. It mobilizes private capital to help solve critical development challenges and in doing so, advances U.S. foreign policy. Because OPIC works with the U.S. private sector, it helps U.S. businesses gain footholds in emerging markets, catalyzing revenues, jobs and growth opportunities both at home and abroad. OPIC achieves its mission by providing investors with financing, guarantees, political risk insurance, and support for private equity investment funds.
Established as an agency of the U.S. Government in 1971, OPIC operates on a self-sustaining basis at no net cost to American taxpayers. OPIC services are available for new and expanding business enterprises in more than 150 countries worldwide. To date, OPIC has supported more than $200 billion of investment in over 4,000 projects, generated an estimated $76 billion in U.S. exports and supported more than 278,000 American jobs.