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.