Takeaways from the COVID-19 pandemic: MIGA’s perspective from Africa

Cheikh Tidiane Diagne, an Underwriter in the Operations Group at the Multilateral Investment Guarantee Agency (MIGA), based in Dakar, reflects on the response to the pandemic and climate change in Africa.

After nearly 20 months of home-based work and countless virtual meetings with clients and governments, I had my first post-pandemic trip in November 2021 to Rwanda, one of the fastest growing economies in Africa. The purpose of this trip was to join MIGA’s Executive Vice President, Hiroshi Matano, for his first meetings in Africa with private sector investors and government officials, and to assess progress on MIGA-backed projects in the country. Being in the same room with our partners, I quickly realised that while technology allowed us to stay connected, there is no substitute for face-to-face meetings and seeing the transformational impact of projects at first hand.

Putting things into context, MIGA is strongly committed to the African continent particularly given the large need for capital investments to accelerate growth. MIGA can play an important role as an enabler of these investments through the provision of tailormade guarantee proposals and solutions to unlock access to finance and capital, attenuate investors’ perception of risk, and accelerate closure of projects.

Currently, Africa represents 28% of MIGA’s global portfolio of close to $22.3 billion with $5.9 billion (as of November 2021). MIGA is currently supporting over 99 active projects across all sectors (Infrastructure, Energy & Extractives, Manufacturing, Agribusiness and Services, Finance and Capital Markets) in 30 African member countries. MIGA established its physical presence in Africa in 2016 with a first office in Dakar (Senegal) followed by a second office in Nairobi (Kenya) in 2019, in an effort to be closer to our clients, partners and stakeholders and enhance our support for private investors in Africa. This meant that frequent travel to our member countries to raise awareness of our instruments, and face-to-face-meetings with partners were essential parts of our business development activities.

With the limitation in travel and the disruption in business caused by the COVID-19 pandemic, we were prompted not only to do things differently, but also to reflect on how to create more impact as an organisation as the following trends were emerging: economic recovery, digital transformation and climate change.

Economic recovery strategies

According to the World Bank, the COVID-19 pandemic led to a 5.2% contraction in global GDP in 2020, the deepest global recession in decades, despite the extraordinary efforts of governments to counter the downturn. The impact of COVID-19 is also expected to exert downward pressure on FDI flows, whereby FDI was expected to decrease by 30-40% during 2020-2021. The impact of the crisis on emerging markets and developing economies was expected to be particularly severe. As a result, many countries rolled out their economic recovery strategies. For most African economies, these strategies centred around building resilience through strengthening of infrastructure and connectivity, deepening of industrialisation with local production of vaccines, medicines, food processing, and digital inclusion.

Given its critical role in mobilising private sector investment for development, MIGA launched a $6.5 billion COVID-19 response programme which included the launch of a trade finance programme as an enabler of trade in emerging markets, particularly relevant for the African continent as a large importer of critical goods. This response also underpins the reflections that we undertook as an organisation to reconsider our impact through product and process innovations to deliver relevant solutions to our partners in a timely and streamlined manner.

Digital technologies adoption

The pandemic had a significant and positive impact on the speed of adoption of digital technologies for organisations like MIGA and the World Bank as we adopted home-based work and restricted travel, yet more than ever member countries needed our support. We therefore had no alternative but to quickly adopt technology to stay connected within our organisation but also with our external partners to remain relevant. The transition was relatively smooth for an organisation like MIGA as a number of tools were at our disposal, as was the case for most organisations and individuals working or living in a developed economy.

However, for the African continent, this shed a light on the ‘digital divide’ and the lag that the continent is facing as access to internet remains limited for most people, locking them out of access to critical services such as education and healthcare and e-commerce. This increased the urgency for African economies to accelerate their investments in the digitalisation agenda to transform their economies, with the digital economy as a key driver of growth, job creation and innovation. MIGA is very sensitive to this agenda and is looking at playing an active role in enabling and promoting investments in this space through support of mobile network operators, digital financial services providers and digital infrastructure providers such as data centres, telecoms towers, and energy service contracts (ESCOs) to the telecoms sector.

After initially turning inward, African governments swiftly realised that a global and coordinate response was key to limiting the spread of the COVID-19 virus and its economic impact.

Climate action plan

A similar coordinated approach was considered to have an effective climate action plan to combat the global challenge of climate change. In November, the long-awaited COP26 happened in Glasgow, which provided a timely opportunity for governments, global leaders, organisations and individuals to discuss and come up with a global response and coordinated concrete actions to address the threat that climate change poses to our planet. Following up on the Paris Agreement to ‘make finance flows consistent with a pathway towards low greenhouse gas emissions and climate-resilient development’, COP26 spurned optimism on the role that private investors, through innovation, can lead the changes that will shape the global transition to net zero greenhouse gas emissions across all industries.

Africa, despite its low contribution to greenhouse gas emissions, remains the most vulnerable continent to climate change impacts as recently highlighted by the floods and torrential rains in Niger and Sudan (usually dry countries) and food insecurity due to droughts in Madagascar. This suggests that African countries need to quickly implement investments in climate adaptation and resilience through a combination of public, private and public-private partnerships in climate sensitive sectors such as water, infrastructure, energy and agriculture to support a climate resilient and green growth.

Organisations like MIGA and the World Bank Group are at the forefront of the climate mitigation, adaptation and resilience agenda with commitments to ensure that 100% of our operations will be aligned with the Paris Agreement goals by 2025. For MIGA, our commitment towards fighting climate change in Africa continues to be demonstrated, including through support for a renewable energy project in Burkina Faso, a geothermal project in Ethiopia, off-grid solar home systems in DRC, Rwanda and Kenya, climate-resilient roads in Kenya, and a coordinated effort with the World Bank and IFC to support the development of a mini-grids market.

I am excited to be part of this organisation and journey as this gives MIGA the opportunity to play a critical role in leading and standard setting when it comes to support to the African continent, particularly with respect to economic recovery, digital transformation, and climate change. Whether meeting with clients virtually from my home in Dakar or meeting face to face with government officials, I am constantly reminded of the accomplishments we have made and challenges yet to come.

Cheikh Tidiane Diagne is an Underwriter in the Operations Group at MIGA, the political risk insurance and credit enhancement arm of the World Bank Group. Based in MIGA’s Africa Regional Hub in Dakar, Senegal, he focuses on business development, structuring and execution of MIGA’s projects across various sectors throughout the Sub-Saharan Africa region.