The gap was filled by the Export Credit Insurance Corporation of South Africa through the provision of medium to long-term export credit and investment guarantees by underwriting bank loans for political and commercial risk insurance cover, on behalf of the South African government.
The short-term transaction market was amply catered for, but medium to long-term export transactions still had a need for a dedicated export credit agency, hence the formation of the Export Credit Insurance Corporation of South Africa.
Acting as a catalyst for private investment, the Export Credit Insurance Corporation of South Africa steps in where commercial lenders are either unwilling to or unable to accept long-term risks.
While the Export Credit Insurance Corporation of South Africa is part of a broader government policy, it remains an independent limited liability company, but with the government as its sole shareholder.
The institution is enabled under the amended Export Credit and Foreign Investments Insurance Act of 1957.
Along with the Export Credit Insurance Corporation of South Africa’s major shareholder – the Department of Trade and Industry – the Export Credit Insurance Corporation of South Africa makes use of market research tools and specialised business development units to create new insurance products that support government’s export promotion objectives. The revised performance bond insurance product, which was launched in 2016, is one such example.
Currently, the Export Credit Insurance Corporation of South Africa is working on covering credit lines and return of plant equipment. It also continues to be a catalyst for increased lending capacity by financial institutions by entering into agreements with other export credit agencies (ECAs).
In this way, it creates a framework for both re- and co-insurance. To this end, it has adopted a comprehensive plan of action aimed at actualising cooperation programmes for mutual benefit in conjunction with, among others, BRICS ECAs, Afreximbank and African Trade Insurance.
Most African markets are considered unchartered territories with challenging business environments. Thus, the business strategies foreign investors apply elsewhere in the world cannot be used in the continent.
Accordingly, the business approach to the continent by financiers and project sponsors will have to be informed by a comprehensive understanding of individual country and regional dynamics. The Export Credit Insurance Corporation of South Africa excels in this regard by virtue of its presence and proximity to most African markets.
Through its credit enhancement and risk mitigation facilities the Export Credit Insurance Corporation of South Africa enables South African exports and outward investments.
Access to competitively priced export credit creates the ability for local contractors to bulk up and compete more effectively in foreign markets.
With the Export Credit Insurance Corporation of South Africa in support of such transactions, the South African export market is enabled and contractors are becoming more credible.
This has a far-reaching impact on fostering a stronger economy and drives domestic job creation, contributions to fixed capital formation and the GDP, as well as the generation of fiscal revenue.
The Export Credit Insurance Corporation of South Africa is also able to price African risk more competitively, given its knowledge of the African market.
The Export Credit Insurance Corporation of South Africa addresses obstacles through facilitation and by aiding in the release of funding required for infrastructure, which is of particular concern to global organisations seeking a presence in Africa.
Export credit is imperative, considering capital exports are long-dated assets. It is customary for firms to finance such exports with bank debt for cash flow-management purposes. Export credit financing is therefore an important and key aspect of international trade.
The Export Credit Insurance Corporation of South Africa is committed to sustainable business by providing innovative solutions, operational and service excellence, business development and strategic partnerships.
In enabling frontier markets to optimise production, the Export Credit Insurance Corporation of South Africa is effectively motivating a positive socio-economic impact.
Its mission is to provide export credit and investment insurance solutions in support of South African capital goods and services by applying best practice risk management principles.
