ECIC Newsletter ISSUE10

YOUR EXPORT RISK PARTNER

MESSAGE FROM THE ECIC CEO

MR. KUTOANE KUTOANE

We continue to engage in cutting-edge research methodologies not only to make an impact nationally, but to work towards the AfCFTA agenda. Although we have the advantage of knowing this territory relatively well, we also have the challenge that comes with learning to approach familiar ground more substantially. Elements of this philosophy are embedded deep within our core values and clear examples of it in action can be found daily in the Corporation in efforts of transformation and client centricity. We look forward to working with our stakeholders to vigorously pursue the AfCFTA agenda and to monitor the implementation of our evolving new strategy in this regard.

The latest Integrated Report represents collective inputs and a wide array of contributions and thoughts from the shareholder down to the management and employees of the Corporation. Once again, we owe credit to many stakeholders who have helped us achieve these results, either through their direct engagement, or through investments. The 2020/21 fnancial year has proven the Corporation’s resilience amid continued economic headwinds as well as the devastating impact of the global pandemic.

This past year has been a time of tremendous change for both the ECIC and the South African economy alike and one in which, in many respects, had the eyes of the world focused on survival from COVID-19 onslaught. Despite these trying times, the year started on a positive note with the offcial start of trading under the rules of African Continental Free Trade Agreement (AfCFTA)

Change however forces adaptation that can be stewarded by effective leadership. Our aim in the coming year is to promote, encourage and facilitate South African exports to take full advantage of opportunities offered by AfCFTA as well as to ensure that the Corporation continues to remain strong, agile, and sustainable. The Corporation’s standards remain resilient and comprehensive as demonstrated by our ability to collaborate, adapt, and fnd new ways of doing things even as we were confronted with uncertainty and gloom from volatile global markets. Transformation and excellence are also both pervasive elements that are deeply entrenched throughout our mandate to shape the future of the business.

The Corporation is instinctively responsive to the nature, needs and direction of the export market within which we operate. This balance and integration are fundamental to our commitment and it is indispensable to realising the aspirations refected in our vision, to be a world class export credit agency in facilitating South African export trade and investment globally.

The cornerstone of our success has been an unwavering commitment to our core values and responsible operations as we consistently work towards achieving our goals through integrated initiatives that place a high priority on moving us forward simultaneously on multiple fronts and managing our total impact as an export credit agency.

I thank both management and employees for their hard work, dedication, agility, and loyalty as well all our stakeholders for their contribution and commitment to ECIC during this period.

Kutoane Kutoane

UNSCRUPULOUS ELEMENTS USING THE COMPANY NAME AND LOGO OF ECIC

The Export Credit Insurance Corporation of South Africa SOC LTD (ECIC) would like to inform the public of unscrupulous individuals using the name and logo of ECIC, intended to defraud unsuspecting persons. These individuals have used the ECIC logo on various social media accounts, as well as letterheads, sending emails impersonating employees of ECIC to lure the public with fctitious offers of “affordable loans”. The unsuspecting members of the public are made to believe that the offers and loans are genuine. ECIC reiterates its role as an insurance company that offers specifc insurance products and does not provide or offer loan funding. Members of the public should ignore any unsolicited loan offers purporting to be backed by ECIC.

RESEARCH PAPERS COUNTRY REPORTS

THE SOCIO-ECONOMIC IMPACT OF MOZAMBIQUE LIQUIFIED NATURAL GAS (LNG) PROJECT IN SOUTH AFRICA BY SONGEZO MPINI

The establishment of the Export Credit Insurance Corporation (ECIC) of South Africa is a government initiative that has proved to be successful, as well as invaluable, to government, over many years since its establishment in 2001. The ECIC has been successful in supporting and insuring projects in Africa and other emerging markets which in turn bear positive economic impact for both the host country and the South African economy. An example of this illustration is the Liquifed Natural Gas project in Mozambique (“The MOZ LNG”). The exploration, discovery, and subsequent commercial development of natural gas in Mozambique has the potential to deliver signifcant economic benefts in South Africa as the benefts ripple through various supply chains, benefting producers, consumers, and government. This paradigm is relatively simple through the ECIC which enables lenders through its risk insurance products, directly enabling market access of South African suppliers of capital goods and service.

The South African economy is currently faced with a stubbornly low growth environment, now worsened by the pandemic. In its efforts to support exportled growth and overall growth enhancing government policies, the ECIC continues to be successful in facilitating projects that contribute signifcantly to domestic economic growth, employment creation and public fnances. To quantify the impact of ECIC supported projects, a socio-economic impact assessment is conducted and the assessment of the MOZ LNG impact on

the economy is estimated based on the ECIC supported loan amount of US$800 million and 50% SA content. The assessment implies expected contribution to be generated on an annual basis, on average, for the next 20 years the impact is assessed in both the host country (Mozambique) and in South Africa, and is primarily on enhancing GDP, creation of job opportunities, household income and government revenues.

The ECIC backed loan facility in the project is anticipated to stimulate South African production and exports which will have a positive economic impact across sectors and thereby enable forward and backward value chain linkages within the South African economy. The anticipated impact will occur both during the construction and operational phase of the project. To quantify the impact in South Africa facilitated by the ECIC covered loan facility in the MOZ LNG project including the activity directly related to the project, the indirect and induced impacts that fow from that, and the other sectors of the economy. ECIC supported project is estimated to contribute to the generation/sustainability of employment opportunities of 26 256 people, with local households earning a total of R4.6 billion. In addition, a total of 6.8 billion of value added to GDP is estimated to be generated, and approximately R1.8 billion of tax revenue is expected to be contributed to the South African government accounts.

AFRICAN CONTINENTAL FREE TRADE AGREEMENT ARTICLE

Accelerating Intra-African Trade

The goal of the African Continental Free Trade Agreement is to speed up trade within Africa and between African countries, as well as boost the continent’s trading position in the global market by strengthening its common voice and policy space in global trade negotiations.

The agreement establishing the African Continental Free Trade Area (AfCFTA) was brokered by the African Union (AU) and adopted by 44 of its 55 member states on 21 March 2018. By February 2019, all AU countries, save for Eritrea, had become signatories to the AfCFTA, which came into force on 30 May 2019.

The backdrop to the AfCFTA is that Africa is one of the world’s least integrated continents, with intra-African exports constituting only 16.6% of total exports in 2017, which is one

of the issues the agreement aims to at least improve, if not solve.

The AfCFTA will cover a market of more than 1.2 billion people, including a growing middleclass, and a combined gross domestic product (GDP) of more than $3.4 trillion.

Trading under the AfCFTA Agreement was due to commence on 1 July 2020, but as a result of the COVID-19 global pandemic, this date was postponed, with a new date yet to be confrmed by the AU Commission.

Objectives

The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of businesspeople and investments, and thus pave the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better

harmonization and co-ordination of trade liberalization and facilitation, and instruments across Africa.

“It will provide, particularly our small and medium-sized enterprises in South Africa, with the opportunity to take advantage of the opening up of these markets and the integration that comes with that, and they will beneft immensely from the ability to trade more on the continent.” Kutoane Kutoane

As a Corporation we are keen to play a prominent role in positioning South African actualising the benefts of the AfCFTA for the country. ECIC has the experience, and we understand the trading dynamics, as well as the risks and challenges faced by the economies involved. We are, therefore, also better placed in the country to facilitate South African companies’ ability to enter that market or expand their presence on the continent.

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