Tense African election year reinforces need for credit insurance

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Several African countries are scheduled to hold elections in 2013 and South African debtors insurance underwriting company, Credit Guarantee Insurance, has issued a warning to exporters operating in these countries.

Five confirmed African countries will be hosting their presidential and national elections in 2013. These countries include Kenya (4 March), Togo (24 March), Tunisia (23 June), Mali (7 July), Zimbabwe (between 15 and 30 July) and Cameroon (unknown).

Credit Guarantee Insurance says in a statement that there is uncertainty as to whether a country will emerge on the other side of an election peacefully and without conflict. “[A peaceful election] will allow the various pillars of that society, including business, to continue and make a meaningful contribution,” the statement reads.

Theo Reddi, general manager of exports at Credit Guarantee says that exporters will consider things like whether a new government will change the laws regarding trade; whether it will make amendments to the manner in which banks operate; and whether it will honour payments for imports concluded during the tenure of the former government. “These are just a few of the unknowns that an exporter might have to face at these times, and which reinforces the need for export credit insurance,” says Reddi.

Cameroon’s opposition party, the Social Democratic Front (SDF), plans to petition current President Paul Biya to make clear the country’s electoral calendar. Parliamentary and local council elections were scheduled to take place together last year, but were deferred to this year because of the voter’s list recompilation.

Joanna Turner, associate director of Control Risks’ sub-Saharan Africa global risk analysis says the elections in Kenya and Zimbabwe are expected to be a close-run race. “Tension is likely to run high and we are expecting some small-scale violence, which may affect those operating in the country,” says Turner.

In 2007, Kenya’s elections witnessed unprecedented levels of violence and lawlessness. “Exporters who credit insured their shipments rested a little easier in contrast to those who had not and who were forced to face an uncertain, drawn out and possibly detrimental outcome,” says Reddi.

Issues giving rise to the turmoil in Kenya have not been resolved as yet. “We hope that a similar situation does not hamper a peaceful election in 2013.”

Exporters are likely to consider what potential risks these countries could pose pre-, during and post-elections. Though without a crystal ball, it is virtually impossible to determine the effects on the business community both before and after an election.

“In today’s volatile global environment, country risk should be prominent on the radar of all exporters, irrespective of whether a country is scheduled to have an election or not, and their transactions should be secured with credit insurance cover,” Reddi argues.