Sentiment upbeat, but still challenges ahead
• Economic slowdown in recent times has forced exporters to diversify and explore new markets
While the end of 2017 and beginning of 2018 have seen improved economic conditions and market sentiments, SA’s economy is still depressed with a projected GDP growth of 1.1% for this year, which is the third lowest of 43 countries in sub-Saharan Africa, according to Arthur Ansley, head of trade finance at ReichmansCapital.
“The only countries behind us in projected growth are Zimbabwe and Equatorial Guinea,” he says.
Ansley says while low imports are a function of depressed economic activity, the weak rand, although strengthening recently, has helped the export side of the equation.
“Resurgent commodity prices have also helped exports. Another positive in the local international trading sector is that there have not been too many business failures in our client base which reflects that businesses are managing their cash flows and sustainability.”
Although ReichmansCapital has seen a growth in its trade finance business, Ansley does not believe it is a result of market growth; rather he contends that it is a function of gaining market share from other players — the commercial banks in particular.
However, he says with the rand strengthening and the business confidence index improving, markets, companies and individuals are more upbeat.
“Nevertheless, while the investment climate has improved, by how much economic activity has recovered is difficult to say.
“Much of our business is retail based with many clients importing goods to sell in to this sector, which itself is under pressure with consequent pushback on input pricing.
“While sentiment is more positive than last year, the country is still faced with a number of challenges, including political, educational and agricultural.”
In terms of Africa, much of the business being done in the continent through SA also seems to have contracted.
Ansley says while there are opportunities in African infrastructure development, there are mixed signals with opportunities not prevalent across the board.
“You have to be country specific and look at each separate geography in terms of its particular social and political risks. One of the big problems in certain African countries is the inability to obtain foreign exchange timeously to pay for imports.”
In terms of the international trading arena, Ansley says markets have gained ground and are also more positive.
He says markets in Europe, outside of the UK and their Brexit issues, have improved. For example, unemployment rates in Italy have fallen, which is good for their coming election, and the German economy is also doing nicely.
“In the US the Trump administration is business friendly, the Dow Jones has surged up to the very recent sell off, and the country seems well positioned going forward.
“China is consuming resources again and the oil price has regained ground, so international trading markets are not in a bad space at all.”
Ansley reports that while SA’s main export markets have not changed dramatically, the economic slowdown over the past few years has forced exporters to diversify and explore new markets.
He believes that one of the biggest challenges in the trade finance sector worldwide is disruptive technologies in the digital space.
“It is important to understand the changes and apply them in our businesses. We need to be aware of both the opportunities and challenges brought about by rapid technological development, because technology is set to play a much more important role in international trade, especially in terms of the development of an online, paperless and secure trade finance environment.”
“Likewise fraud risk has to be top of mind, because techniques used by fraudsters are becoming more sophisticated every day. It is vital importers and exporters know their counterparties and who they are dealing with.”
TECHNOLOGY IS SET TO PLAY A MORE IMPORTANT ROLE IN TERMS OF AN ONLINE, PAPERLESS AND SECURE TRADE FINANCE ENVIRONMENT ANOTHER POSITIVE IN THE LOCAL INTERNATIONAL TRADING SECTOR IS THAT THERE HAVE NOT BEEN TOO MANY BUSINESS FAILURES IN OUR CLIENT BASE