ECIC IR 2023

Integrated Report 2023

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Reflections by the Chief Financial Officer

As a consequence of the impact of macro economic environment mentioned above; the Corporation raised the provision for incurred but not reported claims reserve (IBNR) of $91 million (R1.6 billion) for four projects ensuing the default on debt by the Government of Ghana (GoG). For two of the four projects, a claim of $15.1 million was received during the current financial year which is still under consideration. The defaults by the GoG have increased the sovereign credit risk in terms of our inhouse country risk rating model from a level 4 to a level 5 thus resulting in a creation of the provision for unexpired risks (concentration risk reserve) amounting to $7.6 million (R129 million). These two factors resulted in the Corporation reporting an underwriting loss of R1.4 billion for the year ended 31 March 2023. The financial performance was further exacerbated by the foreign exchange losses reported of R612 million which are primarily driven by the depreciation of the South African Rand against the US Dollar from R14.4705 to R17.8139, therefore resulting into a net loss after tax of R1.5 billion, currency translation gain of R1.5 billion and total comprehensive loss of R39 million. Due to the loss reported in the current financial year, the deferred tax asset for tax losses has since increased from R45 million reported in the previous financial year to R109 million in the current financial year. Despite tax losses recorded over the two consecutive years, the Corporation has a track record of generating taxable profits in the previous years and is expected to generate taxable profits from the 2024 financial year onwards. The deferred tax asset is expected to be utilised within the next financial year. This is demonstrated in the Corporation’s corporate plan for 2023/2024 to 2027/28 financial years.

Mrs Noluthando Mkhathazo

REFLECTIONS BY THE CHIEF FINANCIAL OFFICER Management’s main objective is to run ECIC as a self-sustainable organisation inclusive of creating value to our stakeholders. This objective underpins how we conduct our business and manage the associated risks. The past year has been the toughest year in the history of the organisation where we experienced the delayed impact of the Russia/Ukraine war and COVID-19 which resulted in many countries experiencing high debt levels with some even defaulting on their obligations with the case in point being Ghana.

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