The Export Guarantee Fund of Iran (EGFI) has said it will cover certain letter of credit (L/C) transactions with South Africa in the two countries' efforts to boost bilateral trade.

The announcement was made at South Africa and Iran's 8th Joint Bilateral Commission held in Teheran in December 2004, during which both sides expressed the wish to expand the volume of trade in goods and create more diversity in trade exchanges, according to a statement issued by South Africa's Department of Foreign Affairs (DFA).

Trade agreement

A key focus for the commission was Iran's declaration that it wanted to start detailed discussions with the aim of establishing a Preferential Trade Agreement (PFA) with South Africa. It said it would consider the PFA in 2006, after consultation with the Southern African Customs Union.

Both sides agreed to sign the Agreement on Customs Co-operation in the near future, in either South Africa or in Iran.

Banking co-operation

Both Iran and South Africa stressed the need for further co-operation between the banking systems and financial institutions in the two countries through the establishment of credit lines.

EGFI said it was ready to cover the non-payment risk of credits granted to South African buyers based on L/Cs opened or bank guarantees issued by EGFI approved banks or where appropriate, against a sovereign guarantee according to the DFA statement.

The statement further added that non-payment risk of the credits to be granted to South African companies on open account basis may also be covered by EGFI, but only after such companies had been assessed as creditworthy.

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