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By Taurai Craig Museka
OVER 275 delegates representing factors, export credit agencies, credit insurers, banks, non-banking financial institutions, central banks, multilateral institutions, law firms from 25 nations converged from the 22nd to the 23rd of April in Harare for the Regional Conference on Factoring, Receivables Finance and Credit Insurance in Southern Africa hosted by Factors Chain International (FCI) and the African Export-Import Bank (Afreximbank).
The theme of the conference was: “Empowering Economic Growth Through Innovative Factoring & Receivables Finance Solutions”.
Reserve Bank of Zimbabwe Deputy Governor, Dr Jesimen Chipika was the guest of honor at the event, which was also graced by executive vice President, Afreximbank Mrs Kanayo Awani and FCI secretary general, Neal Harm.
Key topics discussed included challenges and opportunities in factoring in Africa, the importance of facilitative legal and regulatory environment and using factoring and credit insurance together to strengthen business growth in Africa.
I was a privileged to be one of the attendees of the two-day conference, and what drove my decision to attend this conference was obviously because one of my favorite discussion topics, credit insurance, was on the agenda but beyond that I took lessons, which could benefit you too.
Leason 1: Never skip the fundamentals.
Whilst I thought I knew what factoring was, one of the first sessions in the conference, which was on the fundamentals of factoring proved that indeed it’s key to always begin with the fundamentals. What I thought was factoring was actually invoice discounting. Whilst presenting on the fundamentals of factoring, Mrs Aysen Cetintas, Education Director at FCI clearly explained that invoice discounting was NOT the same as factoring.
If it was not for the humbling experience on the factoring fundamentals, I would have probably assumed the presentations on the fundamentals of credit insurance were not necessary for anyone. Regional Manager of Marsh, Mr Muhammad Lombard and Managing Director of Export Credit Guarantee Corporation (ECGC) did a great job of unpacking fundamentals of credit insurance, and for me it was a much-needed refresher.
I learnt that it is necessary for any sober businessperson to understand fundamentals of the business they are undertaking, but beyond that, they must also understand the fundamentals of any area of business connected to their business. Whilst, bankers, insurers, regulators, lawyers etc where discussing solutions for SME financing, I was perplexed by the absence of representatives of the SMEs, who I thought were going to benefit more from the fundamentals of the factoring and credit insurance products.
Opportunity: There are multiple opportunities for businesses to learn the fundamentals of any subject. FCI offers a foundational courses on factoring, most of which are accredited by the London Institute of Banking and finance. (learn more about it on https://fci.nl/en/academy). This is not only information for the bankers but could benefit even business owners.
Lesson 2: “Izandla ziyagezana” meaning “hands wash each other”
I recently found this South African proverb which encapsulates the essence of mutual support and interconnectedness. “We cannot be what we ought to be without each other”. Collaboration is the greatest strategy for growth. Whilst calls on the need for African nations to trade with each other more have become like a song on repeat, there is still a lot of work that needs to be done to make that happen. I liked the concept in factoring that was developed by FCI called the two-factor model. From my understanding, this is a financing model where a financier in one country will depend on a financier in another country to assist in vetting an importer in their country. In simple terms, if you are importing products on credit, financiers in your country can put a strong word out for you to your suppliers to help you to get credit, and they can even go to the extent of guaranteeing you.
Opportunity: If factors (the finance companies) are working well together, what will stop credit insurers from working together? Responding to a question during a panel discussion, veteran credit insurer turned factor, Louis Hofmeijer indicated the need for African insurers to carry a portion of the trade credit risk in order to attract bigger reinsurance players in Africa.
Lesson 3: The Egyptian King who didn’t know Joseph
While delivering a public lecture at the University of Zimbabwe earlier this year, my mentor Apostle Tavonga Vutabwashe gave an account of how there was a king who rose in Egypt who didn’t know Joseph, yet the same Joseph had done so much for the nation of Egypt. In that story, it is very unfortunate that no one kept records about the great work Joseph had done to provide insurance against a drought in Egypt.
Throughout the conference I got a realization that Africans have a challenge of keeping records. The panel discussion of challenges in obtaining credit insurance in Africa revealed that credit insurers normally cover only the top 50 companies in most nations because most of these are the only ones keeping information and publishing it. “Most SMEs lack relevant information that can give credit insurers confidence in issuing credit insurance cover” said Mr Yusuf Vilakazi, Underwriting Specialist at Lombard.
Opportunity: It’s interesting to know that a solution to counter lack of information is coming from Egypt! Afreximbank launched a product called MANSA which is a pan-African customer due diligence repository for financial institutions, corporate entities and SMEs, developed to address the perceived risk of doing business in Africa and with Africans. In simple terms, this is a platform where through a click of a button, companies will be able to find relevant information about their counterparts all over Africa. Companies have an opportunity to begin to insert their profiles on the repository. Taking this step is a step towards opening channels for financing.
Conclusion
After two days of great interactions and discussions, I discovered that factors and credit insurers are like a girl and a boy who like each other but they haven’t really made the decision to fully commit to each other, not because they don’t need each other but because they have not yet gotten to know each other really well. When a relationship is like that, there’s need for the couple to go out more, spend some more time together, eat together and just communicate. More conferences like these could help in achieving the growth that everyone is looking for.
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