Supply chain finance is being used in Africa to boost the capacity of suppliers to fulfil contracts.
African suppliers are capitalising on finance products being developed by banks such as Absa, Nedbank and Standard Chartered, which are working in sectors including mining and energy, telecommunications and retail.
Absa Bank, a regional bank which has acquired the assets of Barclays Africa, has developed a supply chain product earmarked for suppliers in its African markets. Supply chain financing is an arrangement whereby suppliers are able to access financing from banks on the strength of invoices.
David Mparutsa, the head of supplier development for Absa Bank’s Africa operations, told SM by email that its Enterprise and Supplier Development (ESD) programme seeks to “collaborate with corporate clients to provide non-collateralised lending to their contracted” suppliers.
“The ability to raise adequate financing to perform on contracts is a significant challenge for many SME local suppliers,” explained Mparutsa.
He added: “The [ESD] gives procurement managers the ability to transform their supply chains and have a greater participation of local suppliers knowing that any financing required to perform on the contracts will be provided by the bank.”
Absa has implemented ESD in Ghana, Kenya, Uganda, Tanzania, Zambia, Botswana and Mozambique.
ESD is mostly being utilised by companies in natural resources, retail, telecoms, health and energy sectors. Going forward Absa will focus on building similar capabilities within the agriculture sector, explained Mparutsa.
Government requirements on corporates in areas such as mining to source more supplies locally is also driving supply chain finance, as such companies seek to increase the capacity of local suppliers.
Mining companies in Zimbabwe, such as units of Impala Platinum and Anglo Platinum, have been roping in more local suppliers and capacitating them through local banks.
Absa said the government in Ghana is “playing an active role in promoting local procurement through legislation which ensures certain goods and services can only be procured” from local suppliers.
“Procurement managers are then faced with the task of finding local suppliers with the technical and financial capability of performing on supply chain contracts,” explained Mparutsa.
Other banks in Africa told SM companies in mining, retail, telecommunications and health sectors are involving them in supply chain financing arrangements.
“Supply chain finance remains very much on Nedbank’s radar in terms of structured working capital solutions on a pan African basis,” a spokesperson for Nedbank told SM.
Nedbank has operations in South Africa and other countries including Zimbabwe and Namibia.
“[There is] increased interest from customers in our Namibian market in particular, the potential exists to leverage our subsidiary network and alliance with Ecobank to expand our offering,” added the spokesperson.
According to Nedbank, technological advancements are enhancing supply chain financing models, especially with the advent of offerings in cloud-based solutions “on which supply chain finance programs are run”.
This is being underpinned by improved “connectivity across the continent” and it “allows for all participants in an supply chain finance ecosystem (buyers and suppliers) to benefit from this solution which unlocks significant working capital for buyers through days payable extension”.
Banks such as Nedbank are also “providing liquidity to emerging companies who supply” bigger companies across the continent.
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