BIC-BRED (Switzerland) SA is the subsidiary of BREDGroup dedicated to providing Commodity Trade Finance for trading companies, in particular the ones active in the field of soft commodities. In Africa, the Bank offers abroad range offinancing covering various stages of the supply chain such as stock financing at port of loading, stock financing at port of destination, receivable financing.
Despite adiversity of political and economic situations in Africa,some major trends can be identified. African players in the agribusiness industry are increasingly focusing on value added creation. Flour milling is a good example: this industry has been developing very rapidly over the past years and will continue to expand in the future in order to meet demand coming from fast-growing population and urbanization of lifestyles. Imports of feed stuff are also on the rise driven by livestock and fish farming industries.
On the export side, we observe that African countries’ integration into world’strade flows is being achieved by promoting fair trade and trace ability, especially in the cocoa and coffee business. Such evolution has been driven by growing demand from major consuming markets as well as local players’ agenda to focus on niche markets with high-value added products.
What are the main challenges for financing soft commodity trade flows in Africa?
As a Bank,our main task is to provide our Customers, i.e. trading companies, with transactional, secured and self-liquidated Commodity Trade Finance. Financing starts when the goods are purchased from the supplier. These goods are pledged in favour of the Bank, which is eventually repaid by the proceeds is therefore crucial for the Bank to secure adequately this last phase, hence the importance of having good confirmation capacity for letter of credit and/or draft avalized by localbanks.
We have teams dedicated to monitoring financial institutions.They have developed astrong expertise and built awide network of partner banks throughout Africa over the years. They also cooperate with BREDGroup’s subsidiary in Djibouti, BCI MerRouge,and its repoffice in Addis-Abeba.
In addition, Commodity Trade Finance implies ongoing monitoring of the financed transactions, including the counterparties involved (suppliers, warehousekeeper, forwarders), as well as regular thorough market analysis. Political risk remains a parameter to be taken into account, since government in terventions can create major market disruptions.
In a fast-paced changing environment, the Bank needs tounder stand the underlying physical markets and their global trends to have effective risk management and offer tailor made product.