Export Credit Insurance Corporation of South Africa SOC Limited (ECIC) Presentation to the Portfolio Committee on Trade and Industry ECIC Corporate Strategic Plan 2017/18 – 2019/20 28 MARCH 2017

Ecic representatives Kutoane Kutoane – Chief Executive Officer Tel: 012 471 3800 or 082 604 6622 kkutoane@ecic.co.za Mandisi Nkuhlu –Chief Operating Officer Tel: 012 471 3800 or 082 906 3705 mnkuhlu@ecic.co.za

ECIC MANDATE ECIC mandate: Facilitation of SA export trade and cross-border investments with the rest of the world – regional bias Enabling Act is the Export Credit and Foreign Investments Insurance Act, 1957, as amended. Presently, under review by the dti.

LEGISLATIVE AND REGULATORY FRAMEWORK Companies Act Income Tax Act Public Finance Management Act and ECIC is designated as a Schedule 3B entity. Short-Term Insurance Act. In order to protect the interests of its clients and ensure that it is actuarially sound, ECIC is subject to the supervision and regulation by the Financial Services Board (FSB).

Ecic’s vision and mission We are committed to sustainable business growth through innovative solutions, operational and service excellence, business development and strategic partnerships. Mission Our 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.

Ecic’s vision and mission Values The Corporation has five values being: Accountability – we accept transparency and responsibility for our decisions and actions. Excellence – We are committed to the highest level of performance through continuous improvement of our skills and business practices. Innovation – We encourage open-mindedness and support innovation and the development of new ideas and processes for the continued improvement of our Corporation. Integrity – We strive to conduct every aspect of our business with honesty, integrity, and fairness. Teamwork – We work together as a team internally and collaborate externally with our stakeholders and customers. We appreciate that as a team, we can achieve much greater things than as individuals. These values are reinforced by the Code of Ethics and Business conduct “the Code” and are also reflected in our policies and procedures.

Key strategic goals Improve knowledge & skills; In the effort to achieve its mission, the ECIC is driven by ten (10) strategic goals: Improve knowledge & skills; Improve product offering; Increase strategic partnerships; Improve business processes; Improve communication and stakeholder/customer management;

Key strategic goals cont Improve Business Development; Decrease Cost to Revenue Ratio; Increase Revenue; Increase Capital Base; Increase in Stakeholder/Customer Satisfaction.

Improve knowledge & skills Output Medium Term Targets 2017/18 2018/19 2019/20 Skills Audit and implementation of annual training plans (key areas of focus will include international trade finance, investments etc) 90-100% implementation of training plan for 2017/18 90-100% implementation of training plan for 2018/19 90-100% implementation of training plan for 2019/20 Total Expense Budget (Rm) R10.8m R12.9m

Improve product offerings Output Medium Term Targets 2017/18 2018/19 2019/20 Develop and/or review products (the anticipated transition into an Eximbank would widen the scope of product offering) 1 new product developed Review product offerings in terms of relevance to customers Implement revised products Total Expense Budget (Rm) R9.2m R9.9m R10.8m

Increase strategic partnerships Output Medium Term Targets 2017/18 2018/19 2019/20 Leverage existing partnerships to generate knowledge sharing initiatives (This will encompass sharing info on new products, pricing methodologies, training sessions with other Export Credit Agencies etc.) 8 knowledge sharing initiatives Total Expense Budget (Rm) R8.6m R9.3m R10.1m

Improve business processes Output Medium Term Targets 2017/18 2018/19 2019/20   Implement new business systems plan 100% Implementation of the MIS System 40-60% adoption, monitor usage 60-80% adoption, monitor usage Total Expense Budget (Rm) R9.8m R10.5m R11.4m

Improve communication and stakeholder/customer management Output Medium Term Targets 2017/18 2018/19 2019/20   Improve and enhance brand visibility Implement 80 - 100% of 2017/18 marketing and communications campaigns Implement 80 - 100% of 2018/19 marketing and communications campaigns Conduct new survey Baseline to be determined by survey Implement 80 - 100% of 2019/20 marketing and communications campaigns Total Expense Budget (Rm) R19.8m R23.5m R27.4m

Improve Business Development Total Expense Budget (Rm) Output Medium Term Targets 2017/18 2018/19 2019/20 Research and identify new opportunities (country/sector research studies to identify business opportunities for SA companies) 2 research reports to identify new opportunities Total Expense Budget (Rm) R12.7m R13.5m R14.5m

Decrease Cost to Revenue Ratio Output Medium Term Targets 2017/18 2018/19 2019/20 Drive revenue growth and cost containment to maintain Cost to Income ratio below 35% Develop appropriate reports to track the cost income ratio on a periodic basis Management Accounts Budget Variance Reports Cost to Income ratio not exceeding 35% Total Expense Budget (Rm) R79.0m R82.4m R83.3m

Increase Revenue Output Medium Term Targets 2017/18 2018/19 2019/20 Increase premium revenue – project application approvals USD 400m– USD 500m  USD 450m – USD 550m USD 500m-USD 600m Execution of the investment strategy Perform within 3% of the weighted ZAR and USD portfolio benchmark as per the IPS* Perform within 1,5% of the weighted ZAR and USD portfolio benchmark as per the IPS* *Investment Policy Statement

Total Expense Budget (Rm) Increase Revenue cont Output Medium Term Targets 2017/18 2018/19 2019/20 Achievement of profit target Achieve 90% of budgeted NPBT NPBT: Is Net Profit Before Tax. It excludes Salvages, It is to be calculated on the Rand functional currency, i.e. foreign currency gains or losses are excluded Total Expense Budget (Rm) R50.8m R54.7m R57.9m

Total Expense Budget (Rm) Increase Capital Base Output Medium Term Targets 2017/18 2018/19 2019/20 Increase in capital base (this is key in enhancing ECIC’s underwriting capacity and driving its mandate) 5% increase in equity Total Expense Budget (Rm) R199.8m R300.0m R49.5m

Increase in Stakeholder / Customer Satisfaction Output Medium Term Targets 2017/18 2018/19 2019/20 Improved customer Satisfaction Implement 90%-100% survey findings Conduct survey Implement 80% new survey findings Total Expense Budget (Rm) R7.5m R8.1m R8.9m

Alignment with government objectives NDP Target the dti Strategic Outcomes-Orientated Goals ECIC Goal / Outcome Exports (as measured in volume terms) should grow by 6% a year to 2030 with non-traditional exports growing by 10% per year Facilitate transformation of the economy to promote industrial development, investment, competitiveness and employment creation Increase ECIC’s product range to cover customer needs, address market gaps and remain competitive Proactively attract business from new and existing customers to facilitate more exports and cross border investments South Africa’s trade with regional neighbours should increase from 15% of our trade to 30%   Build mutually beneficial regional and global relations to advance South Africa’s trade, industrial policy and economic development objectives. To access new markets through collaboration by leveraging on our partners resources and knowledge base as well as removing constraints

Alignment with government objectives NDP Target the dti Strategic Outcomes-Orientated Goals ECIC Goal / Outcome   A capable and effective state, able to enhance economic opportunities, support the development of capabilities and intervene to ensure a rising floor of social rights for the poor Promote a professional, ethical, dynamic, competitive and customer-focused working environment that ensures effective and efficient service delivery To develop a competent and competitive workforce that is able to deliver on the business strategy and the achievement of ECIC’s objectives. To access new markets through collaboration by leveraging on our partners resources and knowledge base as well as removing constraints. Improve Business processes to promote efficiencies in delivery of services and products cost effectively

Facilitate Export trade and CROSS- BORDER investments GLOBAL TRADE OUTLOOK KEY CHALLENGES The outcome of the US elections, BREXIT and the fragility within the EU has made the global trade outlook more uncertain. The likelihood of an increase in trade protectionist measures could lead to trade disputes and possible “trade wars” among major trading powers. This could have a significant impact on trade prospects for South Africa and sub-Saharan Africa. Downward growth prospects in developed economies, slow global investment and uncertainty about trade policy in the US and the EU does not bode well for global economic prospects. Fiscal vulnerabilities and current account deficits remain very high for commodity-dependent sub-Saharan economies. Falling capital inflows put pressure on currencies and reserves.

Facilitate Export trade and cross - Border investments IMPACT OF ECIC ON THE SOUTH AFRICAN ECONOMY FOR THE PERIOD 2013/14 – 2015/16 Total project expenditure on SA content R6.9 billion GDP Impact R5.4 billion Employment impact Annual average 20,520 man-hours Tax revenue impact R1.4 billion

SOUTH AFRICAN EXIMbank The Shareholder is considering the conversion of ECIC into a fully fledged SA Eximbank The business case due for completion in June 2017 in collaboration with external consulting experts Will require new legislation – currently being considered by the dti

AFREXIMBANK The dti and National Treasury are supportive of South Africa (ECIC) taking equity in the African Export Import Bank (Afreximbank) in order to promote expansion and diversification of Africa’s trade. Based on the outcome of the due diligence exercise, the ECIC Board of Directors decided to recommend US$40 million paid-up equity investment in Afreximbank. The requisite Ministerial approval is still pending. ECIC regards this investment as being a major catalyst for the collaboration with Afreximbank in promoting intra-regional trade.

Projected Portfolio Concentration kept within risk appetite level

Budget 2017/18 – 2019/20 ECIC, as a schedule 3B entity is run on a financially self-sustainable basis by generating its revenue stream from premiums and investment income. ECIC does not receive transfer payments from the Government to fund its operations. The projected growth in ECIC’s capital base will enhance its capacity to underwrite more insurance and pursue its mandate. The expansive approach in the budget such as the increase in operating costs and staff complement is to fund and enhance capacity to implement the corporate strategy and support expansion of product offerings.

Budget 2017/18 – 2019/20 The projected average annual gross premium over the next three years of the strategic plan is R537m. Operating expenses will average R189 million pa, which represents a growth of 18% over the budget period. Claims incurred is anticipated to fall by 122% mainly due to a positive claims outlook. Total assets will increase by 7% to R10.3 billion.

Capital expenditure Planned capital expenditure(CAPEX) amounts to R2.5 million over the budget period. CAPEX spend is mainly on IT infrastructure to modernise business processes and enhance operational effectiveness and efficiency. With increased staff complement the ECIC is looking for new premises that will cater for its growth over the next 5 years and may opt to purchase an office building during the 18/19 financial year. However, in the current budget ECIC has continued with the rental lease option and the option to buy the building and relocation costs will be considered as part of the budget revision exercise next year.

Projections of revenue, expenditure and borrowings

Projections of revenue, expenditure and borrowings   2017 R'000 2018 R'000 2019 R'000 2020 R'000 STATEMENT OF FINANCIAL PERFORMANCE Profit Before Tax (before CSI) -1,551,925 888,694 925,555 624,405 Corporate Social Investment (3%) -21,239 -22,552 -23,131 -19,715 Profit Before Tax -1,573,165 866,141 902,424 604,689 Taxation 440,486 -242,520 -252,679 -169,313 Profit/(Loss) After Tax -1,132,678 623,622 649,745 435,376

Concluding remarks ECIC is committed to work towards a prosperous and equitable South Africa, a better Africa and a better world. Working together as South Africa Inc. we can achieve more exports and broader economic development. ECIC is committed to contributing towards radical economic transformation of the SA economy.

THANK YOU