When the exporter has drawn up the export plan and is ready to export, possibly
the next step on the export road is to give consideration to how the enterprise will
finance its exports. Exporting is a complicated and expensive process. It requires
time, considerable planning, extensive research (much of it overseas), highly skilled
staff, product adaptations, international travel, expensive international promotions
and management involvement. At the same time, profit margins are often low and
payment terms may mean that the exporter receives payment only in 30, 60 or 90
days. Together, this translates into high expenses and slow income. Cash-flow is
often a major problem facing the small exporter.
11.1 When is finance needed?
Financing is required almost from the moment the enterprise decides to get into
exports. Financing requirements can be divided into four stages (the first three are
the pre-contract phases, while the last stage is the post-contract phase).
11.1.1 Financing to carry out research on the internet and spend some
time on planning and cost benefit analysis
Expenses at this stage are related more to the time needed to put into the planning
and preparation process than to actual outlays on travel, research and promotion.
The enterprise should be able to cover these financing outlays itself.
11.1.2 Financing for export market research efforts
This stage requires time and effort to be spent in selecting target countries and then
gaining a better understanding of the targeted markets. In this stage, expenses will
probably be related to a fairly extensive desk research effort (which may involve
purchasing market research reports online and accessing other information for
which there may be a charge). In addition, there should be at least one visit to
the target market to obtain information from industry associations, chambers of
commerce, potential buyers; if possible, a visit to a trade fair or two should be
included. If the research is carefully planned, it may be possible to achieve all
in-market research goals in one visit. A second visit may, however, be desirable.
Larger potential exporters may want to acquire the services of professional research
agencies, which would push up the cost considerably. At this point the company
may already need to consider finding financing for this research (the dti provides
assistance to exporters for their in-market research efforts: se paragraph 11.4).
11.1.3 Financing to implement the export plan
Based on the research completed, the enterprise will refine its initial planning and
will now need to implement its export plan. This is another expensive step in the
export process, because it can involve promoting the product over the internet, via
direct mail, through advertising in trade magazines, taking part in one or more trade
fairs and visiting potential buyers. It is highly unlikely that an enterprise will be able
to achieve its objectives without visiting the market in question. Indeed, it is possible
that at least two or three visits to the market will be necessary before the marketing
drive has any effect.
11.1.4 Financing to help the exporter achieve contractual obligations
Assuming that the marketing effort has paid off and the enterprise has secured a
contract, the next step is to produce the goods, package and label them, ship them
off to the customer, provide the agreed upon service and wait for payment. This is
perhaps the costliest part of the whole process and is very difficult to estimate. This
will be the stage where financing needs are the most acute. It is also likely that this
will take place only two years or so from the initial export development steps and
already thousands of rands have been spent to secure this first order.
11.2 Types of financing and financial support available to the exporter
Sources of pre-shipment finance are:
• bank overdrafts
• loans from financial institutions.
Sources of post-shipment finance are:
• bank overdrafts
• loans from financial institutions
• factoring facilities
• discounting of bills of exchange/drafts.
One of the most common ways of financing exports is by obtaining credit from commercial
banks (much domestic activities are financed). This credit may be in the form of an
overdraft negotiated with the bank or it may be a loan for a specific project. However,
banks prefer not to finance individual orders as they prefer to establish an on-going
business relationship with customers. Banks are the key source of finance around the
world and they take care in considering and analysing the requests for financing received
from prospective exporters. In doing this, they do take many factors into consideration.
Factoring services are designed to take the payment risks inherent in export sales
away from the manufacturers or producers. A company might approach a factor where
it requires cash to finance further production and development. The factor buys the
exporter’s ‘book’, either advancing up to 90% of the value as soon as the ‘book’ is
received with the balance on collection of debts, or paying certain amounts on specific
dates as agreed with the exporter. The factor takes a commission of between 0,75%
and 2%, depending on the nature of the business, sales volumes, invoice value and
client spread, and credit terms. As the new ‘owner’ of the debt, the factor assumes
responsibility for collection of the debt when it falls due. Collections are carried out in the
importing countries via correspondent factors or branch offices.
11.2.3 Discounting of bills of exchange/drafts
When payment is by a letter of credit, a bill of exchange is often stipulated and required
to be drawn on the nominated negotiating bank. Once this bank accepts the bill, it
becomes liable under it. An exporter holding such an accepted bill of exchange can use
it to raise finance by ‘selling’ it to a bank on a discounted basis. A major advantage of
discounting a bill of exchange is that an exporter receives payment in SA rands as soon
as he negotiates the bill, and thus is freed of any further risk of exchange loss. However,
before adopting this method of finance, exporters should discuss this option with the
foreign or international branch/division of their banks.
11.3 Small Enterprise Development Agency (SEDA)
The Small Enterprise Development Agency (SEDA) is the Department of Trade and
Industry’s agency for supporting small business in South Africa. SEDA offers the
following services: Business registration (close corporation, cooperatives, patents);
business planning and management; marketing research and planning; facilitating
access to finance; assistance with access to markets; trade exhibitions; technology
access such as product testing, development and certifications; business training.
For more information on SEDA visit its website: www.seda.org.za.
11.4 E xport Incentives
11.4.1 Export Marketing and Investment Assistance (EMIA) scheme
The purpose of assistance under the EMIA scheme is to give partial compensation
to exporters for costs incurred in developing export markets for South African
products and services and to recruit new foreign direct investment into South Africa.
EMIA is broadly divided into two types – individual participation schemes and group
• Individual Participation Schemes:
- Individual Exhibitions and In-Store Promotions
- Primary Market Research (PMR) and Foreign Direct Investment (FDI)
- Individual Inward-Bound Missions
• Group Participation Incentive Schemes:
- Group Inward Buying Trade Missions
- Group Investment Missions
- National Pavilions
- Outward Selling Trade Missions and Outward Investment Missions
- Sector-Specific Assistance
Financial support for export ers
For more information contact:
Tel: +27 12 394 1716 | Tel: +27 12 394 1961
Fax: +27 12 394 2716 | Tel: +27 12 394 0114/7
Also visit the dti website: www.thedti.gov.za for other business assistance incentive
schemes available to enterprises.
11.4.2 Development Finance Institutions
Small Enterprise Finance Agency (SEFA)
SEFA was established in 2012 as a result of the merger of South Africa Micro Apex
Fund, Khula Enterprise Finance Ltd and the small business activities of the Industrial
Development Corporation (IDC). Loan facilities to enterprises include:
• Bridging loan is a short-term loan to an enterprise to finance working capital needs
(i.e. stock and/or operating overheads)
• Term loan is a loan for a specific amount, which has a specified repayment schedule
and a floating or fixed interest rate. Term loan is used to finance assets that have
a medium- to long-term lifespan, such as machinery, fixtures and fittings, vehicles,
office equipment; it can also be used for start-ups, expansions and acquisitions of
• Structured finance is used to finance businesses that require funding but fall outside
the parameters of term and bridge loan facilities. The support is provided by way
of a debt facility but mainly tailored around the requirements of the project (tailored
Wholesale lending (debt/equity) is offered to intermediaries, joint ventures,
partnerships and other collaborative relationships with the target market and funding
• Survivalists and microenterprises – loans between R500 and R50 000
• Small enterprises – loans being between R50 000 and R1 million
• Medium enterprises – loans being between R1 million and R5 million
For more information on SEFA visit the website:
www.sefa.org.za; call centre: 086 000 7332; e-mail: email@example.com.
National Empowerment Fund (NEF)
Established by the National Empowerment Fund Act No 105 of 1998 (NEF Act),
the National Empowerment Fund (NEF) promotes and facilitates black economic
participation by providing financial and non-financial support to black empowered
businesses, and by promoting a culture of saving and investment among black
people. The NEF implements its mandate in providing asset management, fund
management as well as strategic projects funding.
Funding is currently obtainable from four funds, namely the iMbewu Fund, uMMnotho
Fund, Rural and Community Development Fund and the Strategic Projects Fund.
For further information on the qualifying criteria and services offered as well as the
contact details for the NEF provincial offices visit the website:
call centre: 0861 843 633;
e-mail: firstname.lastname@example.org (funding);
Industrial Development Corporation (IDC)
The IDC is a self-financing, state-owned development finance institution whose
primary objectives are to contribute to the creation of balanced sustainable economic
growth in Southern Africa and to further the economic empowerment of the South
African population, thereby promoting the economic prosperity for all citizens.
The IDC provides finance for industrial development projects by proactively identifying
and funding high-impact and labour-intensive projects; leading the creation of viable
new industries; using South Africa’s diverse industry expertise to drive growth in priority sectors; and taking up higher-risk funding projects.
Various development funds are available of which the Agro-Processing Competitiveness
Fund is one. For more information on this fund, the qualifying criteria and the application
process, visit the website: www.idc.co.za; call centre: 0860 693 888; e-mail: callcentre@