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Building capacity to help Africa trade better

Africa trade finance needs innovation, tech focus

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Africa trade finance needs innovation, tech focus

Africa trade finance needs innovation, tech focus
Photo credit: Thinkstock

Those involved in the finance trade in Africa often overlook what would be needed to catalyse change and deliver on the continent’s potential, according to Justin Sherrard, global strategist, food and agribusiness research, at Rabobank.

As the keynote speaker at the GTR Africa Trade Finance Week in Cape Town he said it in his view it really boiled down to leadership.

Jason Barrass, head of Africa trade at Barclays Africa Group, added that the trade finance industry in Africa is rapidly changing because of alternative funding methods and the use of technology.

“These are interesting times for professional bankers. The industry is at a stage where it is looking at the next growth area and that leads to the question whether Africa’s time has come,” said Barrass.

“It is alarming to see banks not thinking outside the box. The question is how we can use technology to allow us to get more comfortable with risks and how to work better with the funds available out there.”

Food demand

There will be a 46% increase in food demand in sub-Sahara Africa by 2030, according to Sherrard.

“For sure the potential to provide this is there, but if we look at the trade data, we see it is not pointing in that direction. The gap between imports and exports is widening and creates a need to change the way things have been done up to now,” said Sherrard.

“There is a need for innovation and we cannot keep doing trade finance in the food and agriculture sectors in Africa in the way we have been doing it up to now and expect a different outcome.”

In his view supply chains have to be strengthened and co-investment used to enhance infrastructure and boost productivity.

The focus must, furthermore, be on innovation to increase productivity. Risks must also be reduced and access to finance increased.

“We must completely rethink the models we have been using to secure finance in Africa’s agriculture sector,” he said.

“It is possible to embrace innovation and harness the potential which is there.”

Banks must be part of this process, in his view.

Commodity finance

Shannon Manders, editor of GTR (Global Trade Review), said as part of a panel discussion that 2015 is perhaps critical for commodity financing in Africa.

In her view commodity trading houses might now play a key role.

According to Zhann Meyer of Nedbank Capital, there are alternative sources of finance out there in Africa and Manders pointed to the use of so-called hybrid transactions as an example.

For Ryan Stokes of structured trade and commodity finance at Standard Bank, the key is to focus on pockets of opportunity existing accross Africa.

“There is no plan B. We are completely committed to Africa,” he said.

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