a keen interest in. I also think I bring experiences and lessons I have learned in my previous role, which I can put to good use. While it is early days, I am really enjoying the challenge and have found a good team in place at the ECIC that are focused on delivering results for our stakeholders.
How did you occupy your time during your first 100 days in your role?
Generally when one assumes a new leadership role you find yourself coming in from the cold. You quickly have to immerse yourself into your new organisation whilst absorbing a lot of key information. This can make transitioning into your new role a fairly daunting experience. I have been fortunate in this regard because prior to commencing my official duties I was able to meet with senior executives of the organisation and also some board members. This afforded me the opportunity to get a sense of the environment the ECIC is operating in and what they viewed as important strategic issues we have to address in the future.
It proved enormously beneficial to me. By the time I assumed my official responsibilities I already knew my team and had a fairly good grasp on how the organisation was going about delivering on its mandate. During my first few months I then pursued a two pronged approach. On the one side I was becoming acquainted with the organisational fabric, internal dynamics and assessing how we interpret our core purpose in terms of the contribution we make to grow our country’s economy. I did this with the view to determining where I can best make meaningful contributions going forward. On the other side I made sure to fully engage and understand our stakeholders, their view of challenges and opportunities. I cast the net as wide as I could; utilising stakeholder roadshows, direct engagements with exporters, meeting with role players in the manufacturing sector - who are often key exporters - and consulting with our principals in government. I think this has given me a good understanding of what is on the ECIC’s horizon and where I need to focus my attention.
Where do you think the ECIC can make a contribution to South Africa’s long term economic growth?
At executive and board level we have had a number of discussions with respect to the avenues we believe the ECIC can pursue to support economic growth. One of these discussions revolves around the role we can play in building a competitive and vibrant small and medium exporter base. It was interesting for me to observe when I attended the Berne Union AGM, that one of the major topics of discussion amongst countries was the need to develop the SME sector. There is clearly a focus on the development of this sector around the world and export credit agencies (ECAs) are attuned to this.
From our perspective, as a state owned entity, it speaks to our mandate not only in terms of black economic empowerment and the various instruments designed to achieve this. Growing SMEs also speaks to the broader transformation and diversification of our economy that will be absolutely necessary if we are to achieve sustainable growth. So finding ways to make a constructive contribution in this space is high on our agenda. Another one of our challenges is that our export community does not have the deep pockets that some other nations have; particularly when you look at the BRICS grouping there are some countries that have huge financial resources, such as China for instance.
This means we have to be clever about the way we tackle the export market. We need to look at the capital goods and services we can export and ensure where we have key competencies, which are in demand; we must make the most of those opportunities. In this respect, I believe as ECIC we have an important information dissemination role to play. A recent study we have undertaken showing where there are trade and investment opportunities on the African continent in markets that are accessible to South African business, is the type of information we believe we need to share with our exports.
Which of the risks you insure are in your opinion, the most important on the African continent?
One can face a myriad of risks on the continent. It can range from political risk, to the dangers of war, the insecurity of poorly regulated markets, corruption, currency fluctuations and liquidity challenges. This is not to say things are bleak on the continent, opportunities abound. However, each market has its own challenges and we have the knowledge and experienced people that can help exporters mitigate these risks.
There is clearly a scramble on the part of big business the world over to provide products and services to the African continent. Do you think in the face of all the inbound business South African companies can achieve export driven growth?
I think it’s pretty clear that the spectacular growth rates of over 5% that has been achieved for close to a decade across the continent, has sent a clear signal to the rest of the world that Africa is the next growth frontier. This has brought with it intense competition and it is starting to become apparent businesses cannot be successful in these markets on their own. They need the support of their government and in this regard we are also stepping up our assistance. The bouquet of incentive offerings that the dti has developed to assist exporters is evidence of this. As part of this support we for instance offer the interest rate makeup mechanism, to support our banking sector when they make loans to our export sector. This allows our exporters to capitalise on their technical expertise with the added benefit of being reasonably priced in international terms.
I think it is also important to note that as SA Inc, we are building our competitive offering around three pillars. It is our technical expertise, underpinned by a financial solution that is wrapped together by an insurance offering that takes care of the risk component. When you combine a technical, financial and insurance offering in a product, you have a strong competitive advantage and I believe we can make headway in the market.
In which area/s do you think will the next growth phase in ECIC’s portfolio take place?
Currently we are pretty long on mining; over 40% of our portfolio is in this space. We are however cognisant of the fact that we have some very good technical skills competencies in other areas; and we need to capitalise on this. So we are pretty focused on assisting to diversify the export basket. If you consider that on the African continent there is a strong consumer market that is growing rapidly, the magnitude of the opportunities in manufacturing quickly becomes apparent.
Can you elaborate on the Solvency Assessment Management (SAM) project - what it is, how is it being implemented and how it affects ECIC’s business?
Like any other financial institution we also operate in a regulated environment where the regulators in the insurance sector are focused on safeguarding the interests of policyholders. The SAM project was designed along the Solvency II programme of the European Union for short-and long-term insurers. As a short-term insurer regulated by the Financial Services Board, we are now also under the scope of this initiative. The objective is for this to become the key risk assessment management programme for all insurers and we have been participating in forums to make sure we understand how the capital adequacy, risk assessment and governance and reporting requirements will impact on us.
It will require some changes in the way we do things and we will have to bolster our capabilities, especially on the actuarial side of the business. From this year onward we are going to be working hard at making sure we get our reporting right in terms of SAM so that when 2016 comes around, we will be able to meet the new Solvency reporting requirements.
Which opportunities do you see developing as a result of the green economy?
The potential of the green economy is something that I find very exciting. As a country we’ve made great strides in this field, yet we are quite modest about our achievements. We have a lot of technical expertise we can leverage and one simply has to look at the milestones in terms of green buildings, as well as solar and wind energy generation, to realise we have a lot to offer in this regard. In fact, some of the biggest projects we are currently looking at on the continent are where countries are trying to bring green energy into their national energy generation networks. It is a field where I believe we can make a big contribution based on the knowledge we have gained from our own experiences.
What do you think is ECIC’s main role in the market place?
I have recently said to my colleagues that our primary role is to facilitate economic growth in the country by supporting capital export industries. It is very important to keep this perspective in mind because one can easily look at the ECIC and say all we do is mitigate risk. That is a superficial assessment; we are an important link in helping government provide our exporters with an competitive edge in the international markets. To contextualise this we have in recent years, through our work, contributed about R11,8bn cumulative to the GDP of the economy over the past ten years. It is therefore of vital importance that we continue to grow our offerings and support our local industries. I have recently had discussion with the Minister of Trade and Industry, and he made it clear that all role players in this sector have to work hard at ensuring that the revitalisation of our export industries becomes a reality.
How competitive is SA in terms of global trade compared with SADC countries, African countries and BRICS countries?
Mining, upstream and downstream oil and gas operations, energy generation and the creation of world class infrastructure are areas that immediately come to mind. In these fields our technical and engineering expertise is very good. These are areas that we need to take a closer look at because our competitive advantage in these areas is high standards and I think through consistent innovation, we can remain competitive in these areas.
Within the BRICS grouping; India is strong in ICT services, China is at the forefront of manufacturing and Brazil is strong in the resources field. I think there is a lot we can learn from each other in BRICS, even if we are similar in terms of our key exports, as we are with Brazil in terms of our mining activities. Our one big advantage is that we are based on the continent and our government is in constant dialogue with countries across the continent with a view to exploring opportunities for our companies.
What are your strategic objectives at the moment?
There are a number of objectives we have set for ourselves. One of the key things we need to do is lift the profile of the ECIC. I have observed amongst the business community that many of them don’t know of the existence of the ECIC and if they do, they are often not sure how working with an ECA can benefit their organisation. We therefore need to move much closer to the markets we serve so that they can understand and appreciate what it is that we can do for them. To give effect to this we have launched an intense information dissemination campaign which is being driven by our business development unit.
Another objective that is very important to us is the enhancement of our internal capacity. We want our technical and professional teams to be more responsive to client needs in the ever changing global economic environment, particularly as far as export finance is concerned.
What legacy do you hope to leave behind at the ECIC?
I would like to look back and see that we have taken the ECIC into a position of respect and prominence in terms of ECAs on the African continent and global markets. In addition if we have established our position as an important foil in facilitating economic growth for the country and we are widely recognised for the role we play in this regard, I’ll know that my ambitions for the organisation have been achieved.
*The Berne Union was founded in 1934 by private and state export credit insurers from France, Italy, Spain and the UK. Today, with 79 member companies from around the world it has grown to be the leading global organisation for the export credit and investment insurance industry.
In this edition of CEO magazine we speak to Kutoane Kutoane, the Chief Executive Officer of the Export Credit Insurance Corporation. He shares his perspectives on the role exports can play in driving economic growth, how we can capture markets, the competitive advantage our technical expertise offers and the ECIC’s contribution to the export field.
You spent several successful years leading the Gauteng Partnership Fund. What prompted you to take on the role as the CEO of ECIC?
I have always had an interest in global economics, markets and the impact movements in these environments have on a country’s balance of payments and economy. Therefore, when this opportunity presented itself, I knew I had to grasp it because it would allow me to move into a field I have always had
by Valdi Pereira