Funding furnished by the Export Credit Insurance Corporation (ECIC), which provides political and commercial cover for South African exporters, has had a positive economic impact resulting in a cumulative increase in gross domestic product of close to R15 billion since its inception in 2001.
This is according to chief executive Kutoane Kutoane, who addressed a media breakfast this week.
The ECIC falls under the Department of Trade and Industry and its mandate is to facilitate trade by providing commercial and political risk insurance for medium- to long-term export transactions of capital goods and services.
This is one of the innovative ways the government is trying to boost local exports.
Kutoane said the ECIC was contributing to export-led industrialisation. The country shipped a small range of commodities and the corporation would like to see a more diversified basket of goods.
In addition to insuring goods, the corporation provides political risk cover for cross-border capital investments and covers credit from banks.
Kutoane said all the ECIC’s focus markets, including the African continent, came with high risk.
“In Africa, especially, there is unanimous agreement that the political risk associated with instability, onerous and often unpredictable regulatory environment and corruption are the major impediments to business confidence.”
He said in Africa the policy environment did not provide the stability and guarantees that investors required for undertaking long-term investment commitments. Notable risks included liquidity shortages, heavy public debt, dependence on volatile or single tradable commodities and weak local currencies.
Mandisi Nkuhlu, the chief of operations, said 86.3 percent of the ECIC’s portfolio was in Africa and half of the goods covered had to be sourced from South Africa. It had a 43 percent exposure to mining.
Its flagship mining projects were a copper mine in the Democratic Republic of Congo, a mineral sands mine in Mozambique, a Malawi uranium mine, and a gold mine in Liberia.
He said the value of transactions approved had shot up from $516 million (R5.5bn) in 2010 to $833m in 2013, an increase of 28 percent. So far, transactions valued at $756m had been approved this year.
Chief financial officer Sedzani Mudau said the fiscal contribution of the ECIC was R1.2bn and it had total assets of R5.5bn. It made losses in the first two years of operation, but average underwriting profit has been R150m, peaking at R364m.