Traders must play by Africa’s rules when managing risk

When it comes to cross-border

trade in Africa, South African

companies need to appreciate

the various jurisdictions,

insurance legislation and

regulations that are at play.

This was the cautionary

advice from Norton Rose

Fulbright director Peter Lamb

when he addressed a joint

FTW/JCCI business breakfast

on Logistics in Africa in

Johannesburg recently.

He said many African states

were imposing their own

conditions on traders, such as

having to insure goods locally

with a local underwriter/

broker.

“Different international

conventions also work

differently in different

African jurisdictions. Some

international conventions

have not been ratified, while

some African states have made

local amendments to these

conventions,” he said.

African jurisdictions can

also be highly formalistic,

meaning one has to provide

originals of every document

being relied upon.

South African companies

looking to do business in

Africa should furthermore

familiarise

themselves

with the

continent’s

unique

geography.

“Plan ahead

and know the

route. Bridge

strikes on

the continent

are all too

common,

because route

surveyors

are not being

appointed,” he

cautioned.

Parties also needed to

understand what types of

transport modes were being

used, as each form of carriage

had its own risks and could

be governed by its own

international liability regime.

“When developing a risk

matrix, consider it from each

angle ie, from the seller, the

buyer, the banks and the

underwriters. Also, consider

the nature of the cargo, be it

containerised, bulk, breakbulk,

dangerous

goods,

abnormal,

perishable or

frozen goods.”

Two ways to

manage risk

from a legal

perspective

are through

contracts

and through

insurance.

There are four

main issues

to consider;

the contract

of sale; the logistics contracts;

the banking and finance

arrangements and the

insurance policies.

“When considering your

contract of sale, you need

to understand and focus

on when the risk is passing

between the purchaser and

the seller. Whenever anyone

talks about risk, they need

to have a theoretical and

practical understanding of the

incoterms.”

He added that the passing

of risk did not mean the

passing of ownership. “Identify

exactly who is obliged to do

what in terms of liabilities

between the parties. Each

party in the logistics chain

should be governed

by a contractual

relationship.

Understand whose

obligation it is to

do what, what the

risks are, and who

bears them,” he

added.

All parties need

to understand who

makes payment, if

someone is using a

Letter of Credit and

whether or not that

payment is linked

to the logistics

arrangements.

He says many

companies are also

entering into contracts

with little attention paid to

Arbitration, Choice of Bill and

Jurisdiction clauses.

“Don’t just rely on

logistics service

providers as there

are too many roleplayers

in the

chain,” he added

INSERT & CAPTION

Whenever anyone talks

about risk, they need

to have a theoretical

and practical

understanding of the

incoterms.

– Peter Lamb