Structured Trade & Commodity Finance (STCF)

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As a previous Banker, Trade Finance was and still is the swiftest cash conversion cycle (CCC) supported by volumes with Africa’s wealth in commodities makes this a lucrative industry for Traders.

As a conventional financer who has limited appetite for risk and is majority focused on providing innovated solutions to increase and maintain market share it is evident that there is a market failure to provide funding mechanisms and bespoke solutions to service the STCF market.

This lead to numerous boutiques and trade financing houses being established albeit due to the many various disciplines a Trade Financier required, credit focuses on liquidity versus NAV , legal (UCP 600 / URDG 758), industry specialist, logistical & warehousing, collateral management, financial acumen supported by Structuring versus vanilla trade finance would make it challenging for the gap to be serviced by any boutique or trade financing houses as this is perhaps the same reasons that lead to an opportunity for a STCF to service this market.

The STCF financier would services this market would need to be capitalized through upstream funding whereby Product and Weighted Average Cost of Capital (WACC) would favor the commodity industry, these are preferably done in LIBOR to reduce the interest bill (NII) albeit is occasionally done by financiers and those who are prepared to assume the risk often are private equity or 3rd party financier with a high IRR which erodes the liquidity or the ability for a STCF financier to service the market with a foresight versus hungry shareholders or 3rd tier capitalizers.

 

The STCF has huge opportunities of a CCC of 3-4times per/a supported by a growth year on year of 10% versus a stagnant 15-20% every exists, for Philanthropist and investors with foresight who would like to capitalize of the IP of Wellstone Capital as a fund manager , we will welcome engagements.