ECIC AR 2024 9TH

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Integrated Report 2024

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IDENTIFIED MATERIAL ISSUES The material issues, with our strategic objectives, are integral to the way in which we manage the implementation of our strategy and performance assessments. The Board concurs that the following material issues are salient to our business operations and most likely to cause risk for the Corporation, our shareholder, and key stakeholders. We describe the issues here, as well as their impact on our key stakeholders to either create or erode value. Amendment of the ECIC Act We are engaging with the dtic on the amendment of the ECIC enabling legislation to authorize ECIC to cover non-South African financial institutions. The proposed legislative change would have to be processed through Parliament. A process most likely to be extensive bringing with it amelioration and growth. The revision of the ECIC legislation will be key in positioning ECIC to be competitive and structurally placed to support South African exporters through a range of insurance products that are complemented by corresponding financial products. In considering the revision of the ECIC legislation, a key focus will be on broadening the scope of insurance products range, including potentially considering the expansion of ECIC’s mandate to have a lending or financing capability, Currently, there is a need of a “One Stop Shop “entity that can provide wholesale financing which should, amongst others, include trade financing facilities, credit facilities at concessional funding or credit margins, provide capacity building funding especially to aspiring exporting companies, especially SMMEs and Black Industrialists. The Corporation’s mandate is to make South African exporters attractive to international buyers and to stimulate economic growth through export transactions that contribute to job creation and global competitiveness. The competitive and collaborative landscape is within the international export credit agency (ECA) market. The South African financing institutions use these ECAs, and these ECAs work together, to compete on the African continent. As such, ECIC and SA exporters are competing with international ECAs and suppliers for projects.

ECIC is an instrument in government’s hand to facilitate expanded trade and investments by SA companies. It is in this context that ECIC wants the issue of the authorisation to provide insurance to non-SA banks and other financial institutions to be resolved. In the effort to reposition ECIC to play a stronger role in support of intra-Africa trade, the option to work with some of the financial institutions on the African continent who have better footprint in some of the regions on the continent may broaden access to funding to buyers who seek to buy goods and services from South Africa. This will include foreign subsidiaries of South African financing institutions established, amongst others, to manage their foreign or hard currency financing requirements. The partnership with non-SA banks may also take the form of risk sharing arrangements. For instance, as a shareholder in Afreximbank, ECIC has concluded a cooperation agreement with Afreximbank which includes the provision of risk sharing facilities. Through these risk sharing facilities, ECIC can underwrite higher values of exports while retaining a lower net exposure. The level of South African content that the buyer under the export contract commits to is pegged to the gross loan value insured by ECIC. For instance, in the Moz LNG transaction ECIC has supported a loan commitment of USD800m on the back of the Afreximbank guarantee of up to USD400m. The ECIC target net exposure is USD430m, and the other portion of the reinsurance to ECIC will come from the private reinsurance market in London. In as much as ECIC will not utilize the full USD400m commitment from Afreximbank, the value add of the partnership speaks for itself, as it fosters higher levels of exports from South Africa whilst limiting the impact of concentration risk of the total sum insured on the ECIC insurance book. Progress on ECIC expanded mandate Three transactions to the equivalent value of USD8,3 million were approved during the financial year: 1) W orldwide Rail and Mining (Pty) Ltd – USD3,3 million 2) B ond Equipment – AUD3,7 million 3) H all Longmore Holdings (Pty) Ltd – R50 million

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