Facilitating trade finance and providing letters of credit (L/Cs) are priorities in Africa's efforts to rebuild its economy in the wake of the coronavirus pandemic according to the president and CEO of one of the continent's major regional developments.

Admassu Tadesse of the Eastern and Southern Africa Trade and Development Bank (TDB) says the pandemic has created production shutdowns, supply chain disruptions, and a profound decline in demand for commodities and economic services, notably transport, tourism and retail.

Supporting trade facilitation

Given the twin demand-supply shock African economies are experiencing, the region's build-back-better agenda must address both sides of the issue says Tadesse who adds that in particular, increased attention to trade facilitation is needed.

The TDB is looking to support trade facilitation with a number of tools, most notably through trade finance offerings that enable exporters and importers to transact securely as well as efficiently in terms of both time and cost.

Such tools are vital for supporting African trade, as several major international correspondent banks have retreated from African markets in the face of more stringent compliance and regulatory requirements imposed by international banks.

Digital L/Cs

Cutting edge technologies such as blockchain will help says Tadesse who is keen to promote the benefits of digital L/Cs.

"Traditionally, parties wait for physical documents to be generated and passed from one to the other before the ownership of the goods can be transferred, which can take up to 15 days," he says.

A blockchain-based trade finance solution reduces the turnaround time, saving up to seven working days in a trade cycle, while significantly enhancing security according to Tadesse who concludes that digital L/Cs reduce not only the costs but also the carbon footprint and paper waste of trade finance transactions.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.