8/6/2019 Sugar Industry MIGA

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The factory, set to open in late 2007, will also support small growers in the area who currentlyexperience high losses while transporting their cane to factories further afield. Total millproduction is expected to be 50,000 tons a year, thanks to new technology and an experiencedteam to manage the project from inception to operation.

The enterprise was also financially attractive to the investors due to the competitive advantagesof economies of scale and low capital outlay. The one thing stopping the investment from goingforward was the prospect of noncommercial risks such as expropriation, transfer restriction, andwar and civil disturbance. This is where MIGA stepped in. MIGA agreed to guarantee up to 90percent of the equity and about 95 percent of the investors non-shareholder loan to Kibos Sugarand Allied Industries Limited by issuing $6.7 million in political risk insurance.

MIGA Allays Investor Concerns about Political Risk

Perceptions of risk by investors and bankers can be a major obstacle to investment. MIGAsrisk mitigation tools can play an important role in securing foreign direct investment, spurring

economic growth and employment in developing countries, says Yukiko Omura, MIGAsExecutive Vice President. Projects that aim to reduce poverty in sub-Saharan Africa; strengthenrural communities; support the development of the private sector; and encourage investmentsbetween two developing countries (South-South investment) are in line with MIGAs priorities.

Foreign investment can play a critical role in a countrys development by introducing moderntechnology and management methods, and by linking the country with the globaleconomy, adds Nkem Onwuamaegbu, underwriter for the project. We were interested in thisproject because it really took aim at improving the Kenyan people's quality of life.

Charles Midigo, who farms over 19 hectares of land in Kibos, had switched to subsistence crop

farming (maize, cassava, and potato) after the closure of the local mill in Miwani. The move hadproved to be volatile financially due to market and price fluctuations. Thanks to the Kibos sugarproject and the switch back to cane cultivation, Mr. Midigo expects supply-side risks to bevirtually eliminated and his profit margins to double. Many farmers like Charles Midigo havealready signed contracts with the project, says Elisha Ondango, chairman representing 32cooperative societies of cane producers in the Miwani and Kibos zones.

The project looks poised to take Kenya one more step toward revitalizing its sugarcane farmingindustry. Self-sufficiency in sugar production may help drive much-needed economic growth inthe countrythe very reason that MIGA got involved with the project in the first place.