Fi­nanc­ing Soft Com­mod­ity Ex­port and Im­port Trade Flows in Africa

The Africa Report - - EXPERT ADVICE -

BIC-BRED (Switzer­land) SA is the sub­sidiary of BRED Group ded­i­cated to pro­vid­ing Com­mod­ity Trade Fi­nance for trad­ing com­pa­nies, in par­tic­u­lar the ones active in the field of soft com­modi­ties. In Africa, the Bank of­fers a broad range of fi­nanc­ing cover­ing var­i­ous stages of the sup­ply chain such as stock fi­nanc­ing at port of load­ing, stock f inanc­ing at port of des­ti­na­tion, re­ceiv­able fi­nanc­ing.

Despite a di­ver­sity of po­lit­i­cal and eco­nomic sit­u­a­tions in Africa, some ma­jor trends can be iden­ti­fied.

African play­ers in the agribusi­ness in­dus­try are in­creas­ingly fo­cus­ing on value added cre­ation. Flour milling is a good ex­am­ple: this in­dus­try has been de­vel­op­ing very rapidly over the past years and will con­tinue to ex­pand in the fu­ture in or­der to meet de­mand com­ing from fast-grow­ing pop­u­la­tion and ur­ban­iza­tion of life­styles. Im­ports of feed­stuff are also on the rise driven by live­stock and fish farm­ing in­dus­tries.

On the ex­port side, we ob­serve that African coun­tries’ in­te­gra­tion into world’s trade flows is be­ing achieved by pro­mot­ing fair trade and trace­abil­ity, es­pe­cially in the co­coa and cof­fee busi­ness. Such evo­lu­tion has been driven by grow­ing de­mand from ma­jor consuming mar­kets as well as lo­cal play­ers’ agenda to fo­cus on niche mar­kets with high-value added prod­ucts.

What are the main chal­lenges for fi­nanc­ing soft com­mod­ity trade flows in Africa?

As a Bank, our main task is to pro­vide our Cus­tomers, i.e. trad­ing com­pa­nies, with trans­ac­tion al, se­cured and self-liq­ui­dated Com­mod­ity Trade Fi­nance. Fi­nanc­ing starts when the goods are pur­chased from the sup­plier. These goods are pledged in favour of the Bank, which is even­tu­ally re­paid by the pro­ceeds is there­fore cru­cial for the Bank to se­cure ad­e­quately this last phase, hence the im­por­tance of hav­ing good con­fir­ma­tion ca­pac­ity for let­ter of credit and/or draft aval­ized by lo­cal banks.

We have teams ded­i­cated to mon­i­tor­ing fi­nan­cial in­sti­tu­tions. They have de­vel­oped a strong ex­per­tise and built a wide net­work of part­ner banks through­out Africa over the years. They also co­op­er­ate with BRED Group’s sub­sidiary in Dji­bouti, BCI Mer Rouge, and its rep of­fice in Ad­dis-abeba.

In ad­di­tion, Com­mod­ity Trade Fi­nance im­plies on­go­ing mon­i­tor­ing of the fi­nanced trans­ac­tions, in­clud­ing

In a fast-paced chang­ing en­vi­ron­ment, the Bank needs to un­der­stand the un­der­ly­ing phys­i­cal mar­kets and their global trends to have ef­fec­tive risk management and of­fer tai­lor­made prod­uct.

the coun­ter­par­ties in­volved (sup­pli­ers, ware­house­keeper, for­warders), as well as reg­u­lar thor­ough mar­ket anal­y­sis. Po­lit­i­cal risk re­mains a pa­ram­e­ter to be taken into account, since gov­ern­ment in­ter­ven­tions can create ma­jor mar­ket dis­rup­tions.

Paul GUERY, Re­la­tion­ship Man­ager CTF BIC-BRED (Suisse) SA

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