Corporate and Investment Banking

Corporate and Investment Banking Documentary credits to manage and mitigate trade risks across Africa Cl ick he re 1 Documentary credits Stand...
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Corporate and Investment Banking Documentary credits to manage and mitigate trade risks across Africa

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Documentary credits

Standard Bank – your trade partner in, for and across Africa Documentary credits to manage and mitigate trade risks across Africa

As exporters expand into new markets, the importance of having a banking partner that you can trust is greater than ever. While you can take prudent steps to know your trading partners, there are many factors beyond your control that can prevent or delay you from being paid. These can extend from sanctions to money laundering prevention legislation, and a host of different in-country regulations. Using a letter of credit through Standard Bank’s global network, you will have peace of mind that you will receive payment. Letters of credit are issued by the buyer’s bank at the seller’s request. It is sent to Standard Bank in one of the 20 countries we operate in across Africa. If the import is in China, Japan or the USA, the buyer can approach one of our partner banks to ensure that the request is handled quickly and efficiently. Standard Bank then substitutes the credit worthiness of the buyer and undertakes to effect payment to you after you have shipped the goods and presented compliant documents.

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Documentary credits

Letters of credit support your trade activities as credit risks are not only managed, but mitigated as:



Buyer

1. Contract of sale

Seller



Standard Bank can provide a safe and secure environment to trade with international buyers across our African footprint of 20 countries



Issuance is driven by the buyer but payment depends on the performance of the seller



Credit risk is transferred to the buyer’s bank at issuance of a documentary credit



Issuing bank and country risk is transferred through confirmation to the seller’s bank to expedite payment in the event of default

1. Contract entered into between the buyer and seller.



You can optimise your working capital, where:



− Compliant documents can be negotiated (given value) and discounted prior to maturity of the payment terms so receivables can be converted faster than their due date

3. The buyer’s bank transmits the documentary credit to the seller’s bank.



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Application

4. Advise

Also, when using a confirmed letter of credit, you may need to be paid immediately to support working capital needs while providing extended payment terms to the buyer. Standard Bank can then advance a discounted payment without recourse to you prior to payment due date. This is known as discounting.

The documentary credit process

2. Application

Furthermore, to mitigate against the possibility of the buyer’s bank being unable to pay (which can be due to reasons from insolvency to political interference in a country), you can add confirmation to the letter of credit. This transfers the buyer’s bank and country risks to Standard Bank, so that in the event of default, you will still be paid.

− Under a confirmed documentary credit, discounting is without recourse to you.

Buyer’s bank

3. Issue

Seller’s bank

2. Buyer applies for the documentary credit to their bank.

4. Standard Bank advises the documentary credit to the seller. If the documentary credit requires confirmation, Standard Bank add its undertaking to pay in the event of default by the issuing bank and advise the seller.

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10. The buyer’s bank settles with Standard Bank.

Payment

Buyer

Seller

5. Goods shipment

11. Where a letter of credit is not confirmed (the seller has not requested payment on shipment), Standard Bank pays the seller.

11. Payment

6. Documents

8. Documents

9. Payment

Supporting your trading activities across regulatory environments

7. Documents

Buyer’s bank

10. Payment

Seller’s bank

With a deep understanding of the regulatory environments across our footprint in Africa, Standard Bank offers documentary credits that meet the requirements of applicable exchange control regulations. We help advise and assist buyers with varied regulatory requirements in issuing documentary credits, tailoring letters of credit to meet the needs of the parties involved.

Contact us for information on international trade services in, for and across Africa For further information on any of our products and services, contact:

5. The seller ships the goods as per contractual agreement with the buyer. 6. The seller presents the documents to Standard Bank for examination and negotiation. For short-term financing, under a confirmed letter of credit where the maturity of the documentary credit is in a stipulated future date, Standard Bank can advance funds to the seller without recourse.

Your nearest Standard Bank International Trade Services office Telephone: 0860iTrade/0860 487 233 Visit our website at www.standardbank.co.za (select Corporate and Institutions, click on Products and Services, and click on International Trade Services under Transactional Services).

7. Standard Bank presents the document to the buyer’s bank. 8. The buyer’s bank provides documents to the buyer. 9. The buyer pays their bank.

Authorised financial services and registered credit provider (NCRCP15) The Standard Bank of South Africa Limited (Registered Bank) Reg. No. 1962/000738/06 SBSA 182805-6/14

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Disclaimer This document has been prepared solely for information purposes by The Standard Bank of South Africa Limited, acting through its Corporate and Investment Bank Division (“SBSA”). Any indicative terms provided to you are provided for your information and do not constitute an offer, a solicitation of an offer, invitation to acquire any security or to enter into any agreement, or any advice or recommendation to conclude any transaction (whether on the indicative terms or otherwise). Any information, indicative price quotations, disclosure materials or analyses provided to you have been prepared on assumptions and parameters that reflect good faith determinations by us or that have been expressly specified by you and do not constitute advice by us and it should not be relied upon as such. The information, assumptions and parameters used are not the only ones that might reasonably have been selected and therefore no guarantee is given as to the accuracy, completeness, or reasonableness of any such information, quotations, disclosure or analyses. No representation or warranty is made that any indicative performance or return indicated will be achieved in the future. This document is not an official confirmation of terms, and any transaction that may be concluded pursuant to this document shall be in terms of and confirmed by the signing of appropriate documentation, on terms to be agreed between the parties. The information in the document is also subject to change without notice. SBSA, or an associated company, may have effected or may effect transactions for its own account in any investment outlined in the document or any investment related to such an investment. Prospective investors should obtain independent advice in respect of any product detailed in this document, as SBSA provides no investment, tax or legal advice and makes no representation or warranty about the suitability of a product for a particular client or circumstance. Transactions described in this material may give rise to substantial risk and are not suitable for all investors. SBSA will only provide investment advice if specifically agreed to by SBSA in appropriate documentation, signed by SBSA. This information is to be used at your own risks, and SBSA makes no representation with regards to the correctness of the information herein.

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