ecic value proposition - ec export symposium · 2019. 3. 30. · political risk events (90% to...
TRANSCRIPT
ECIC VALUE PROPOSITION
ECDC EXPORT SYMPOSIUM
27 March 2019
The mandate of the Export Credit Insurance Corporation of South Africa SOC
Ltd (“the ECIC”), is to facilitate export trade and cross-border investments
between South Africa (“SA”) and the rest of the world.
The ECIC was established in 2001 under the Export Credit and Foreign
Investment Insurance Act, 1957:
▪ Is a 100% State owned insurance company;
▪ Reports to the Minister of Trade and Industry and has authority to conclude
insurance contracts on behalf of the government of the Republic of South
Africa;
▪ Is regulated by the Prudential Authority, operating as part of the South
African Reserve Bank (“SARB”) and the Financial Conduct Sector Authority;
▪ Provides political and commercial risk insurance to facilitate export trade
and cross border investments; and
▪ an provide cover for South African Rand (“ZAR”) and United States dollar
(“USD”) denominated transactions.
OVERVIEW OF THE ECIC
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The corporation;
▪ Holds a Reserve Fund as part of its balance sheet, which is utilised to settle
claims as and when they fall due; and
▪ Has a special dispensation from the SARB to offer insurance in US Dollars
and receive and keep the premium in US Dollars to hedge its USD
exposure.
▪ The National Treasury records a contingent liability in the State Accounts for
the insurance exposure incurred by ECIC (from time to time) in excess of its
capital.
▪ The South African government has undertaken to replenish the Reserve
Fund, should it be projected that ECIC may not have sufficient own
funds to meet claims as they fall due.
▪ The ECIC can reinsure its exposure directly or through its broker Arthur J.
Gallagher & Co.
▪ The National Treasury and the Department of Trade and Industry are
represented on the ECIC Board.
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GOVERNMENT SUPPORT
SUSTAINABLE DEVELOPMENT POLICIES
The ECIC adheres to Sustainable Development Policies
Anti-Bribery
▪ The ECIC does not support export contract and investments secured
through bribery or from debarred entities; and
▪ Requires disclosure of any agents involved.
Environment & Social Impact
Projects need to:
▪ meet International Finance Corporation ( “IFC”) (World Bank) standards on
environmental assessment;and
▪ be compliant with Environment & human rights laws.
Sustainable Lending
▪ The ECIC will not support sovereign lending that will severely burden the
recipient country’s economy.
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ECA backed financing can be harnessed right across the capital spectrum,
from equity to long-term senior secured , sovereign and project finance debt.
It can also be used for short-term working capital financings.
The ECIC support across sectors includes but not limited to:-
▪ Agri-processing
▪ Aviation
▪ Defence (excludes offensive weaponry , the rest on a case by case
basis)
▪ Energy
▪ Ports / Railways / Pipelines
▪ Power / Water Desalination
▪ Real estate
▪ Healthcare
▪ Shipping
▪ Steel Mills / Rolling Plants
▪ Telecommunications
ECA BACKED FINANCING BENEFITS
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ECIC SUPPORT CONSIDERATIONS
▪ A minimum of 15% of the export contract value must be paid to the
exporter by the buyer
▪ Only 85% of the export contract value is eligible for ECIC backed finance
and insurance support.
Supported Tenors:
▪ Minimum credit repayment period of 2 years
- Minimum tenor not applicable to working capital and bond products
▪ Up to [15 ] years repayment period for project finance transactions
- Longer tenors can be considered depending on the nature of the
project
▪ Up to 15 years for investments
▪ For investment insurance, there must be a cross-border investment and
the equity investment must be made through a South African registered
entity.
▪ Cover for performance guarantees, bid bonds etc. must be linked to an
existing or potential export contract by a South African Company.
▪ The ECIC charges a premium for the services it provides and for some
products assessment fees may apply.
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TYPES OF INSURANCE COVER
Our value add is risk sharing and risk mitigation. The insurance cover is provided for losses arising from:
POLITICAL RISK EVENTS (90% TO 100%)
▪ Expropriation, Nationalisation, Confiscation
▪ Transfer restrictions
▪ War & Civil Disturbance
▪ Breach of Contract
▪ Protracted Default
▪ Terrorism, Sabotage and Piracy
COMMERCIAL RISK EVENTS (95% TO 100%)
▪ Insolvency
▪ Protracted Default / Payment Default
70% South African content required on all export credit contracts.
Relaxation towards rate applies to projects in Africa: 50% South Africa
local content and 20% from any African country
Content definition:
▪ Materials less imported component.
▪ Wages & salaries (paid in South Africa).
▪ Freight costs (paid in South Africa).
▪ Insurance premiums (policy issued & paid in South Africa).
▪ Finance charges (excluding post delivery).
▪ Fees and charges paid for any other services performed in South Africa.
on the exporters behalf by a South African resident organization.
▪ Fees and profits accruing to the exporter.
CONTENT REQUIREMENTS
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ECIC PRODUCTS
INVESTMENT
COVER
Cover provided against political risk insurance (“PRI”) causes of loss which prevents the foreign business to:
▪ operate as envisaged for at least one year; and/or
▪ produce profits for three consecutive years.
▪ Cover for up to 15 years.
Maximum ECIC liability:
▪ 90% of Investment (the insured amount) Plus:
▪ Retained profits/dividends up to the insured amount over the life of the investment.
▪ Same applies to shareholders/non-shareholders loans and interest
Structure
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ECIC PRODUCTS CONT.
BUYERS
CREDIT
Financial Credit
▪ Financial institution becomes involved
▪ Proceeds of loan paid to exporter
▪ Foreign buyer ( corporate or sovereign) undertakes to repay loan
▪ Cover up to 100% (PRI) and up to 95% CRI of loan ( Loan shall not exceed 85% of contract price)
Project Finance structure
▪ Export credit loan repaid from cash flows generated by the project that has been financed.
▪ Cover up to 100% (PRI) and 85% (CRI) of loan. (Loan shall not exceed 85% of contract price).
Structure
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LENDER(S)
ECIC PRODUCTS CONT.
CONTRACTORS
COVER
▪ To insure the Contractor against political intervention prior to shipment
▪ Pre-shipment political risk insurance
▪ Maximum ECIC liability = 85% of actual costs incurred
Structure
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SMALL MEDIUM
TRANSACTIONS
PROGRAM
Funding
parameters &
Advantages
▪ This is a corporate loan facility (financial statement analysis) for export contracts with a value of US$20m or less.
▪ The repayment tenor is 5yrs or less
▪ ECIC provides 100% Political Risk Insurance cover and 100% Commercial Risk Insurance Cover.
▪ Guaranteed rates of exchange available
▪ Quicker approval process than typical for the ECIC e.g. for project finance
▪ Simpler documentation
▪ Less security required
Borrower
Evaluation
Criteria
Exposure Level:
Less than USD 1
Million
▪ Recent
favorable trade
references
▪ Favorable credit
report
▪ Buyer in same
line of business
for at least two
years
▪ No material
adverse issues
▪ Management
Accounts with
positive
operating and
net profit in the
past fiscal year
Exposure Level: >USD 1
Million - USD 5 Million
▪ Favorable bank report
not older than twelve
month
▪ Buyer’s audited financial
statements with notes to
the financial statements
for the last two fiscal
years
▪ Buyer’s unaudited
financials with notes to
the financial statements
signed by the directors
of the buyer
Exposure Level: >USD 5
Million - USD 10 Million
▪ Buyer’s audited financial
statements for the last
three fiscal years complete
with notes to the financial
statements and an audit
opinion
▪ Positive operating and net
profit in the most recent
fiscal year
▪ Current ratio in the last
fiscal year is equal to or
greater than 1.25
▪ Free cash flow/debt
service ratio of at least 1.3
in the most recent fiscal
year
▪ ECIC exposure not exceed
40% of tangible net worth
of buyer
▪ Buyer/borrower in same
line of business for at least
three years
Exposure Level: USD 10
Million - USD 20 Million
Criteria
▪ Positive net cash from
operations in the last two
fiscal years;
▪ Total liabilities/tangible net
worth ratio in the last two
fiscal years is equal to or
less than 2.5;
▪ Free cash flow/debt service
ratio of at least 1.5 in the
last two fiscal years;
▪ ECIC exposure does not
exceed 50% of tangible net
worth at the end of the
preceding fiscal year; and
▪ Buyer/borrower in same line
of business for at least three
years.
ECIC PRODUCTS CONT.
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ECIC PRODUCTS CONT.
LEASE &
PHYSICAL LOSS/
RETURN OF
EQUIPMENT
▪ Cover relates to the integrity of items (owned/leased), which an export contractor uses for the performance of
their transactions abroad.
▪ Items should be owned outright by the export contractor or are subject to a financial lease.
▪ Cover is also available in the event that export contractor is unable to get the equipment out of the foreign
country once the project or work is completed.
▪ The requirement is that items to be insured should have adequate and effective property/engineering
insurance coverage against casualty and business risks.
The exporter obtains the following cover:
▪ Risks are assumed for at most 100% of the value of the equipment covered/ outstanding lease instalments as
given in the repayment schedule.
Eligibility of Cover
▪ The physical loss/ lease/ return of equipment insurance cover is recommended for:
▪ Owned/ leased capital goods/ equipment that are/ is mobile and excludes equipment stored or operated
underground in connection with mining operations.
▪ The cover can be made available either in isolation or in combination with ECIC’s export credit cover, namely
“Supplier’s Credit” or “Buyer’s Credit”;
Risks Covered
▪ This type of cover provides protection against losses or damage to equipment or loss of rental income from
equipment, where the cause of loss is due to political events
▪ This risk is significant when the instalments for debt servicing are to be paid directly by the buyer or the
participating financial institutions.
Percentage Cover
▪ Damage/ loss as a result of war revolution, riots and civil disturbances;
▪ Confiscation, expropriation and nationalisation of all or any material part of the business or assets of the
insured debtor
▪ Forced abandonment;
▪ Deprivation, i.e. loss of use or possession of items in the host country
▪ Cover could also be provided for other political events such as selective discrimination and arbitral award
default;
▪ Inability (by the lessee or lessor) to ship the equipment out of the host country due to restrictions or
prohibitions or any measure or decision of a government of a foreign country (the promulgation of a law, or of
an order; a decree or a regulation) that prevents, restricts or controls the export of the goods and/or any part
thereof out of the host country;
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THE ECIC VALUE PROPOSITION
The ECIC through its political and commercial risk insurance:
▪ Facilitates availability of funding for export trade: The ECIC
comprehensive insurance support is able to crowd in the lenders to provide
long term funding to buyers of South African goods and services.
▪ Provides capital relief to reduce cost of funding: Banks benefit from
100% political risk cover and up to 95% commercial risk cover which
reduces the capital charge held for these exposures under Basel III and
reduces the cost of funding.
▪ Facilitates access to markets: ECIC is open for cover in many countries
on the African continent and other emerging markets and some of these
markets remain untapped for our exporters and investors and are seen as
high risk jurisdictions.
▪ Facilitates deal origination: Through our business development initiatives
we seek to partner with clients (SA companies, investors, contractors,
financiers, advisors etc.) to bid for new contracts through joint bids and
expression of interest – by utilizing the “SA Inc” approach.
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THE ECIC VALUE PROPOSITION
▪ Support for small transactions: ECIC provides 100% political and
commercial risk cover for transactions that have a value of USD20m or
smaller to facilitate access to finance for benefit of the exporters and their
buyers.
▪ Enables diversified sources of funding: ECIC may support South African
and non-South African lenders – including banks, development finance
institutions, institutional investors etc. in support of eligible transactions.
▪ Flexible underwriting terms: ECIC may support tenors longer than 15
years and flexible/sculpted repayment terms to suit the cash flow profile of
the underlying transaction and is willing and able to restructure and extend
cover for projects in distress.
▪ Track record and claims payment history: ECIC has a good track record
of success for supported transactions and a reliable payment history for
those transactions that fail.
APPROVAL PROCESS
Process Flowchart
Application Form KYC and Anti- Bribery
Verification
Projects EXCO
CIC
Board
Project Evaluation
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Indicative
Premium Request
and initial screening
&
Supporting
Documentation
• Amounts equal to or below
<=US$20 m
Approval
Amounts above US$20m
<=$50m Approval
Amounts above US$50m
Approval
Transaction approval timelines vary and can
take between 2 - 4 months depending on
▪ The nature of the transaction e.g. Project finance
or PPP;
▪ Quality of information provided at application;
▪ Level of due diligence required.
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A PROVEN TRACK RECORD RIGHT ACROSS THE PRODUCT SPECTRUM
Zimbabwe
Makomo Resources
USD 10m
SMT ECIC backed
financing
Coal fired Plant
2013
Liqhobong
Diamond Project
USD 75m
ECIC-Backed
Project Finance
2015
Lesotho
Bulyanhulu Gold Mine
USD142m
Construction of
Carbon-in-leach plant
2013
Tanzania
Habesha Cement
USD 14.5m
Equity Investment
Investment Cover
2016
Ethiopia
Kippoi Copper Mine
USD 3.1m
Discounting
Receivables Facility
2016
DRC
Cenpower Generation
Company
USD 447m
340MW Combined
Cycle Gas Turbine
Power Plant
2014
Ghana
GPR Leasing Africa
USD 11.7m
Leasing of
locomotives for
use in Zambia &
Zimbabwe
2015
Mauritius
CenPower
USD 51m
Shareholder loan
& Equity
Investment Cover
2016
Ghana
Kuvaninga Electricity
USD 5m
Investment Cover
&
2016
Mozambique
Cenpower Generation
Company
USD 447m
340MW Combined
Cycle Gas Turbine
Power Plant
2014
Ghana
Mining Company
Katanga
USD7m
Supply of articulated
dump trucks
2014
DRC
Zomay Marine &
Logistics LImited
USD 75m
ECIC-Backed
Project Finance
2015
Nigeria
Mozambique
Kuvaninga Electricity
USD 40m Gas fired
Power project
2014
C&I Leasing LPC
USD 4.4m
Crew transport vessels
2013
Nigeria
Societe Nationale
Des Chemis De Fer
DuCongo
USD7.9m
Refurbishment , supply
& maintenance of
locomotives
2013
DRC
Bea Mountain
Mining Corporation
USD88m
Development of a
Gold open pit mine
2014
Liberia
African Hospitality Ltd
USD 12m
EPC contract for a
Local Hotel
2013
Ghana
IDC
USD 30m
Credit Line from
IDC to Agricultural
Bank of Zimbabwe
2012
Zimbabwe
Bilboes Pty Ltd
USD7m
Refurbishment of mine
And processing plant
2012
Zimbabwe
Zomay Marine &
Logistics LImited
USD 75m
Refurbishment of mine
And processing plant
2012
Nigeria
Best Natural Resources Deal in Africa
Liqhobong Diamond Mine transaction in Lesotho
Best ECA in Sub-Saharan Africa
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CONCLUSION
▪ As an African ECA with a strong footprint across the continent, the ECIC is
an invaluable strategic partner for doing business in Africa.
▪ South Africa has strong political and economic ties on the African continent
and other emerging market countries and these have been reinforced
through bilateral relations.
▪ The ECIC has been instrumental in supporting a wide variety of transactions
across many sectors of the economy with a successful track record
spanning over a 15 year period.
▪ The ECIC utilises waiting periods to conduct advocacy work during the pre-
claim phase in transactions to avert potential claims – the recent examples
being Sudan, Zimbabwe and Angola.
▪ When all else has failed, ECIC can be counted upon to pay the claim for
losses caused by the covered political risk events.
BUSINESS DEVELOPMENT TEAM CONTACT DETAILS
Portia Dube Export Credit Insurance
Corporation
Head Business Development
Block C7 & C8 Eco
Origins Office Park,
Highveld, Centurion
South Africa
Tel: +27 12 471 3838
Mob: +27 82 336 5057
Email: [email protected]
Zuko MdandalazaExport Credit Insurance
Corporation
Business Development Unit
Block C7 & C8 Eco
Origins Office Park,
Highveld, Centurion
South Africa
Tel: +27 27 471 3862
Mob: +27 79 729 7437
Email: [email protected]
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THANK YOU
Dr. Mbiya Baudouin Export Credit Insurance
Corporation
Business Development Unit
Block C7 & C8 Eco
Origins Office Park,
Highveld, Centurion
South Africa
Tel: +27 12 471 3875
Mob : +27 72 640 6271
Email: [email protected]
Paul MojalefaExport Credit Insurance
Corporation
Business Development Unit
Block C7 & C8 Eco
Origins Office Park,
Highveld, Centurion
South Africa
Tel: +27 12 471 3885
Mob: +27 83 408 3943
Email:
a
Tommy Motau Export Credit Insurance
Corporation
Business Development Unit
Block C7 & C8 Eco
Origins Office Park,
Highveld, Centurion
South Africa
Tel: +27 12 471 3899
Mob: +27 72 641 0722
Email: [email protected]
This presentation has been prepared and provided on a strictly private and confidential basis for information
purposes only. Without the express prior written consent of the ECIC, the Presentation and any information
contained within it may not be reproduced, copied or used for any purpose other than your evaluation of the
ECIC, or provided to any other person, except your employees and advisors on a confidentiality basis.
This Presentation does not constitute and should not be construed as, an offer, invitation or inducement to
obtain any products of the ECIC nor shall it or any part of it form the basis of, or be relied on in connection
with, any contract or commitment whatsoever.
The information does not constitute either advice or a recommendation regarding any of the ECIC products.
The Information provided from or through this presentation is general in nature and is not specific to you the
consumer or anyone else.
The information contained in this presentation is not intended to be a comprehensive description of the
ECIC’s product offering and many details which are relevant to particular circumstances may have been
omitted. When considering applications from South African registered institutions and other potential users
of the products, the ECIC will look at each case on its merits.
DISCLAIMER
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