INTERNATIONAL INTERNATIONAL DELEGATION TO DELEGATION TO

NAMPONAMPO

PRESENTED BY CHRIS THIRION

HEAD: PLANNING & PORTFOLIO MANAGEMENT16 MAY 2011

2

ROLE OF ECAsROLE OF ECAsEXPORT CREDIT AGENCIES AND SPECIFICALLY THE EXPORT CREDIT INSURANCE CORPORATION OF SOUTH AFRICA UNDERWRITES

BANK LOANS SUPPLIERS CREDITS INVESTMENTS

ABROAD TO ENABLE SOUTH AFRICAN CONTRACTORS TO PARTICIPATE IN CAPITAL GOODS & SERVICES CONTRACTS OTHER COUNTRIES.

COUNTRY ANALYSIS

Exposure on African continent of USD 925 million spread over: Angola 2% DRC 9% Gabon 1% Ghana 4% Malawi 10% Nigeria 2% Mozambique 60% Sudan 3% Swaziland 1% Uganda 3% Zimbabwe 4% Zambia 0.5% Seychelles 0.5%

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Export CreditExport Credit

SA Exporters

Exporter’s Cover GREs

Policy of Insurance# 100% PRI# 85% CRI (Project Finance); ≤ 100% CRI Corp. Buyer

SA LENDER(S) BUYER

LOAN AGREEMENT# Loan = 85% of SA Contract Price

# Interest = LIBOR + 2.50%# Tenor = 2 – 10 years

IMU

Exporter Undertaking Agreement # 50% SA Content or # Qualifying Exporter

South Africa Foreign Country

SUPPLY AGREEMENT

# Export Capital Goods/Services

# Payment Terms: 15% Down Payment 85% Financial Credit

# Delivery Period: up to 36 Months

TRADE RISKSTRADE RISKS

EXPROPRIATION

LOSS DUE TO EXPROPRIATORY MEASURES TAKEN BY HOST GOVERNMENT

TRANSFER RESTRICTION

LOSS DUE TO ACTION BY HOST GOVERNMENT PREVENTING THE CONVERSION OF LOCAL CURRENCY INTO HARD CURRENCY OR THE TRANSFER OF HARD CURRENCY OUT OF THAT COUNTRY

TRADE RISKS (Continue)TRADE RISKS (Continue)

WAR & CIVIL DISTURBANCE – LOSS DUE TO ACT OF WAR, CIVIL COMMOTION, TERRORISM AND SABOTAGE

BREACH OF CONTRACT – LOSS DUE TO A MATERIAL BREACH BY HOST GOVERNMENT OF A CONTRACT ENTERED INTO WITH THAT GOVERNMENT

PROTRACTED DEFAULT – LOSS DUE TO PAYMENT DEFAULT BY GOVERNMENT BORROWER/GUARANTOR

TRADE RISKS (Continue)TRADE RISKS (Continue)

CONTRACTOR NON-DELIVERY – pre shipment

INSOLVENCY – SEQUESTRATION, LIQUIDATION OR JUDICIAL MANAGEMENT OF THE BORROWER

PROTRACTED DEFAULT – AN UNDISPUTED PAYMENT DEFAULT BY THE BORROWER

CONCLUSIONCONCLUSION

NOT GETTING PAID!

DUE TO:

POLITICAL AND RELATED INTERVENTION COMMERCIAL OUTCOMES

POLITICAL AND RELATED POLITICAL AND RELATED INTERVENTIONINTERVENTION

EXPROPRIATION

WAR & CIVIL DISTURBANCE

BREACH OF CONTRACT

PROTRACTED DEFAULT

TRANSFER RESTRICTION

NON-CONVERTABILITY

CONCLUSIONCONCLUSION

NOT GETTING PAID!

DUE TO:

POLITICAL AND RELATED INTERVENTION COMMERCIAL OUTCOMES

COMMERCIAL OUTCOMESCOMMERCIAL OUTCOMES

INSOLVENCY

SEQUESTRATION, LIQUIDATION OR JUDICIAL MANAGEMENT OF THE BORROWER

PROTRACTED DEFAULT

AN UNDISPUTED PAYMENT DEFAULT BY THE BORROWER

TRADE ACTIVITIES TRADE ACTIVITIES EXPOSED TO RISKSEXPOSED TO RISKS

EXPORT CREDIT SUPPLIERS CREDIT FINANCIAL CREDIT

INVESTMENTS EQUITY INVESTMENTS SHAREHOLDERS LOANS COMMERCIAL LOANS

EXPORT CREDITEXPORT CREDIT

SUPPLIERS CREDIT CREDIT TO FOREIGN BUYER GIVEN BY EXPORTER

TRADE RISKS INVOLVED: PRE-SHIPMENT - POLITICAL POST-SHIPMENT - POLITICAL AND COMMERCIAL

MITIGATION: PRE-SHIPMENT PRI COVER PREVENTING EXPORT DUE TO

POLITICAL EVENT IN COUNTRY OF DESTINATION POST-SHIPMENT PRI AND CRI COVER ENSURING

PAYMENT IS RECEIVED TO A LEVEL OF 100% OR 85% FOR PRI AND CRI RESPECTIVELY

TRADE ACTIVITIES TRADE ACTIVITIES EXPOSED TO RISKSEXPOSED TO RISKS

EXPORT CREDIT SUPPLIERS CREDIT FINANCIAL CREDIT

INVESTMENTS EQUITY INVESTMENTS SHAREHOLDERS LOANS COMMERCIAL LOANS

EXPORT CREDITEXPORT CREDIT

FINANCIAL CREDITRECOURSE OR NON-RECOURSE LOANS PROVIDED TO FOREIGN BUYERS TO PROCURE CAPITAL GOODS & SERVICES FROM SOUTH AFRICAN EXPORTERS/ CONTRACTORS

TRADE RISKS INVOLVED: FINANCIAL INSTITUTION EXPOSED TO POLITICAL ANDCOMMERCIAL RISKS ON OUTSTANDING LOAN ADVANCED

MITIGATION: POST-SHIPMENT PRI AND CRI COVER AGAINST NON-PAYMENT

TO A LEVEL OF 100% PRI AND FROM 85% UP TO 100% CRI ON LOAN ADVANCED

TRADE ACTIVITIES TRADE ACTIVITIES EXPOSED TO RISKSEXPOSED TO RISKS

EXPORT CREDIT SUPPLIERS CREDIT FINANCIAL CREDIT

INVESTMENTS EQUITY INVESTMENTS SHAREHOLDERS LOANS COMMERCIAL LOANS

INVESTMENTS INVESTMENTS

EQUITY INVESTMENTINVESTOR MAKING AN EQUITY INVESTMENT IN A FOREIGN ENTITY FOR THE PURPOSE OF EXPANDING OR DIVERSIFYING ITS BUSINESS

SHAREHOLDER LOANSHAREHOLDER ADVANCING A LOAN TO THE FOREIGN ENTITY

COMMERCIAL LOANFINANCIAL INSTITUTION PROVIDE A COMMERCIAL LOAN TO FOREIGN GOVERNMENT OR PRIVATE SECTOR ENTITY TO EXPAND BUSINESS, INFRASTRUCTURE, DEVELOPMENT OF A NEW PROJECT, EXPANDING OF EXISTING PROJECT

INVESTMENTS INVESTMENTS

TRADE RISKS INVOLVED:

EQUITY INVESTMENT INTERVENTION BY FOREIGN GOVERNMENT RESULTING IN BUSINESS NOT BEING

ABLE TO OPERATE AS ENVISAGED OR NOT MAKING PROFITS FOR A CONSECUTIVE PERIOD OF THREE YEARS

NOT BEING ABLE TO REPATRIATE CAPITAL AND DIVIDENDS

SHAREHOLDERS LOAN – NOT BEING ABLE TO REPATRIATE THE LOAN AS WELL AS INTEREST EARNED

COMMERCIAL LOAN – NOT BEING ABLE TO REPATRIATE THE LOAN AS WELL AS INTEREST EARNED

MITIGATION: INSURANCE COVER UP TO 90% OF THE INVESTMENT (ACTUAL CASH EQUITY),

SHAREHOLDER LOAN OR COMMERCIAL LOAN INSURANCE COVER UP TO 90% OF DIVIDENDS OR INTEREST (NOT EXCEEDING IN

AGGREGATE THE AMOUNT OF CASH EQUITY INVESTED OR CAPITAL AMOUNT OF LOAN)

LEVELS OF COVERLEVELS OF COVER

Cover up to 90% should the required % SA content be achieved

SA Content:

Materials less imported component Wages & salaries (paid in SA) Freight costs (paid in SA) Insurance premiums (issued in SA) Finance charges (excluding post delivery) Fees & charges & profits

SA LOCAL CONTENT SA LOCAL CONTENT POLICYPOLICY

No minimum % applies to projects in Africa:

Exporter to be resident in SA as defined in terms of Income Tax Act no 58 of 1962

Exporter must have entered into export contract with foreign buyer

Exporter must have financial & technical means Exporter to achieve minimum score of 30% in terms of

the Broad Based Black Economic Empowerment Scorecard

50% SA local content applies to rest of the world as well as to projects in Africa if the BBBEE scorecard cannot be met

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ECIC Worldwide ExposureECIC Worldwide Exposure

ASSISTANCE TO SMEsASSISTANCE TO SMEs

Performance Bond Insurance

Supplier’s Credit for Small Medium Transactions

PERFORMANCE BOND PERFORMANCE BOND INSURANCEINSURANCE Developed in partnership with IDC;

Focus on SMMEs facing financing capacity hindrances;

Enable SMMEs to participate in exports of capital goods & services;

PERFORMANCE BOND PERFORMANCE BOND INSURANCEINSURANCEProduct Criteria:

Bond value to 10% of contract price

Bond callable on demand

SMMEs to benefit (National Small Enterprise Act, Act 102 of 1996)

Export contract value not exceeding USD10 million

Credit term two years or more

ASSISTANCE TO SMEsASSISTANCE TO SMEs

Performance Bond Insurance

Supplier’s Credit for Small Medium Transactions

SUPPLIER’s CREDIT FOR SUPPLIER’s CREDIT FOR SMALL MEDIUM SMALL MEDIUM TRANSACTIONSTRANSACTIONS Rationale for the development of the Rationale for the development of the

productproduct

Improve turnaround times for concluding and financing of small & medium transactions

To cater for transactions ranging from US$1million to US$ 20 million more effectively

SUPPLIER’s CREDIT FOR SUPPLIER’s CREDIT FOR SMALL MEDIUM SMALL MEDIUM TRANSACTIONSTRANSACTIONS Rationale for the development of the product Rationale for the development of the product

(continue)(continue)

To assist small to medium exporters to offer their clients credit that is simple and quick to implement

To create jobs in SA and to stimulate economic growth

To improve ECIC competitiveness in the market

2009 SUPPPORT 2009 SUPPPORT AGREEMENTAGREEMENTLocal Banks

ABSA First Rand Investec Standard Nedbank IDC

International Banks

Royal Bank of Scotland Standard Chartered Citibank Deutsche Bank Credit Agricole

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THANK YOUChris Thirion

cthirion@ecic.co.za

www.ecic.co.za

+2712 471-3800