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Focus on Europe only at your Peril

09 February 2012 Credit Guarantee Insurance Corporation

The Eurozone itself and countries within the Eurozone, given the daily litany of difficulties, have received most of the international media’s attention almost to the exclusion of other countries around the world. Undoubtedly the current financial crisis

“Be warned though that payment defaults from a number of other countries have recently spiked upward,” cautions Theo Reddi, General Manager Exports at Credit Guarantee Insurance Corporation.

“One of our leading indicators is the number and value of notifications from insured exporters, which from December 2011 and January 2012 included buyers in Australia, Oman and Dubai,” continues Reddi. “Also, whilst the world looks to Africa for growth opportunities, the perils that lurk under the surface cannot be ignored. In this respect default notifications received in the last two months came out of Uganda , Mali , Swaziland, Malawi, Congo (Brazzaville), Botswana and Senegal.” The notifications received of pending or potential losses arising from debtor defaults in Malawi totalled R2,4m; Mali R4,4m; Uganda R5,6m and Australia of R6,8m. Oman, Dubai, Spain and Botswana contributed amounts less than R1.0m.

In fact for the 2011 year, in addition to claims paid on payment defaults from European debtors, claims were paid for defaults arising out of the following countries:

Countries

Values Paid

Industries

Argentina

R1,129,570.03

Carton Boxes

USA

R871,572.50

Flower, wine, tyres, fish & spices

Israel

R501,564.81

Fruit


Claims also emanated from the following African countries:

Countries

Values Paid

Industries

Mozambique

R5,378,427.79

Plastic pipes & fittings, security, computers

Nigeria

R1,305,178.75

Steel

Ghana

R997,235.83

Construction Material, wine & carton boxes

Angola

R596,444.15

Machinery & mining supplies, Computer components

Kenya

R437,973.36

Pumps & Computers

Zambia

R215,058.18

Carpets & Tools

Malawi

R189,540.00

Steel & Manufacturers of plastic products

Namibia

R147,394.31

Security, clothing, Automotive spares & building materials

Botswana

R146,283.05

Wood & Laminate flooring, tools & fruit

The notifications received of pending or potential losses arising from debtor defaults in Malawi of R2,4m; Mali R4,4m; Uganda R5,6m and even Australia of R6,8m. Oman, Dubai, Spain and Botswana also contributed, albeit amounts less than R1.0m.

 As a result of the European crisis, even the risk associated with securing payment under a Letter of Credit drawn on banks in the Eurozone, has increased due to the possibility of any number of those financial institutions going to the wall.

“Political upheaval on the African continent as well as in the Middle East, also poses new threats for exporters the world over. Consequently, local exporters need to focus far more attention on and manage the payment risks from virtually every foreign buyer and country around the globe, as failure to take significant precautions, may very well result in substantial losses,” concludes Reddi.

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