Many countries, including China, the US, and the UK, have established export-import banks to provide trade finance, export credits, and credit insurance to domestic companies. Over a third of countries globally use export credit agencies to promote economic growth. These institutions offer concessional trade finance services to companies, aiming to increase domestic employment and production by facilitating exports.
South Africa has announced plans to set up its own export-import bank, but establishing a successful one is a different challenge. The government has a history of struggling to run complex businesses that require skill and good governance. The Land Bank, for example, has faced difficulties and relied on taxpayers to stay afloat. This background suggests that the private sector should play a leading role in the proposed export-import bank.
The private sector has the expertise, balance sheet, and governance structure to run an efficient export-import bank. A fiscally constrained government should focus on providing public goods where there has been market failure, rather than competing with the private sector. South African public entities, such as the Export Credit Insurance Corporation and the Industrial Development Corporation, already provide financial, risk, and guarantee services to exporters.
According to RMB's 2025 "Where to Invest in Africa" report, South Africa has a massive R1.3-trillion in untapped export opportunity, the highest on the African continent. A well-capitalized export-import bank, run competently without political interference, can unlock value in the value chain. The opportunity is even bigger when considering the reforms happening in the logistics sector to improve the country's competitiveness.
The government can learn from the shareholding structure of Business Partners Limited, a public-private partnership where private institutional investors own 80% of the equity and the government holds 20%. This structure has achieved great success and can be considered for the export-import bank. A government-led export-import bank will not gain the necessary market confidence.
The proposed export-import bank can complement existing facilities granted by banks to exporters and importers, providing more optionality for the sector. If launched, the bank must be done correctly, allowing experts to lead the way. The private sector's involvement is crucial to ensuring the bank's success and making a real difference in improving the country's competitiveness.
The South African government must make a decision on the institutional structure to pursue in setting up the export-import bank. With the right approach, the bank can help the country grab its untapped export opportunity and boost economic growth and employment. The government's intention to mobilize private capital with a private shareholding in the bank is a promising start.
Key points
- The private sector should lead the proposed export-import bank to ensure its success.
- South Africa has a massive R1.3-trillion in untapped export opportunity.
- A well-capitalized export-import bank can unlock value in the value chain and boost economic growth and employment.
