Financing Soft Commodity Export and Import Trade Flows in Africa
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