Trade finance and supply chain liquidity have emerged as critical challenges to sustainable economic development essential to driving immediate pandemic recovery while also protecting national economies from major disruptive events in the future.
Why? Leading economists have estimated that more than $9 trillion in liquidity and working capital has been trapped in global supply chains, resulting in mass bankruptcies of otherwise healthy companies and putting millions of jobs at risk.
Protecting supply chain liquidity will likely be a top priority for the new national committee tasked with leading the UAE’s post-pandemic economic recovery, as well as one of the key performance indicators the committee tracks to monitor the financial health and recovery of private businesses and state-owned enterprises.
On a national level, governments have stepped up with strategic initiatives to proactively promote trade finance schemes to keep supply chains moving and get suppliers paid. We’re not talking “free money” stimulus programs.These are smart investments to stimulate immediate trade to keep economies on the path of sustainable long-term post-pandemic growth.
In the UAE, the Central Bank stepped up with a nearly $70 billion Targeted Economic Support Scheme (TESS) strategically engineered to ease liquidity challenges of national banks. One of the core pillars of TESS enabled banks is to inject essential working capital into the economy through corporate loans and interest relief to protect the national supply chainand help finance ongoing trade, keeping the national economy moving forward.
In Denmark, the Danish Export Credit Agency (EKF) and Tradeshiftpiloted an initiative to transform export credit financing into a supply chain remediation programdesigned to unlock $55 billion in supplier payments in just 12 months.
While governments are taking immediate actions to protect supply chains and stimulate economic growth, the private sectoris taking a page from consumer e-commerce giantsto build digital business-to-business (B2B) marketplaces to strengthen, streamline and support supply chains.
These new B2B marketplaces can immediately connect thousands of buyers and suppliers across the globe on a single digital platformwhile financing trade to foster rapid supplier payments. They provide an easy and effective solution to fully digitizing supply chain purchasing, invoicingand payment systems, eliminating outdated paper-based systems that kept both buyers and suppliers from accessing invoices throughout the lockdown.
With end-to-end digital transaction processes, B2B marketplaces can be easily and fully integrated with ERPaccounting systemsand managed through web and mobile interfaces. They increase efficiency, enable digitized global trade, and most importantly, can integrate trade financing to ensure suppliers get paid and keep money flowing through local, regional, and global supply chains.
While these B2B marketplaces are modelled after popular consumer e-commerce platforms, like many next-generation businessmodels they have the potential to be far more lucrative and impactful. In 2018, B2B marketplaces worldwide drove approximately $680 billion in annual transactions or around 60% of the revenue driven through popular consumer marketplaces. By 2024 they are expected to be nearly neck-and-neck at roughly $3.5 trillion in global transaction value.
Amazon’s business marketplace reported $1 billion in revenue in 2015, its first year in operations. That revenue number expanded to $10 billion in 2018 and is projected to bulge to $31 billion by 2023. And Alibaba’s B2B marketplace is on a similar growth trajectory.
While the likes of Amazon may be a threat to traditional procurement technology, private B2B marketplaces will continue to grow in demand. The public nature of mass open marketplaces makes companies nervous about products getting copied and pricing strategies beaten. Private marketplaces eliminate that risk while delivering the fundamental value proposition of selling more, getting paid faster and greatly increasing efficiencies.
Now the race is on to establish a leadership position in B2B marketplaces in the Middle East and Africa.First-mover status here remains an open door. And the COVID-19 supply chain crisis was a business shattering wake-up call that is expediting the move by companies across the MEA region to finally abandon the paper route and adopt fully digitized procurement and invoicing.
In South Africa, Raindew Trade is leveraging the Tradeshift e-Marketplace platform to establish the first homegrown B2B marketplace serving companies across the region. Raindew Trade is implementing an immediate $1.5 billion instant supplier payment scheme for local businesses as well as companies in select African markets, while leveraging that first-mover advantage to onboard major corporate buyers to use the first African-based B2B marketplace to digitize and build efficiencies into their long-term procurement and payment processes.
The ability to ensure trade financing is the killer app for these B2B marketplaces. Bringing in a large, diverse, multi-layered buyer network into a marketplace that can effectively and efficiently onboard thousands of suppliers and provide trade financesolves the scale issue that banks have long struggled with when trying to efficiently support supply chain financing. That enables B2B marketplaces likeRaindew Trade to provide immediate value and benefit to companies across the pan-African supply chain while establishing a sustainable new business model in the region.
Lack of digitization in both companies and global supply chains make it very challenging to unlock the trillions of dollars owed to suppliers that is essential to driving immediate economic recovery as well as sustainable long-term growth.
One key learning from this global pandemic is that now is the time to leverage advanced technology that is readily available to create a truly connected global supply chain. With nearly half of all businesses worldwide expected to increase B2B marketplace purchasing within the next three years coupled with the ability to integrate cheap and efficient trade financing, B2B marketplaces can provide the solution to much needed rapid procurement digitization in the region and prevent major global supply chain disruptions and logjams that could again threaten economies across the region.