India Eximbank has extended a line of credit of US$10mn to Absa Bank, the largest commercial bank in South Africa, to support India’s exports to that country. An agreement to this effect was been signed in Pretoria, on July 4 by PR Dalal, general manager at India Exim and Peter Gordon, head of international banking at Absa.
Exim’s credits afford a risk-free, non-recourse export financing option to Indian exporters. Under the agreement to Absa, importers from South Africa, are required to make advance payment of 10% of contract value to the Indian exporters and the balance 90% of contract value would be reimbursed by Exim to the Indian exporters, upfront upon the shipment of goods. The credit period available to the importers, through Absa, is up to five years.
India’s exports to South Africa amounted to US$351mn during 2001-02, registering a growth of 13.8%, over US$308mn for the previous year, mainly on account of rise in export of non-basmati rice. Agriculture and processed food products, transport equipment, cotton yarn, fabrics, ready made apparels, machinery and instruments and manufactures of metal, were the principal items in India’s export basket to South Africa in 2001-02.
During April 2002-January 2003, India’s exports to South Africa stood at US$408mm, an increase of almost 41% as compared to US$290mn, during the same period in the previous year. Potential areas that Indian exporters can focus upon, are transport equipment, machinery, chemicals and pharmaceuticals, food items and spices, leather products, glass and ceramics, manufactures of metals and apparels. There also exists considerable potential for setting up joint ventures between Indian and South African partners in sectors like textiles, pharmaceuticals, information technology and hospitality services.