“When the rhythm of the drum changes, the dancer has to change his steps.”
It was this traditional African proverb that opened a panel discussion on the ever-relevant topic of trade digitalisation, at last week’s GTR Africa London conference. And as trade continues to become more digital, market participants are adapting accordingly.
The session, titled “MLETR and the Commonwealth Model Law: A status update on adoption in Africa,” closed a day of engaging discussions at the annual industry conference.
BACB’s Patrick Baatz, Associate Director, was joined on the panel by Rhodrick Kalumpha from major international trader Global Tea & Commodities and Anthony Wadsworth-Hill representing non-bank lender Mercore. Vashti Maharaj, digital trade policy advisor at the Commonwealth Secretariat served as moderator.
The panel discussed the progress of adoption of the United Nations’ Model Law on Electronic Transferable Records (MLETR) across Africa, and how other regulatory initiatives such as the Commonwealth Model Law on Digital Trade are helping to expedite the transition to a more digitalised trade environment.
Kalumpha shared a corporate’s experience of managing trade flows during COVID – with the resulting mountains of paperwork being delivered to his home illustrating the limitations of traditional processes.
Of course, digitalising transactions brings the transaction times down dramatically. Patrick raised the example of a traditional trade transaction – with a paper-based deal being created by a seller in Switzerland, sent to a buyer in Cote D’Ivoire for their acceptance, forwarded to their local bank to add their aval before being sent back to Europe for discounting. But there is a better way. In collaboration with Mercore, BACB has already run a demo of a digitalised trade transaction, which was run in all of 10 minutes thanks to digital technology provided by Mercore. It uses blockchain technology to pass the document between parties who add their digital signatures in a similar fashion to Docusign.
And the benefits for all parties are clear. With such a dramatic amount of time being saved, banks are able to lend for longer – and consequently earn more. The corporate is able to access working capital quicker. Wadsworth-Hill discussed how the digitalisation of trade finance documents makes transactions that were previously unfinanceable – those with shorter turnarounds, perhaps – financeable. Eliminating these traditional, paper-based processes can turn, say, a week of lending time into two or three – making it more attractive for banks or non-bank lenders.
Updating legal frameworks across the whole of the African continent will naturally take time. Until then, Patrick explained, more education and compliance training is needed for corporates and FIs in Africa to help them work in closer alignment with international banks’ standards – reducing friction.
Ultimately, digitalisation makes trade finance faster, cheaper and more accessible for both small and large businesses. Africa, where small and medium-sized business make up a larger proportion of the economy, stands to gain even more than other regions.
BACB thanks all fellow panellists for a truly engaging discussion, and GTR for organising yet another successful conference.
