ECIC AR 2024 9TH

E

D

H

S

I

L I

N

B

2

0

A

0

T

S

1

E

Integrated Report 2024

E X P O R T C R E

L T D

O C

A S

C

R I

D I

F

T

A

I

N

H

S

T

U

U

R

O

A

S

N

F

C

O

E

N

C

O

O

I

R

T

P

A

O

R

Balance sheet leakages As highlighted in the Identified Material Issues section on page 12, the Corporation has suffered 3 leakages on its capital base: 1. Tax on unrealised foreign exchange gains due to a mismatch between IFRS and the Income Tax Act which has resulted in excessive tax being paid in years that the Corporation has made a loss; 2. Tax leakage on unrealised US dollar denominated insurance salvages which will result in taxes paid up front on uncertain recoverability of those salvages; and 3. Shortfall on the IMU grants received from government to cover the IMU Scheme payments by ECIC on the government loan that was absorbed in 2017. These leakages have an impact on the Corporation’s financial sustainability, ability to pay future claims, and attractiveness to financial institutions. It is imperative that the new administration engages the Corporation on these challenges to support the envisioned export-led growth of the South African economy. Appreciation On behalf of the Board, I thank Mr Ntshengedzeni Maphula for his commitment as Acting CEO after the untimely passing of the previous CEO in July 2023. The Board appreciates and acknowledges that he has wholeheartedly tackled the challenge of the dual acting roles of COO and CEO. My appreciation goes to the Board, executive management, and the staff for their hard work during the year. I believe that South African exporters, banks and development finance institutions are in capable and committed hands; and I thank them for their continued support of the Corporation. A heartfelt thanks is extended to the previous Minister of Trade, Industry and Competition for the continued guidance towards the valuable and meaningful contribution to his vision for the dtic family.

suffering massive losses. Despite settling the Ghana related claims and the massive provisions raised in the 2024 financial year, ECIC’s solvency position remains very strong at above 2-times cover in respect of both EC and SCR. In November 2022, Ghana approached the Paris Club of lenders for a debt relief and restructuring. The cumulative debt owed by Ghana to the various public and sovereign entities such ECAs, DFIs and Eximbanks amounted to approximately $5 billion, inclusive of ECIC’s underwritten debt amounting to $167 million. The proposed debt relief and restructuring package was considered by the Paris Club’s Official Creditors Committee. South Africa was represented by ECIC, DBSA and National Treasury at the Official Creditors Committee. ECIC has attended the Committee meetings since August 2023. The proposed terms for the debt relief and restructuring have not been favourable to ECIC and other country creditors and involved a 15-year grace period on debt repayment and with the debt repayment be settled in year 16 and 17 in two bullet instalments. This means that ECIC will have to wait for a period of 15 years to receive any salvages from the claims paid and this will be in years 2039 and 2040. The back-ending of the debt repayment will have a huge impact on ECIC’s revenues, however, ECIC will be able to rebuild its balance sheet overtime, as it has a strong pipeline of projects which will have to be underwritten. Apart from the Ghana claims that have been settled in full, the Cenpower project has been experiencing liquidity challenges due to the Ghana Electricity Company not being able to settle the arrear amounts owed to Cenpower. However, to date, Cenpower has not defaulted on its debt obligations, and it is currently involved in discussions with its lenders including ECIC on a long-term debt restructuring. It is expected that Cenpower and its lenders will finalise the debt restructuring before the end of March 2025. The conclusion of the long term debt restructuring is dependent on the Ghana Parliament approving amendments to the Power Purchase Agreement, which includes extending the Power Purchase Agreement by a further period of 5 years. Payments are still up-to-date, and the Corporation does not expect to receive a claim.

YOUR EXPORT RISK PARTNER

23