Philip Panaino, regional head, transaction banking, Africa & Middle East, Standard Chartered, says awareness of supply chain finance needs to expand from corporate treasurers to their broader organizations.
Global Finance: What African nations have the biggest SCF potential?
Philip Panaino: While SCF enquiries are being made across most countries in sub-Saharan Africa, we are seeing increasing uptake across all East African countries [Kenya, Uganda and Tanzania], West African countries like Cameroon and Côte d’Ivoire as well as the bigger markets like South Africa, Nigeria and Ghana.
On the face of it, the future potential for SCF in Africa is high, as more and more financial managers are increasing their focus on working-capital optimization, improved liquidity management and diversification of funding sources.
Nevertheless, there is still some way to go in fully embedding SCF in Africa. For one, while many corporate treasurers have very good awareness of SCF, such awareness may not have filtered through the rest of their organization. Instances abound where financial managers are disconnected from procurement, undermining the success of SCF initiatives.
There is also the small matter of the different legal and regulatory frameworks on the continent to contend with. Legislation around documents of title, withholding tax, banks’ rights with respect to receivables purchased, and perfection requirements can be quite murky in many jurisdictions. Accounting standards in different countries also pose a challenge.
GF: What sorts of supply-chain-finance solutions are buyers and suppliers looking for in Africa?
Panaino: Basically, supply-chain finance solutions that comprehensively address the working capital needs of each party across the entire supply chain.
SCF allows buyers to extend the payment terms offered to their suppliers and reduce the collection period for suppliers. In addition, suppliers receive favorable funding from SCF providers on the back of the anchor buyer’s superior credit rating.
GF: How can banks assist in the uptake of SCF without burdening African SMEs with costly tech upgrades?
Panaino: By developing effective anchor-centric programs. While technology has become a massive enabler, efficiency can only be realized if suppliers have ready access to this technology. The challenge is in how technological solutions are deployed. Any technology-based solution should deliver capabilities in a secure and transparent way and be accessible without imposing massive IT development obligations on the suppliers or even the buyers. Our Vendor Prepay (VPP) solution with auto-financing option does just that, delivering instant financing to the SME supplier with minimal onboarding, IT and documentation demands.