SA Franchise Warehouse

Trade Finance is pivotal for South’s Africa’s economic growth prospects

How Collateralised Trade Finance can help

Michael Naidoo

In the South African economy, much like many other developing countries’ economies, the importance of the manufacturing, mining and agriculture sectors cannot be underestimated as key factors to help build budding economies. As these industries can be credit-intensive, Collateralised Trade Finance (CTF) can offer unique and tailor-made solutions to counter possible financial constraints. 

Michael Naidoo, CEO of FNB Specialised Finance says, “CTF involves the financing of commodities, goods and products being exported, imported, bought or sold locally and internationally. It provides structured trade finance and innovative risk-hedging solutions for traders, importers and exporters, merchants buyers and sellers, intermediaries and agents.”

Cross border trade involves multiple risks and CTF structures and transfers the risks associated with trade financing from a business to parties that are better equipped to absorb these risks. Through tried and tested trade finance risk mitigation techniques, CTF can help a business mitigate cross-border, contractual and country risks. 

As the rise of entrepreneurship is crucial for South Africa’s growth, the economy needs to grow at a faster rate to create jobs, eradicate inequality and eliminate poverty. Businesses and entrepreneurs need to diversify efforts in order to help the economy grow and activities such as importing and exporting can certainly assist and CTF can  facilitate and finance such efforts.

Collateralised Trade Finance is extensive and provides innovative ways to solution specific trade financing requirements. Traditional trade finance products such as back to back letters of credit and guarantees, transferable letters of credit, equipment import finance, invoice and debtor discounting complement more sophisticated trade finance products such as inventory finance, collateral managed finance and agricultural process financing. CTF’s broad range of solutions ensures that a spectrum of specific trade finance requirements can be fully satisfied and associated risk suitably mitigated.

The National Development Plan outlines a long-term vision for South Africa that includes growing a more competitive and diversified economy. “CTF can support a business to benefit from cross-border and local procurement and sales, through the use of independent bank approved transport, insurance, inspection and freight forwarder service providers to assist the mitigation of trading, cross border, transit and ownership risks,” concludes Naidoo.