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LONDON. — His company may have been operating for 61 years, but that counts for nothing when Second Muguyo, finance manager at Zimbabwean copper and silver goods manufacturer Copperwares, tries to access overseas credit.
The problem? Foreign lenders and trade partners don’t know the company well enough.
So when suppliers or customers demand cash payments or products up front, it locks in precious capital that can only be recouped when tache finished goods are delivered — up to 10 months later.
The impact on the company’s business has been to curtail its expansion, limit overseas sales and cap hiring of local workers — a problem mirrored by firms across the country, hampering its ability to recover from years of economic slump.
“Currently, we don’t have any credit terms, even from our neighbouring countries,” Muguyo said.
“We are funding our suppliers and customers left, right and centre, but we only receive it (payment) after 10 months.”
Now, help may be coming in the form of an access pass to the world’s financial system from a body set up by the G20 group of nations after the 2008 financial crisis, when regulators struggled to see who was exposed to stricken bank Lehman Brothers.
Largely confined so far to big corporates in the developed world, Legal Entity Identifier (LEIs) codes provide companies with a unique 20-character string of letters and numbers.
Copperwares is about to become one of the first mid-sized African companies to get one.
Companies undergo a series of checks to prove who they are to hold one, lowering the risk for overseas counterparties and helping the company access cheaper, more flexible funding.
Currently, just 8 251 LEIs have been issued in African countries, many to local units of major developed market companies, out of more than 1.8 million active LEIs globally. — Reuters
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