Article written by Herman de Kock (Executive Head of Sales & Service at Nedbank Business Banking)
Amid rising fatalities linked to the Coronavirus pandemic and the gradual reopening of the economy with lockdown regulations beginning to ease, there will be a severe impact on businesses trading cross border with a clear need for solutions that can help one navigate these uncertain times.
While the new normal will bring with it opportunities to help restore potential opportunities denied under lockdown level 5 and 4 with no trading allowed, this may create additional challenges. For example, one would be expected to experience severe cashflow hurdles, particularly if your business is exposed to global markets, dependent on income from exports, with the real constraint that demand is severely contracted, and your cashflow pressure will originate as a result of a mismatch in meeting forward cover.
To this end, one needs a trusted partner to help tide one’s business over during strained economic times. Nedbank Business Banking has solutions to alleviate cashflow pressures through temporary short-term overdrafts or the extension of import facilities.
Two key areas of the economy where exports can play a key role are mining and manufacturing. However, according to Nedbank economists, the outlook on mining production for the remainder of this year will probably be constrained by stop-start domestic production, subdued global demand and stagnant commodity prices.
The outlook of manufacturing production also remains bleak due to the devastating impact of the Coronavirus on the local and world economies. Global lockdowns, subdued commodity prices in light of weak global demand, coupled with stringent local lockdown regulations, will weigh down heavily on the sector.
Businesses are, therefore, reliant on income from global markets through exports but there is a risk that some may not receive export proceeds on time with the added impact on forward contracts leaving a business in a negative cashflow position as forward exchange contracts (FECs) unwind. If a business is exposed to global markets, dependent on income from exports and with the very real challenge now that demand is severely contracted or delayed, your cashflow pressure will originate as a result of a mismatch in meeting forward cover.
The inability to receive export proceeds, (or a delay thereof), can put your business in a position where it will not be possible to utilise your FECs, with the added risk of not being able to fund the negative cashflow differences on unwinding FECs. As an importer, your cashflow will also be under pressure as a result of the disruptions in supply globally.
For example, our digital global trade solutions facilitated through a web-based platform called NedTreasury, include the following:
- Documentary credits and collections – Issuing of import letters of credit and receiving export letters of credit via NedTreasury, as well as accepting a bill of exchange online.
- Foreign treasury – Online quoting and booking of foreign exchange rates and securing forward exchange contracts.
- Payments and enquiries – Enabling processing of incoming and outgoing payments, as well as online viewing of both foreign currency accounts and ZAR statements.
- Global E-Messenger (GEMS) – Automated service that enables email notifications on incoming and outgoing cross border payments, debit and credit advices, and forward exchange contracts.
Clients should always as the first point of contact, consult with their global specialist to discuss their global trading requirements ensuring that an appropriate solution is offered.
The new normal as a result of Covid 19 has fundamentally changed the way companies do business – the walk-in and face-to-face interactions are no longer easily possible while manual completion and email of forms require digital enablement. We assure our clients that we have the expertise and necessary digital tools to enable global trade.
Nedbank will be hosting a webinar on e-commerce on 9 July. For more details email firstname.lastname@example.org.