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Presentation to Presentation to Portfolio Committee on Portfolio Committee on
Trade and IndustryTrade and Industry
Export Credit Insurance Export Credit Insurance Corporation of South Africa Corporation of South Africa
Limited (ECIC)Limited (ECIC)
12 March 200812 March 2008
2
Mr. Tladi Ditshego- ChairmanTel: 011 456 6316
Dr Patrick C Kohlo - CEOTel: 012 394 3510
Mr. Mandisi Nkuhlu - Senior General Manager
Tel: 012 394 3513
Mr. Emile Matthee - General ManagerTel: 012 394 3532
ECIC RepresentativesECIC Representatives
3
Export Credit and Foreign Investments Insurance Act, 1957 (as amended).
ECIC established 2 July 2001 as a self sustained national export credit agency.
Registered insurer subject to supervision by the Financial Services Board (FSB).
ECIC Enabling ActECIC Enabling Act
4
Provision of insurance on behalf of Government for contracts in connection with export transactions, foreign investments and loans or similar facilities.
ECIC Mandate in terms of the ECIC Mandate in terms of the ActAct
5
Filling the market gap between the requirements of capital goods exporters/investors and the capacity and appetite of private sector insurers (especially in respect of term political risk events up to 15 years or even longer).
Essence of ECIC mandateEssence of ECIC mandate
6
ECIC FUNCTIONS
ECIC STRATEGIC GOALS
STRATEGIC PLANS AND BUDGET ANALYSIS
APEX PRIORITIES
ECONOMIC CLUSTER OBJECTIVES
Discussion OutlineDiscussion Outline
7
• Formulate underwriting policy
• Evaluate export projects
• Assess credit risks
• Structure securities to mitigate risks
• Manage insurance portfolio
• Endeavour to diversify portfolio
ECIC FunctionsECIC Functions
8
• Focusing on customers
• Enhancing performance
• Engaging in strategic alliances
• Fostering risk orientation
• Providing effective stewardship
ECIC: Strategic GoalsECIC: Strategic Goals
9
Provide high quality service to all clients including manufacturing exporters, export contractors, financial institutions, investors, host country authorities and buyers of capital goods and services.
1) Focusing on Customers1) Focusing on Customers
10
Build a high performance organization, operating on an effective and self-sustaining basis through prudent underwriting and sound risk analysis practices.
2) Enhancing Performance2) Enhancing Performance
11
Forge partnerships and alliances with other insurers, government agencies and international organizations to complement service and leverage resources.
3) Engaging in Strategic 3) Engaging in Strategic AlliancesAlliances
12
Create enterprise wide risk awareness and the application of effective risk management techniques.
4) Fostering Risk Orientation4) Fostering Risk Orientation
13
Consistently utilise sound business, environmental and social principles, applying international best practice.
5) Providing effective 5) Providing effective stewardshipstewardship
14
• Sustained growth in insurance portfolio
• Successful reduction of reinsurance portfolio
• Efficiently managed claims and salvages
• Growth in investments to facilitate insurance capacity
Achievements to DateAchievements to Date
15
31 March 2006 R5,6 billion
31 March 2007 R8,8 billion
31 Dec 2007 R9,9 billion
Sustained Growth in Sustained Growth in Insurance PortfolioInsurance Portfolio
16
Country ExposureCountry ExposureECIC EXPOSURE AS AT 31 DECEMBER 2007
Zimbabwe1.48%
Sudan1.55%
DRC8.94%
Turkey6.35%
Ghana2.46%
Zambia4.76%
Kazakhstan2.04%
Iran26.14%
Mozambique - Mozal Aluminium
13.13%
Mozambique without Mozal
28.90%
Nigeria1.59%
Other Countries2.65%
17
02 July 2001 R13,8 billion*
31 Dec 2007 R2,28 billion
*Includes short term transactions which have since been privatised.
Successful Reduction of Successful Reduction of Reinsurance PortfolioReinsurance Portfolio
18
Claims Salvages
• 2005/6 R 63,1 m R 38,4 m
• 2006/7 R 150,0 m R 64,3 m
• 2007/8* R 20,8 m R 156,0 m
*Up to December 2007
Well Managed Claims and Well Managed Claims and SalvagesSalvages
19
Investment funds at inception: R 1,083 billionFunds as % of portfolio: 7.848%
Investment funds at 31 Dec 2007: R 2,282 billionFunds as % of portfolio: 18.371%
ECIC well placed to accommodate future transactions: total capacity calculated as R30 billion
Growth in Investments to Growth in Investments to facilitate Insurance Capacityfacilitate Insurance Capacity
20
Budgeted income statement for the year ending 31 March 2009
Strategic Plan and Budget Strategic Plan and Budget AnalysisAnalysis
21
Budget 2008/2009Budget 2008/2009Description Estimated Budget
2008 2009
R'000 R'000
Gross Premium 215 372 158 090
Earned Premium 187 893 106 462
Net Claims Rec/(Pd) 129 890 (25 363)
Provision - Decr/(Incr) (2 703) 23 750
Commission Rec/(Pd) (2 692) (800)
Net Operating Expenses (24 675) (34 113)
Underwriting Profit (Loss) 287 713 69 936
Other Income 166 409 171 676
Net Profit before taxation 454 122 241 612
Taxation (131 695) (67 651)
Net Profit after taxation 322 427 173 961
Capital Expenditure (CAPEX) 34 871
22
Building on the achievements of 2007/2008;
Key priority initiatives targeted for 2008/2009:
2008/20092008/2009
23
2007/2008: Comprehensive interrogation of ECIC insurance policy in collaboration with customers and under supervision of local and international Basel II experts.
Target for 2008/2009: More consumer friendly policy certified as Basel II compliant by Reserve Bank.
Cost: Absorbed in salary expenses.
Initiative 1Initiative 1
24
Economic Impact Assessment Model built in collaboration with the dti and National Treasury.
Aimed at undisputed economic impact results.
Cost: Absorbed in salary expenses.
Initiative 2Initiative 2
25
Documentation TrainingDocumentation Training Training of staff on intricate project
finance documentation.
In previous years external facilitators provided extensive training on project structuring techniques.
Total training budget R350,000
Initiative 3Initiative 3
26
Portfolio Management System Portfolio Management System (PMS)(PMS)
New PMS to enhance effectiveness, efficiency and accuracy of ECIC portfolio administration.
Cost: R500,000
Initiative 4Initiative 4
27
Comprehensive and up to date industry Comprehensive and up to date industry and relevant research reportsand relevant research reports
Industries covered / to be covered: aluminium, copper, zinc, cobalt, gold, oil, tourism, global political environment, toll roads, shipbuilding, call centres.Further sectoral research will be driven by global risks identified. Conduct legal reviews of buyer countries.
Cost: Industry research cost absorbed in salary expenses; Legal reviews R250,000.
Initiative 5Initiative 5
28
International Credit Risk Insurance International Credit Risk Insurance ForumsForums
Active participation in International Union of Credit and Investment Insurers (Berne Union):
- Drafting guiding principles– Pricing review team
Increased participation at OECD.
Budgetary implication (incl. membership fees) R1,581,000
Initiative 6Initiative 6
29
Increased Deal Flow into AfricaIncreased Deal Flow into Africa
• 62% of ECIC’s current exposure in Africa
• 89% of ECIC’s deal pipeline of USD 1.4 billion (R ± 11 billion) towards Africa
Cost of due diligence expenses = R1,150,000
Initiative 7Initiative 7
30
New ApplicationsNew Applications
USA0.48%
Georgia0.51%
Russia6.05% Poland
0.72%
North America0.66%
Gabon21.74%
Botswana15.49%
DRC39.40%
Malawi8.03%
Seychelles3.56%
Uganda1.67%
Mozambique0.12%
Malaysia1.05%
Nigeria0.54%
31
QuotationsQuotations
North America0.77%Indonesia
4.01%
Togo31.09%
Nigeria2.51%
Malawi2.57%
Kenya10.64%
Ghana6.41%
Gabon18.65%
DRC1.98%
Angola21.36%
32
Assistance to SMEsAssistance to SMEs
• Performance Bond Insurance
• Developed in partnership with IDC
• Focus on SMMEs facing financing capacity hindrances
• Enable SMMEs to participate in exports of capital goods and services
Policy InterventionPolicy Intervention
33
Product Criteria:• Bond value to 10% of contract price• Bond callable on demand• SMMEs to benefit (National Small
Enterprise Act, Act 102 of 1996)• Export contract value not exceeding
USD10 million• Credit term two years or more
SME Performance Bond SME Performance Bond InsuranceInsurance
34
Eastern Cape Development CorporationTrade and Invest KwaZulu Natal (TIKZN)Invest North WestMpumalanga Economic Growth AgencyWESGROSA Boatbuilders Business AssociationEntrepreneurs Month organised by the dtiSouth African Association of Consulting Engineers Gauteng Economic Development AgencyLimpopo Economic Development AgencyKhula EnterprisesBlack Management ForumTIKZN road show (6 workshops)
Roadshows done onRoadshows done onSME ProductSME Product
35
APEX PRIORITIES
ECONOMIC CLUSTER OBJECTIVES
Government Policy PlansGovernment Policy Plans
36
Project 13: Assistance to SMEs (ECIC Performance Bond)Project 21: Resolution of challenges facing Zimbabwe, (support dti in finalization of investment protection agreement to facilitate ECIC supported projects).Project 22: Reconstruction in DRC (strong pipeline of ECIC supported projects – mining; scanning equipment for border posts)Project 23: Intensified economic diplomacy (OECD, Berne Union, Prague Club, Conferences – international relations work to benchmark and align ECIC’s business practices).
Apex PrioritiesApex Priorities
37
INCREASE ECONOMIC EFFICIENCIES
• Basel II compliant policy
• Conduct host country legal reviews to develop appropriate legal templates to be replicated for future transactions
• Re-negotiate with banks financing costs pertaining to export credit transactions (utilize OECD studies)
Economic Cluster ObjectivesEconomic Cluster Objectives
38
PROMOTING DYNAMIC SECTORS
• Conducting research and developing new products for Call Centre Operations, (foreign exchange cover, breach of contract) - labour intensive sector , Shipbuilding industry
INTEGRATED SUPPORT FOR SMEs
• Covered under APEX Priorities
Economic Cluster ObjectivesEconomic Cluster Objectives