An approach that presents South Africa as offering a coherent “suite” of services to potential foreign importers of local goods – rather than simply the export product itself – may boost the country’s export earnings and drive the local industrialisation agenda, the Export Credit Insurance Corporation (ECIC) said on Monday.

Conceived by the ECIC – South’s Africa’s export credit agency – the so-called 'SA Inc' model envisaged the collaboration of an export credit provider, commercial banks, development finance institutions (DFIs) and ready-for-export manufacturers to create a comprehensive underwritten export offering.

“Our aim with this is to combine individual competencies by providing a technical solution, such as exported capital equipment, accompanied by a financial solution, such as bank funding, and wrap it up with the required credit insurance,” ECIC CEO Kutoane Kutoane told a media breakfast in Johannesburg.

Established under the auspices of the Department of Trade and Industry (DTI) in 2001, the ECIC’s mandate is to facilitate export trade by providing commercial and political risk insurance for medium- to long-term export transactions of capital goods and services.

The corporation also provides political risk cover for cross-border capital investments.

“There are some major risks against which the ECIC provides insurance to exporters. These include liquidity shortages, heavy public debt, dependence on a volatile single-tradable commodity and weak local currencies. Without this insurance, most banks wouldn’t provide financing,” Kutoane explained.

In addition, through its role of underwriting bank loans against political and commercial risks, the ECIC enables bankers to better mitigate the risks associated with financing exporters of capital to high-risk global destinations, particularly in Africa.

Informed by overarching policies such as the National Development Plan and the New Growth Path, the firm sought to increase South Africa’s role in regional development and drive the economic integration of the continent through industrialisation and trade.

Kutoane noted that the corporation would also look to work jointly with local DFIs, such as the Industrial Development Corporation, the Development Bank of Southern Africa and the Public Investment Corporation, to investigate the best manner in which financial resources and ECIC-provided risk solutions could be deployed in the form of a “one-stop-shop”.

“Our primary consideration in this will continue to be complementing rather than replacing our well-resourced private banking and credit insurance partners,” he commented.

DISTINCT MARKET FOCUS
Elaborating on the regions located within South Africa’s export-focused crosshairs, the ECIC head identified the developed economies of Europe and North America, the emerging markets of Africa – particularly Southern African Development Community member States – and nontraditional markets, such as India and China, as areas offering the greatest returns.

At a sectoral level, the country currently had “significant” competence and interest in a number of upstream oil and gas service and supply areas, including the repair, maintenance and upgrade of various oil and gas marine vessels.

This presented export opportunities in engineering services with respect to the design, fabrication and construction of specialised modules for oilfields, including storage tanks, processing modules for offshore platform or onshore facilities, docking facilities, tugs and barges, as well as civil structures.

“At the product level, South African firms can provide equipment and materials such as pumps, valves, pipes, motors, instrumentation and process equipment for the specialised needs of the upstream industry,” said Kutoane.

He added that South African firms were recognised as leaders in turnkey new mine design and operations, mine safety, ventilation, tracked mining, geological services and shaft sinking. 

Moreover, the Programme for Infrastructure Development for Africa and other interregional infrastructure plans presented opportunities for South African exporters of electrical equipment and rural and urban electrification.

There were also opportunities in agroprocessing and other light manufacturing, industrial electronics, transport and haulage equipment, mining equipment and servicing, maritime-related industries and tourism.

“Most of these are opportunities in which South Africa already has significant competencies. We, therefore, see conditions as ripe for these opportunities on the continent to be accessed by our country, exporter and investor community – which we collectively call ‘SA Inc’,” Kutoane commented.

The ECIC’s current exposure totalled some R19.4-billion in supported capital projects.

Of this, 85% were projects located in Africa, while 8% were in the Middle East and 7% in Asia.

“We intend to double our exposure over the next three to five years, while promoting more diversified sector coverage. Obviously, this will depend largely on the appetite of exporters and South African investors,” he noted.