THE GOVERNMENT export finance initiative, intended to promote and encourage exports, is available to small/medium business (traders or manufacturers) who under normal banking practices would not qualify to secure extra financing from the major banks to execute export orders.
The department of trade and industry (DTI) is fully behind the scheme, Victor Mzimela of Credit Guarantee told FTW.
Out of approximately 320 export guarantees issued to the 11 participating banks, approximately R15m in paid and pending claims has been received.
Credit Guarantee was given a mandate by DTI to manage the scheme and provide guarantees on the exporters in favour of the banks, against which the banks would consider the granting of an export loan facility.
Following Credit Guarantee's notice to the banks that they should take part of the risk (10%), an FNB spokesperson told FTW the majority of the banks had announced the withdrawal of their support, pending the submission to, and outcome of, their respective credit sections' approval of the new terms and conditions.
Mzimela admitted the banks had voiced their complaints, particularly with regard to the arduous administrative and management functions required.
It is generally anticipated with first time exporters that they will be involved in disputes from the more experienced overseas buyers on quality. This is used as a lever to get discounts or refuse payment to improve their own cash flow, said one banking source.
Disputes on claims between the parties suggested the scheme was too loose and the banks were reluctant to continue because they were restricted to charging interest at prime - the risk/reward ratio was not viable.
The revised proposal reduces the percentage guarantee to the bank and calls for the banks to assure 10% of the risk.
Although it remains high risk we are currently reviewing the situation and focusing on implementing tighter procedures. Mzimela reiterated Credit Guarantee's undertaking to continue to support the small export market.
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