By Stephen Meintjes, Head of Trade and Supply Chain Finance at Moonshots/PBB/Standard Bank
Trade is a key cornerstone of economic growth and prosperity. The revitalisation of trade, both locally and internationally, will be integral to South Africa’s economic recovery from COVID-19.
Trade allows for the flow of cash in our economy and as a result helps to drive economic prosperity, job creation and long-term stability.
Banks play a critical role in helping small and medium businesses trade either their services or goods both in the local and international markets.
There are three fundamental ways in which banks aid businesses to trade.
Firstly, banks give businesses access to finance so that they can grow. This is in the traditional sense the core function of bank. However, in the current environment this is not enough.
Secondly, we are of the opinion that banks today should act as platforms and facilitators, giving businesses access to new markets, suppliers and opportunities.
Finally, banks can create business efficiencies and cost savings for their customers by lending their expertise in order to navigate the complicated trade environment, regulatory frameworks and by providing a holistic trade solution that will meet their needs and more.
How COVID-19 hit trade
The impact of COVID-19 on trade in South Africa has been complicated and layered. The restriction on the movement on goods has taken its toll on various sectors.
This has been exacerbated by delays in the delivery of goods due to our and international ports being closed, extending transit and delivery times for 30 days to 90 days and more in some cases.
These delays negatively impacted the clients’ working cash cycle which has been stretched on both the imports and exports side.
What COVID-19 has shown is the importance of innovation – from both an infrastructure and business model point of view.
Digital is essential
The importance of digital transformation in trade, as in most other sectors, cannot be overstated.
It creates efficiencies and brakes down barriers to entry – linking suppliers and customers all over the world and allowing for the creation of new supply chains.
Digitisation also leads to new or differentiated solutions for customers.
There are two big environments where technology can help businesses: access to information and access to funding. It also increases the efficiency and the speed with which you can gain this access.
Often the biggest inhibitor of trade is the ability to find trusted and vetted counterparts to trade with.
Standard Bank’s solutions
At Standard Bank, our Trade Club solution address this by linking buyers and sellers digitally through a network of 13 international banks.
These buyers and suppliers are vetted by their bank.
In addition to that there are resources that business can access, industry information and analysis needed to enter new markets.
Facilitating relationships that lead to trade opportunities is one of the most important functions which a bank can fulfil.
These relationships will be additionally important as the world looks to recover from the economic impact of COVID-19.
Another inhibitor to trade is local regulations and compliance issues. Clients are often unaware of the complexities of the movement of goods including engaging with shipping lines and harbour officials on the import and export process.
Our Trade Suite offering gives us the ability to advise a client on the movement of their goods, manage the movement of their goods and even calculate the landed cost of each item imported.
Within our Trade Suite business we have a group of experts who handle the importation of goods, from ensuring that it will be manufactured on time, made deliverable on time, and available to the shipping lines timeously as well.
We assist in the movement of the goods all the way from the suppliers premises, to clearing it through customs in South Africa, ensuring that the correct duties are paid, all the different requirements are met to bring it into the country and eventually to arrive at the clients premises.
Sorting out paperwork
Another major challenge that often hampers trade is that all the transactions must be governed by paper flow.
For a client to receive his goods at the port of arrival, he needs to have an original bill of lading – the document issued by a carrier to acknowledge receipt of cargo for shipment.
COVID-19 initially hampered this process, but banks did eventually come together to navigate the challenges – sending documents at a later stage via email for example.
However, the use of blockchain would remove the need to move paper across air while still maintaining the trust and security needed for trade and something which could possibly be scaled up in the future.
Building the right strategy
While digitalisation is integral to trade in the future it will not necessarily ensure success.
What is needed is a strategic intent from business to weather major events such as COVID-19.
This means exploring diversification as an option – both in terms of who you sell to and where you buy your product from.
There are many things that need to happen for South Africa to drive economic growth and trade will be a cornerstone of any recovery that might happen moving forward.
If you can grow a business in a community, it makes more money and then hires more people who spend their income in their community.
COVID-19 has highlighted the need for a deeper understanding of a client’s business and just how important it is to understand the impact of macro and micro-economic factors.
Trade post COVID-19 will be about more than just playing an advisory role. It will be about providing clients with solutions that can materially help with their growth.
At Trade by Standard Bank, we are well positioned to understand our clients’ business and to assist them in navigating the pathway of both domestic and international trade.