Coface offers top tips to UK businesses trading in Africa
Grant Williams, Coface UK’s Risk Underwriting Director said: "Africa is rich in minerals and resources, has a growing base of middle-class consumers and there are great opportunities to contribute to the development of essential infrastructure, such as transport links and power supplies. While countries such as China have been quick to seize the initiative, the signs are that UK companies are increasingly ready to tap into the fast-expanding markets on the continent. South Africa, Nigeria, Senegal, Egypt and Morocco are in the top fifty destinations for UK exporters.
“Of course, we appreciate that some UK businesses may still be held back by fears about political and economic stability or the possibility of payment delays and bad debt. However, we firmly believe these risks can be mitigated by thorough preparation, prudent credit management practices and the support of a proven international partner.
“Coface’s latest expansion to Ghana, Ivory Coast and Senegal means that we are the only credit insurer with a direct presence in nine countries in western and central Africa, demonstrating our confidence in this commercially dynamic region. In fact, the amount of business in Africa insured by Coface in the UK has increased by 24% in the first nine months of 2012 alone. Our unrivalled access to expertise on the ground means we are ideally placed to advise UK companies about potential trading partners and provide services such as credit insurance and debt collection.”
Coface UK has developed five top credit management tips to help UK exporters:
1.Research potential trading partners: Choose a proven international business partner with representation on the ground who can give you access to accurate business information about potential trading partners, their credit worthiness and trading behaviour.
2.Always have a contract: This should set out your payment terms, as well as a Retention of Title clause, setting out your ownership of the goods you supply until they are paid for.
3.Do not extend credit too quickly: You may be keen to build on a promising sales opportunity but exercise caution when setting initial credit limits and stick to them. Do not extend credit without reviewing your customer’s payment behaviour and the likelihood of default.
4.Secure your cashflow by obtaining credit insurance cover: Consider obtaining credit insurance protection against the risk of bad debt or political upheavals and check potential providers’ experience and resources in insuring export trade.
5.Consider debt collection services to tackle late payments: Providers allow you to scale your requirements from one-off debts to complete ledger service management, therefore enabling you to maximise cash flow and reduce debtor days.
And finally, be aware of language differences when communicating with potential trading partners. Many African languages are tonal which means the same word with the same spelling can mean two different things depending on how it is pronounced. Seek local advice to ensure your message is not undermined.
Coface now insures companies against the risk of financial default of their clients in 97 countries worldwide. Its latest country assessments for Africa, which provide a unique overview of the business climate and trading risk within each country, can be accessed for free on its website at www.cofaceuk.com. A more detailed report by one of Coface’s analysts, Doing Business in Africa is also available on the website.