Our Head of Cross-Border Trade Finance, Steve Chemaly, who attended the Global Trade Review (GTR) Africa 2022 in Cape Town with his Norton Rose Fulbright South Africa Trade Finance Team provided some key takeaways:
- AfCFTA will entice SMEs into the formal trade sector and provide the appropriate trade financing support.
- Funding eligibility goes hand-in-hand with ESG compliance, which is being embedded in the risk assessment of the trading client.
- Digitisation of the supply chain could lower the entry barriers for SMEs and for deep tier financing but in contrast to that, the ‘Flight to quality’ among commodity trade finance lenders could have an adverse impact on SMEs.
- The need for infrastructure capital still trumps the need for trade investments on the African continent.
- Export credit insurance should be credit rated in order to be better applied and positioned as a credit risk mitigant.
- The Ukraine crisis has placed the trade and commodity market into a state of disequilibrium and many trade payments are currently not being made.
- There is a real danger that trade finance is being risk managed to death due to the rise in compliance and increasingly stringent KYC protocols but the use of digitised trading platforms and ESG compliance will lower perceived risk levels.
