Original Research

Measuring the impact of trade finance on country trade flows: a South African perspective

Marcel Kohler, Adrian Saville
South African Journal of Economic and Management Sciences | Vol 14, No 4 | a136 | DOI: https://doi.org/10.4102/sajems.v14i4.136 | © 2011 Marcel Kohler, Adrian Saville | This work is licensed under CC Attribution 4.0
Submitted: 05 November 2010 | Published: 06 December 2011

About the author(s)

Marcel Kohler, University of KwaZulu-Natal, South Africa
Adrian Saville, Cannon Asset Managers, South Africa

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Abstract

Trade finance (or short-term credit) plays a crucial role in facilitating international trade yet is particularly vulnerable to financial crises as banks increase the pricing on all trade finance transactions to cover increased funding costs and higher credit risks. Whereas South Africa’s financial institutions largely managed to strengthen their capital positions during the global financial crisis, the country’s trade flows and access to capital (in particular trade finance & its costs) were hard hit by the crisis.


Little is known about the extent of shortages or ‘gaps’ in trade finance and the impact of this on South Africa’s recent trade performance. Whilst our research recognises that access to trade finance is not the main cause of South Africa’s trade contraction, our research suggests that a one percentage point increase in the interbank lending rate of our trade partner could reduce exports by approximately ten percent, all else equal. 


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