[#SecureNorth] In Conversation: Amish Shunker of Standard Bank (1)

African international trade has suffered greatly owing to the Covid-19 pandemic. Banks have suffered losses in tandem. Lately, some global banks, European ones, at least, wonder if the increasingly scandal-prone and thin-margined trade finance business is worth the trouble. A couple have actually decided to leave the business altogether.

What are the implications of these developments for African banks? Are the continent’s banks similarly having a rethink about the trade finance business? What the short, medium and long-term prospects of the trade finance business is in Africa? In early September 2020, I sought the views of Amish Shunker, head of the trade and working capital solutions structuring group at Standard Bank in Johannesburg, South Africa, to answer these questions.

How much trade financing have African banks been able to do this year thus far?

As an overall net importer, the African continent has seen reduced trade volumes, stemming from the supply chain disruptions that port closures, and restricted logistical operations as direct by-products of COVID-19. Over the course of H1, it was quite evident that these flows diminished, however since July, there has been an incremental and more pronounced opening of economies, with reference to trade flow.

It is worth mentioning that the COVID pandemic has warranted that African banks across the continent support their governments and their customers, clients, and citizens to assist with financial support measures and also the importation of protective equipment and health/ pharmaceutical goods as well as staple and strategic products for their respective countries.

Read also: Is commodities financing still profitable for African banks?

Trade financing is premised on trust with core clients – this is gained from being close to them and understanding the way in which their businesses work, and the impact of changes in the economic, social and regulatory & legislative environment – we have seen that the partnerships that we have with our clients have enabled us to continue to support them with their import or export or domestic trade transactions over the pandemic crisis and the various lock down levels.

To what extent have the hitherto increasingly strained correspondent banking relationships of African banks suffered even more due to the pandemic?

Events of disaster – events that impact us all as a global community, like the pandemic, have historically brought people together. In some instances, even business communities & organizations and governments. This pandemic seems to have had a similar impact with respect to banking relationships among peers. This pandemic has demonstrated that banks can partner together to ensure that the end customer (the consumer of the beans/ wheat/ rice/ fuel) faces as little negative impact as possible. Reduced operations capacity due to shut-down and BCP practices were managed proactively with banking partners across our remit on the continent.

This enabled correspondent banking institutions to a specific trade flow to account for potential delays in document receipt and settlement accordingly, and again, manage the end consumer effectively. It has supported a new and closer way of working in many respects.

Some governments also played a role in assisting with this partnership, by allowing for the usage of electronic documentation (e-Bills of Lading, and the like) to support trade transactions. This enabled banks to support their customers and enhance the collaboration over this time.

In addition, there has also been support and partnership with the Development Financial Institutions to support trade flow, across the continent. This enhanced some of the working relationships and collaboration between and among various banks, and enabled clients in countries to have access to goods and services in a timely a manner as possible.