Financing still a major trade barrier

Trade financing is still perceived by exporters and importers as a major barrier to trade in the Southern African Development Community (SADC) region as the perceived risk leads to red tape, high interest rates and cash f low problems, amongst others. This was one of the key findings of a trade financing survey conducted amongst FTW readers last month. The 85 midto- high-level respondents were from South Africa (80%), other SADC countries (14.1%) and international countries (5.9%). Nirri Maharaj, director at Marine Container Forwarding, said that many global trade houses still considered Africa a huge risk. “As a result, there is too much red tape surrounding a finance agreement which often leads to cancellation of an order due to the time it takes for an approval.” A director at a South African financial institution commented anonymously that this perception depended on the country and the company shippers dealt with. “Also, when dealing with a bank, they generally tend to tie up a company’s cash f low to satisfy their security requirements,” he said. The main reason provided by respondents for this perception was that interest rates for trade financing were very high. Theo Bailey, director at Theo Bailey Customs Affairs Consultant & Brokers, said: “This is true to the extent that trading within the SADC requires selffinancing and extended periods of fund recovery.” Logistics manager for Rousant International, Patricia Couper, commented that although funding was provided by the various countries, receiving the actual funding without a letter of credit was extremely difficult. “Mauritius is an exception,” she said. The majority (40%) of respondents also don’t believe that trade conditions have changed for the better, compared to five years ago, though a higher percentage (33.3%) believe conditions have changed for the better in certain countries. Duncan Oliphant, director at Titan Collateral Services Limited, commented that conditions had improved in South Africa, with the number of local banks – with international partners – having mushroomed in recent years. Couper said that Rousant had seen improvement with regard to Mauritius, Zambia and Malawi. “However, with other SADC countries it has actually gotten worse.” Trade finance consultant Michael Schweitzer said that conditions hadn’t improved, noting that traditional providers of finance regrettably often did not have personnel with international trade experience and consequently would not provide finance.