Businesses in Africa
Doing business in Africa can be far away "straight forward" and needs much of persistence. But, for the USA companies which are ready to work with African partners in order to maintain the business, great earning can be achieved. For implementing this it is required relevant training, management knowledge and technical support. Exploring of commercial and development funding by partners is required for innovative financing. From history, it is known that Africa is a continent that consists of 54 countries, rich with natural resources. Recently the emergence of its South has given a boost to trade in the region while traditionally active states as Nigeria and Kenya have stagnated in recent times (International Trade Partnership Solutions, 2009).
So, the task is to develop a business of the SWISS company in Africa. Simultaneously it should be profitable and protected from risks by having proper control. This process is called the international trading. Obviously, that the task of the financial manager is in providing and implementation of safety moving of money with a usage of the international banking system. The letter of credit is a well-known form of reducing the risks. It can offer a guarantee to the seller about future pay and to a buyer that no payment will be made until he or she may receive the goods (Letters of Credit for Importers and Exporters, 2012).
The way of doing the deal looks like this: at first, the two sides agree to have a business. The seller asks a letter of credit to guarantee payment. And buyer goes to his bank for a letter of credit in favor of the seller. After credit risk of the buyer will be approved by bank, credit is forwarded to its correspondent bank. Advising bank will register credit and direct the initial credit to a seller. Seller provides the goods, then works on the documentary requirements needed for the letter of credit and shows the documents to the advising or confirming bank. Advising or confirming bank checks all papers for compliance with the terms and conditions. Then, issuing bank will check them for compliance. Documents to the buyer will be forwarded to a buyer after all this procedure.
It is important to note the discrepancies between documents of the countries. For doing this business the bill of lading should be used. The most common missing in such type of the documents are an incomplete set of bills, onboard notations without date, signing or initials, name of vessel can differ substantially from letter of credit, evidence of forgery or alteration. Also, it will be needed a document required by customs which determines original value of the import, for duties assessment and taxes. The purposes of this commercial invoice are to depict fully the goods, packaging type, weight of shipment, unit and total value and other charges (BusinessDictionary, 2013). The task is in avoiding such problems as amount differences from that shown on draft, amount exceeds limits of letter of credit, to check that draft and invoice are agree with each other, terms of shipment. While insurance policy process it can be appeared that description of goods are not the same as in invoice, risks are not covered enough as required by letter of credit, amount of policy will be insufficient and certificate or policy will not be indorsed. These are all the details, which can be carried out and controlled properly if controlling person is well-grounded in business law issues. However, often cases exist when letters of credit has expired, or is overdrawn, draft and other papers appeared after time called for in the letter of credit, documentation is incomplete, made changes in the papers are not initiated. All these stops trading process and call the further financing loses which is not important for skillful financial manager.
Finally, I have to remember that after reception of the letter of credit, me, as the credit expert have to review everything carefully and check the compliance with all the terms and conditions in order to minimize all available risks.
n.a.(2009). FSC Development Services Ltd. Internation Trade Partnership Solutions. Retrieved from: //www.fscdev.com/africa.html
n.a. (2013). BusinessDictionary.com. Retrieved from: //www.businessdictionary.com/definition/commercial-invoice.html
n.a. (1 August, 2012). Letters of Credit for Importers and Exporters. Gov. Uk. Retrieved from: //www.gov.uk/letters-of-credit-for-importers-and-exporters
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