Structured packages add financial muscle for traders

11 Feb 2000 - By Staff reporter

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Different payment
mechanisms
developed to suit
individual requirements

STRUCTURED TRADE packages, developed to provide different payment and financial instruments to suit individual requirements, enable traders who have the expertise but not the financial muscle to undertake larger deals.
Standard Bank's head of specialised trade, Lloyd Caughey, explained: In a typical transaction, if an agent or distributor in South Africa identifies an international buyer for a specific product which has been sourced from a supplier in South Africa, the bank can employ back-to-back financial instruments.
If the exporter does not have sufficient facilities with his/her bank to issue a letter of credit (L/C), but receives an L/C from the overseas buyer, the inward L/C would act as the security of payment. Against this the bank would back-to-back the credit to the supplier of the goods; the goods would be shipped and the supplier would draw against his domestic credit. The agent or distributor's bank would draw against the international credit. The difference between the two would be the agent's commission.
Apart from reducing the need for collateral for banking facilities, the bank would also
minimise the agent's risks.
In addition it enables the trader to conceal the identity of the supplier and mask the original price of the goods.
Standard Bank has ten International Business Centres (IBCs) throughout the country staffed by international trade managers who can offer support and advice to traders wishing to establish the most appropriate and cost-effective packages
for their export transactions,
says foreign trade promotion manager, Miriam Bassa.
Supported by the foreign trade promotion unit and with the introduction of a trade-related web site, the centres are also geared to provide country-specific information in the form of
trading profiles, bilateral trade statistics and import/export publications.