Local banks look north

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31 August 2005

Having struggled with a gloomy domestic export market for two years, South African banks are looking at the wider region to expand their structured trade and commodity finance business. Oliver O'Connell examines the territory.

The South African export market, especially from a manufactured goods perspective, has suffered greatly over the past 24 months due to the unfavourable exchange rate. The mining industry has also been negatively affected by the strong rand despite a stronger performance of the US dollar price of gold. Many producers are unable to make a profit with the losses made in the conversion from US dollars to rand and recently gold production, a staple of the South African economy, actually fell.

Similarly the maize market, where a substantial portion of structured trade finance transactions in the South African market are conducted, is also under pressure. A significant surplus carry-over from the previous harvesting season and a bumper crop from the current season are depressing commodity prices and, combined with the strength of the rand, very little maize is being exported. Financial losses in this industry have been reported and it...

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