Export parastatal’s Africa push pays off

CAPE TOWN — The Export Credit Insurance Corporation has experienced a “phenomenal” growth in its insurance portfolio to R17bn in the year to end-March from the previous year’s R11bn.

This was due to the corporation’s increased role in Africa, Trade and Industry Minister Rob Davies said in the parastatal’s annual report.

The corporation underwrites bank loans, supplier credits and investments to enable South African firms to win foreign contracts.

The projects supported by the corporation would generate about 15,000 job opportunities in SA and in the host countries where the projects are located. The corporation’s gross written premiums amounted to R718m compared with last year’s figure of R199m and underwriting profit climbed to R380m (R353m).

However, the bottom-line suffered from foreign exchange losses of R405m (R253m) and aftertax income slumped to R62m from the previous year’s R189m.

Most of the new transactions supported were in sub-Saharan Africa, with that exposure amounting to 83.6%, North Africa 1.75%, Russia 8% and Indonesia 8%. Zambia (R4.3bn or 24.6%) had the highest exposure, followed by Mozambique (R2.8bn or 15.7% ), Zimbabwe (R2.3bn, 13.3%), Tanzania (R1.5bn), Iran (R1.4bn) and Russia (R1.4bn).

Mr Davies said the government was working on a new national export strategy which would aim at expanding SA’s exporter base and increase the growth and diversification of its export basket. The Export Credit Insurance Corporation would play an important role in this.

Its chairman Motshwanedi Lesejane was optimistic about business prospects for this year despite the uncertain global economic conditions because of the new opportunities to expand intra-African trade and take advantage of a raft of infrastructure projects in the region.

“Sub-Saharan Africa is an underpenetrated region for the credit and investment insurance community and offers a range of opportunities and challenges for export credit agencies. We foresee a significant increase in demand for our insurance products for trade and investments going into the region,” Mr Lesejane said.

In particular the corporation wants to include more small and medium-sized businesses in the export market. Currently they mostly participate as subcontractors and the agency wants to explore ways to ensure that they benefit directly from the export credit scheme. It has a small to medium transactions programme for this purpose.

Bell Equipment was the first beneficiary of the programme for its contract to supply trucks to a mining contractor in the Democratic Republic of Congo. A boat-building transaction was also supported.

Acting CEO Mandisi Nkuhlu said in 2012-13 the parastatal approved transactions valued at $953m (about R8.8bn) — the highest yet — of which $769m (R7.1bn) was converted into signed policies and disbursements of $645m (R5.9bn).

“Our requirement of 50% South African content has been a catalyst for local procurement and serves to boost job opportunities created in the domestic economy,” he said.

The agency achieved a return on equity of 21.9% (19%).