Short-term insurance product extended to SMMEs

The State-owned Export Credit Insurance Corporation of South Africa (ECIC) has significantly expanded its mandate to support manufacturing projects, with a notable enhancement through the establishment of the Export Passport Insurance Facility.

This initiative underscores the ECIC’s commitment to fostering growth in the manufacturing sector and extending its support to small, medium-sized and microenterprises (SMMEs), says ECIC short-term insurance senior underwriter Ntombifuthi Mdluli.

Since the inauguration of its Short-Term Insurance business in July 2022, the ECIC has successfully concluded several transactions within the manufacturing sector.

Notable among these is the approval of cover for a specialist steel pipe manufacturer for R50-million with an eight-month tenor for exports to Zambia.

Similarly, a mineral processing plant supplier received coverage of R42-million for a six-month tenor for exports to Australia; and an office furniture manufacturer was granted a cover of R13-million for a six-month subcontract, with Nigeria as the destination country.

Mdluli adds that, in a strategic move to widen its service range, ECIC now accommodates SMMEs under an expanded mandate which includes consideration for smaller projects with durations of less than two years, having introduced the Trade Credit Insurance.

This product allows SMMEs to engage in credit terms directly with foreign buyers, thereby enhancing trade opportunities. “It is especially relevant for business-to-business trade in high-risk regions,” Mdluli explains.

The ECIC’s Short-Term Insurance business unit is in the process of implementing its strategic goals, including system enhancements to handle the volume of short-term transactions and the procurement of insurance brokers.

Meanwhile, the Export Passport Insurance Facility, established with a fund of $80-million, is designed to bolster black industrialists, SMMEs, and exporters across all short-term insurance products.

The facility is projected to grow to $500- million over the next five years.

Mdluli notes this facility aims to simplify access to insurance by offering more relaxed criteria requirements, without altering the existing underwriting criteria.

However, she notes that on a case-by-case basis, ECIC will consider special considerations including 100% political and commercial cover, acceptance of financial statements from newer businesses, potential waiver of collateral requirements for bond products, nominal application fees, and institutional support for underwriting and policy documentation processes.

“It’s critical for entities to adhere to onboarding criteria, which include compliance with the Protection of Personal Information Act and Know-Your-Customer requirements,” Mdluli notes, highlighting that the ECIC upholds distinct financial underwriting criteria, tailored to the requisite level of cover.

The organisation’s technical units collaborate extensively to ensure comprehensive evaluation and support of transactions, she adds.

This due diligence aims to provide reassurance on the viability of transactions.

Looking ahead, the ECIC is actively seeking greater exposure to reach more markets, especially with its expanded mandate, Mdluli says, noting that it is engaging with government and financial institutions and participating in exhibitions to connect with potential clients.