Solutions to unlock the value chain for importers
• Bank’s Investec For Business division was born out of the need to better service the mid-market, writes Lynette Dicey
The process of importing is a complex one fraught with potential risks and pitfalls. Businesses need to factor uncertainty around local and global market conditions, currency fluctuations, high import tariffs, onerous customs duty requirements and transport and logistic delays.
“External factors can have a significant impact on the ultimate cost of landing imported products,” says Antony Meltzer, head of Business Development for Investec For Business.
“To remain cost effective and viable importers are having to be much more efficient in terms of their supply chain. Essentially, it’s about hedging all risks when you bring products into SA including hedging the costs of transport and freight.”
Investec’s Import Solution has focused on developing an end to end import solution which allows for a single point of contact in the import process, effectively removing the administration and complexities associated with managing the import procedure and eliminating all risks in the supply chain, particularly for mid-sized corporates.
“We specialise in managing all the underlying components as efficiently as possible, reducing transit times and managing the freight and ancillary costs more efficiently. In addition, we endeavour to provide the correct mix of funding so that the client can access the appropriate finance at the right time, including debtors and other asset-based facilities,” he says.
“Essentially, we manage the entire process on behalf of our clients from confirming and tracking orders, hedging foreign exchange risk and managing logistics, to providing the growth funding the client needs.”
The bank’s Investec for Business division was born out of the need to better service the mid-market. “The mid-market has traditionally been an underserviced area,” explains Meltzer. “In response, we have developed a range of bespoke solutions for this sector of the market, rather than the traditional vanilla options they have usually had available to them.”
Forex is only one component of the risk facing a mid-sized business which imports or exports product. While most banks offer complex forex products, Meltzer points out that in reality, mid-sized companies often don’t have the capacity to manage complex forex products with the result that they don’t get much value out of it.
Increasingly, the mid-market is recognising that by making use of more bespoke and niche solutions, where aligned professionals can manage certain aspects on their behalf, will translate into a costeffective solution. Allowing an aligned third party to focus specifically on managing debt, supply chain and treasury functions in one place eliminates inefficiencies that the client in many cases is not able to quantify.
Managing debt responsibly, explains Meltzer, is typically used by established businesses for growth, as the cost of equity is significantly more expensive and the correct debt and equity mix is imperative for shareholders to maximise their returns. Freeing up cash locked in their working capital cycle goes a long way toward releasing value to shareholders.
For import companies to be sustainable in the current environment requires they move products at the lowest possible price.
“At its very essence our solution offers an outsourced import strategy that delivers on all the necessary logistical requirements while at the same time supporting the clients’ business growth strategy. It offers total visibility of the import process, providing all the relevant information on a silver platter so clients can make better decisions based on the most up-to-date information.”
Uptake on Investec For Business’s bespoke solutions is positive allowing clients to benefit from the bank’s efficiencies and economies of scale when it comes to freight and transport costs. These benefits are then passed on to clients. Managing issues such as capacity at the point of origin also becomes the bank’s problem. In recent weeks, for example, the bank has had to manage capacity issues emanating from production delays at Chinese factors as a result of the Coronavirus outbreak.
Technology is having a positive impact in this regard, providing both importers and exporters with more visibility than ever before in terms of where products currently are during the transit process. Greater visibility is provided by Investec For Business through its unique cloud platform, allowing the client to view everything online from the contents of their container to the location of their ship, to the clients projected future cash flow requirements.
All of this reduces risk, allows for improved monitoring, and a better understanding of cost implications, as well as better forecasting.
“In today’s volatile marketplace, importers have to be agile, innovative and find ways to be cost-efficient if they hope to be sustainable and grow their businesses. This requires unlocking the value chain and finding the right partners that are able to both manage the import process and provide the most appropriate form of trade finance,” he says.
FOR IMPORT COMPANIES TO BE SUSTAINABLE … REQUIRES THEY MOVE PRODUCTS AT THE LOWEST POSSIBLE PRICE