INSIGHTS: IMPORTS AND EXPORTS
Pandemic forces rethink of trading tactics for SA and Africa
Bank responds by assisting clients with a number of innovative initiatives
One of the consequences of lockdowns imposed around the world in an effort to contain the spread of the Covid-19 virus was the reduced mobility of goods as supply chains were affected.
In SA, Level 5 lockdown restrictions strictly controlled what goods were permitted to enter the country and were largely limited to pharmaceutical supplies and personal protective equipment.
In April, the World Trade Organisation (WTO) said it expected world trade to fall by between 13% and 32% in 2020 as the Covid-19 pandemic disrupted normal economic activity with nearly all regions suffering double-digit declines in trade volumes in 2020. It predicted trade was likely to fall steeply in sectors with complex value chains such as electronics and automotive products.
However, the WTO expects a recovery in trade in 2021 but has said this will be dependent on the duration of the outbreak and the effectiveness of policy responses.
Africa and SA, which trades largely with China, Europe and the Americas, was affected by lockdowns in other countries, even before our own lockdown was announced at the end of March, says head of trade for Standard Bank SA, Thandiwe Legwaila.
“As a net importer — meaning that we import more than we export — the shutdown of the global economy was cause for reflection for SA,” says Legwaila. “In many instances we are not producing more goods locally because the cost of producing items in SA is more expensive than it is to import them. However, the pandemic illustrated we are capable of producing more goods locally which represents a significant opportunity.”
She believes the pandemic has strengthened the case for the African Continental Free Trade Area, which aims to ensure more trade connections between African countries and a stronger continental value chain.
Quoting a working paper from the African Trade Policy Centre, Legwaila points out that as African countries struggled to procure essential medical products from global suppliers, there was an immediate shift towards more regionalised and localised supply chains.
“For example, in SA, U-Mask redirected its production from protective masks for mining and agriculture to medical respirator masks; Nigeria is producing ventilators; Senegal, in collaboration with France and the UK, is prototyping a pocket-sized testing kit; and a Ghanaian diagnostic firm, in co-operation with a local university, has developed a test that delivers results in 20 minutes.
“This demonstrates there is potential for Africa’s industries to respond to demand, whether public or private.”
A number of Standard Bank’s import and export customers found themselves having to manage unpaid invoices at the height of the pandemic leaving them facing liquidity challenges coupled with an inability to generate income. Legwaila reveals the bank extended financing facilities to these clients to assist them through this period.
Even before the launch of the government’s official guarantee loan scheme, Standard Bank had established a special fund to support its clients during a particularly challenging period. It was also one of the banks to participate in the government’s guaranteed loans scheme, playing a role in the disbursement of funds.
There is potential for Africa’s industries to respond to demand, whether public or private
“We’re very proud of the proactive role we have played — and continue to play — in supporting our clients through this period,” says Legwaila, adding that the bank is fully cognisant of the fact it will need to partner with clients for at least the next 12 to 18 months as they navigate their way towards a more sustainable path.
Trading internationally is both an opportunity for local businesses to grow as well as potentially acting as a key lever to drive SA’s economic recovery. However, for many smaller businesses, managing all the relevant stakeholders and the many activities required of the international supply chain can be a daunting task, particularly given that international trade comes with its own attendant risks. These include lack of access to finance, insufficient working capital, currency fluctuations and volatility, and a complex regulatory environment.
To help its clients navigate these complexities the bank has developed an end-to-end international trade proposition, TradeSuite, which offers import businesses a single point of contact for all their importation requirements with services extending from the order, supplier tracking, liaising with logistics service providers and monitoring goods while they are in transit, ensuring that customs is cleared timeously, right through to final delivery.
It also covers currency fluctuations and ensures all the necessary documentation required for payments and importation is needed when available, as well as calculating the landed cost per item to ensure accurate pricing. A cornerstone of the TradeSuite proposition is the provision of working capital funding.
However, one of the biggest benefits to clients of Standard Bank is access to the bank’s Trade Club. The club consists of more than 15,000 trusted businesses from around the world which have expressed an interest in trading with African businesses. It uses technology and artificial intelligence to link local producers with buyers internationally, providing customers with access to new trading opportunities.
Trade Club is a significant benefit to small and medium-sized businesses, says Legwaila, many of whom would not otherwise have access to international markets. The pandemic has meant the movement of goods continues to be limited to some extent, which means new markets need to be continually investigated.
“Ultimately, our aim with Trade Club is to support domestic trade and local suppliers and connect them with trading partners in other geographic jurisdictions.”
This article is part of a special Business Day feature titled Insight: Imports and Exports, published in November 2020. Read the other articles in the series:
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