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Presentation to the Portfolio Committee on Trade and Industry ECIC Corporate Strategic Plan 2013/14 – 2015/16. Export Credit Insurance Corporation of South Africa SOC Limited (ECIC). 19 April 2013. Ecic representatives. Mandisi Nkuhlu – Acting Chief Executive Officer
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Presentation to thePortfolio Committee on Trade and IndustryECIC Corporate Strategic Plan 2013/14 – 2015/16 Export Credit Insurance Corporation of South Africa SOC Limited (ECIC) 19 April 2013
Ecic representatives Mandisi Nkuhlu – Acting Chief Executive Officer Tel: 012 471 3812 or 082 906 3705 MNkuhlu@ecic.co.za Sedzani Mudau – Chief Financial Officer Tel: 012 471 3814 or 072 940 7132 Smudau@ecic.co.za Lesego Mosupye – Chief Risk Officer Tel: 012 471 3817 or 082 558 4106 Lmosupye@ecic.co.za
ECIC MANDATE ECIC’s mandate is to facilitate export trade and cross-border investments between South Africa and the rest of the world. ECIC’s enabling Act is the Export Credit and Foreign Investments Insurance Act, 1957, as amended.
LEGISLATIVE AND REGULATORY FRAMEWORK • ECIC is subject to the Companies Act and is required to pay tax like any other normal corporation. • ECIC is a state owned corporation subject to the Public Finance Management Act and is designated as a Schedule 3B entity. • As an insurance company, ECIC is governed by the Short-Term Insurance Act. • In order to protect the interests of its clients and ensure that it is actuarially sound, ECIC is subject to the supervision and regulation by the Financial Services Board (FSB).
Ecic’s vision and mission Vision To be leaders in the medium and long-term export credit and investment insurance business, focusing on customer needs and sound risk management. Mission The mission is to facilitate and encourage South African export trade by underwriting export credit loans and investments outside the country in order to enable South African contractors to win capital goods and services contracts in countries outside of South Africa.
Key strategic goals In the effort to achieve its mission, the ECIC is driven by five (5) strategic goals: • Facilitate export trade and investments outside South Africa. • Strategic Alliances: build mutually-beneficial local, regional and global relations to advance South Africa’s trade and economic development objectives. • Promote a professional, competitive and customer focused workforce that ensures an effective and efficient service to our customers. • Fostering risk orientation: Create an enterprise wide risk awareness and effective corporate governance and risk management practices. • Effective stewardship: Consistently utilise sound business environment and social principles by applying international best practice.
Facilitate Export trade and investments GLOBAL TRADE OUTLOOK KEY CHALLENGES Acts of political violence, terrorism and the outright outbreak of hostilities continue to plague a number of countries in sub-Saharan Africa. Most of what is produced in Africa is consumed beyond the continent. To strengthen intra-African trade, we have to address the existing shortcomings through infrastructure development, efficient border management and better regulation. • The economic slump in the EU and in the US highlights the strategic importance of facilitating our exports and investments into new markets. • The overall landscape on the continent has become more competitive with many other international players and export credit agencies looking to the African continent for growth opportunities.
Facilitate Export trade and investments EXPORT TRADE AND INVESTMENT OPPORTUNITIES • The positive economic growth across many countries on the continent presents interesting business opportunities in mining, infrastructure, industrial projects, etc. • Stronger collaboration and co-ordination between the public and private players will boost the overall competitiveness and effectiveness of S.A. Inc against international competition. • On the whole the ongoing political risk issues serve to underscore the relevance and importance of our political risk insurance scheme as a risk mitigation tool for South African businesses seeking to expand beyond our borders. • Improved collaboration among the BRICS countries and the BRICS business sector, including the Export Credit Agencies (ECAs) presents new opportunities for value added exports.
Facilitate Export trade and investments SOUTH AFRICA’S COMPETITIVE ADVANTAGE • ECIC’s capacity to underwrite large ticket exposures on a long-term basis. • Interest Make-up support for competitive pricing. • The competitive technologies and technical capability of South African businesses in mining, engineering. • Strong balance sheets and African footprint of the South African financial institutions. • ECIC paper being seen as South African government paper.
Facilitate Export trade and investments SMALL TO MEDIUM TRANSACTIONS • ECIC working in partnership with the IDC offers performance bond insurance for SMME exporters. The current initiative is to expand the rollout of this product. • In line with the Industrial Policy Action Plan ECIC offers special products for the Boatbuilders: • Insurance for advance payments guarantees required by overseas buyers • Insurance for working capital facility offered by a bank during the boatbuilding phase • Qualifying small to medium transactions receive enhanced commercial risk cover at 100% whereas normal cover is 85%.
Facilitate Export trade and investments IMPACT OF ECIC ON THE SOUTH AFRICAN ECONOMY • As part of the review of the Interest Make Up Scheme (IMU), the ECIC commissioned a study of the impact of ECIC support on the South African Economy. • The study was commissioned in May 2012 and it covered a period of 6 years from 2005 to 2010. • The study analysed the economic costs and benefits of transactions which have commercial and political risk insurance cover from the ECIC and attract IMU. • Between 2005 and 2010, the ECIC facilitated funding for 21 export projects. Of the total project expenditure that was provided to South African companies, about R5.6 billion was spent locally on goods and services within South Africa.
Facilitate Export trade and investments IMPACT OF ECIC ON THE SOUTH AFRICAN ECONOMY… • Over this six year period, a total of R900 million was transferred to ECIC from the dti for the IMU in 2011 terms. Source: Interest Make-Up exercise, KPMG May 2012
Facilitate Export trade and investments IMPACT OF ECIC ON THE SOUTH AFRICAN ECONOMY… Source: Interest Make-Up exercise, KPMG May 2012
Facilitate Export trade and investments IMPACT OF ECIC ON THE SOUTH AFRICAN ECONOMY… Benefits Costs Source: Interest Make-Up exercise, KPMG May 2012
Facilitate Export trade and investments • Over the next three years, ECIC seeks to pursue and achieve substantial growth and diversification in its insurance portfolio. • The significant rise in supported exports and cross border investments will result in positive economic impact and job creation in South Africa. • The projected growth will bolster the financial sustainability of ECIC and enhance its capacity to underwrite more export transactions. • This growth will be driven largely by infrastructure projects in rail, road and ports on the Continent. • ECIC’s project pipeline over the next three years exceeds US3 billion and the availability of the IMU budget will be key to unlock this potential.
A professional, competitive and customer focused workforce • The ECIC will set out to consolidate the marketing campaign and have a targeted focus on potential and existing clients; • Pursue active business development initiatives in collaboration with other DFIs, SOEs and the private sector; and • Build in-house research capability and specialist knowledge with a strong focus on political and economic issues affecting Africa and other emerging economies in order to advance the economic impact of the ECIC activities.
A professional, competitive and customer focused workforce • Grow the human capital of ECIC to enhance the capacity to implement the medium term growth strategy. • In November 2012 the ECIC approved 10 new positions which we are in the process of filling. • Reinforce the business culture towards a stronger focus on customers and encourage innovation and quicker turnaround times. • Consolidate the strong focus on effective performance management and align rewards accordingly. • Increased access to training and development opportunities.
Foster risk orientation • Integrate risk management with the business strategy using Own Risk Solvency Assessment framework (“ORSA”) to achieve better capital and risk management in line with the Solvency Assessment Management (SAM) requirements coming from the FSB. • Prepare for and implement programmes to be fully compliant with SAM requirements. • Grow the capacity of ECIC to continue supporting large high impact infrastructure projects on the Continent.
Effective stewardship • Enhance corporate citizenship by implementing the Corporate Social Investment Plan and the environmental and social policies. • Enhance economic transformation by implementing new measures to facilitate the participation of BBBEE and SME players in the ECIC export credit scheme.
Approach to Outputs and targets • In drawing up the new outputs and targets the Treasury Guidelines on SMART targets have been taken into account. • In the 2012/13 financial year, based on the quarterly reports submitted to the dti which are reviewed by the internal auditors (Nkonki) and the Audit and Risk Committee, ECIC has been effective in achieving its targets. • The substantial growth in the new approvals in 2012/13 and the overall phenomenal growth in the insurance portfolio (from R11 billion to R17 billion) demonstrates that ECIC has operating systems and internal controls to meet and exceed the targets in certain cases.
Budget 2013/14 – 2015/16 • ECIC, as a schedule 3B entity is run on a financially self-sustainable basis by generating its revenue stream from premiums and investment income. • ECIC does not receive transfer payments from the Government to fund its operations. • The Interest Make-up fund (an export incentive scheme) is a government scheme managed by ECIC on an agency basis. • The projected growth in ECIC’s capital base will enhance its capacity to underwrite more insurance. • The expansive approach in the budget such as the increase in operating costs and staff complement is to fund and enhance capacity to implement the growth strategy.
Budget 2013/14 – 2015/16 • Earned premium anticipated to increase by 39% from R247 million to R343 million in 13/14 and 15/16 respectively. • Operating expenses will average R73 million pa, which represents a growth of 11% over the budget period. • Claims incurred is anticipated to improve by 383% mainly to positive claims outlook. • Operating cash flows will increase by 9% to R305 million. • Total assets will increase by 21% to R5.9 billion.
Capital expenditure • Planned capital expenditure(CAPEX) amounts to R6 million over the budget period. • CAPEX spend of R5 million is mainly on IT infrastructure to modernise and enhance operational effectiveness and ensure that we are able to comply with SAM requirements. • With increased staff complement the ECIC’s is looking for new premises that will cater for its growth over the next 5 years and may opt to acquire an office building during the current year for occupation on 1 April 2014.
Concluding remarks • ECIC is committed to work towards a prosperous and equitable South Africa, a better Africa and a better world. • Working together as South Africa Inc. we can achieve more exports and broader economic development.
