SA to rely on imports well into the future
OVER the past few years world trade has been through something of a slump following the international financial crisis. However, while there is still some uncertainty, levels of activity are on the increase.
Arno van Niekerk, national sales manager trade finance at Sasfin Bank, says South Africa is still a net importer of goods and that is not going to change in the foreseeable future.
The rand has weakened in recent times and the cost of imports has increased as a result. While this has dampened demand for some imported goods, the majority of imports cannot be sourced locally.
"Therefore, importers have to continue bringing goods into the country and the higher costs have to be passed on to consumers," says Van Niekerk.
"As a consequence, our market and the client base on which we focus is expanding. Among these clients additional cash flow is in demand."
He says exports are also proving more robust in this rand environment and South Africa has a large base of manufacturers engaged in exports.
"The weaker rand has benefited them and they are responding to the opportunities."
George Marais, risk analyst at Coface South Africa, says imports in the first half of this year rose 21.2% to R400bn compared to the first half of last year.
"This was due to higher imports of crude oil, refined petroleum products, motor vehicles, original motor vehicle components, as well as machinery for mining, quarrying and construction," says Marais.
He says that South Africa’s imports were sourced mainly from Asia (particularly China, Japan, India, Thailand and South Korea), the EU (mainly Germany, the Netherlands, Italy and the UK), Africa (especially Nigeria, Mozambique and Angola) and the Middle East (mostly Saudi Arabia, Qatar and Bahrain).
Total exports for the first half of this year were R342bn, an increase of 6,5% over the first half of last year.
"The expansion was mainly due to an increase in export values of coal, gold and iron ore. The leading regional export destinations for the first half of 2012 were Asia, the EU and Africa, with China, the US and Japan being the top three export destinations at the individual country level," says Marais.
Craig Polkinghorne, global head of structured trade and commodity finance at Standard Bank, says that there are a number of trends in the trade finance arena as far as banks are concerned. One of these is that banks are pricing to take account of the Basel 3 regulatory environment.
"Basel 3 requires that banks hold more capital than in the past. This comes at a cost that is being priced into transactions. This is especially relevant for longer-term or unsecured transactions," says Polkinghorne.
He says that another trend gaining momentum is that banks are seeking to provide full banking services to their targeted clients in an effort to capture flows that provide returns that are more attractive than a single loan offering.
"Clients will come under pressure to reciprocate the provision of loans through other banking business being awarded to the loan providers."
Leron Varsha, CEO of the Fore Good Group, says suppliers are looking at substantially reducing costs in the supply chain.
"It is essential to review warehousing, logistics, administration, finance and selling expenses to ensure that no excesses remain in the route to market. By this process, service-based businesses supplying these services need to be more efficient and reduce any additional costs."
In the current environment this may lead to a reduction in the workforce.
He says marketing budgets have also been reduced and suppliers want marketers to achieve increased performance with less spend. Sales channels are being looked at and suppliers are utilising technology to help replace the sales role.
With the national retailers in South Africa strengthening, as ever more outlets are deployed, the key account function is becoming critical in driving sales performance, and technology is further utilised to monitor sales in store through the tills.
"Retailers are also seeking to import products directly to decrease costs in the supply chain, and their aim is to increase private label contributions across the board.
"This is not always successful as managing excess inventory, holding costs, product damages and returns may often achieve the opposite result," says Varsha.
He says distributors are looking at importing products manufactured in Europe, Africa or from countries where South Africa has favourable trading agreements in place so they can reduce import duties.
"In addition to this, new regulations in the fast moving consumer goods area have made importing international products more expensive, as food labelling requirements have become highly prohibitive and South African specific labelling is required."
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