Back in March, we confirmed that ZSE & Harare Receivables Exchange were working together to create a national receivables exchange. Today, ZSE announced that the Zimbabwe Receivables Marketplace has been launched today.
What problem are they solving?
My colleague who wrote about Harare Receivables Exchange in 2013 nailed the ordeal on it’s head:
If you run a business in Zimbabwe, or anywhere in the world for the matter, you know that getting the much sought after order to supply a large company is a great deal for your business. But that it’s also not. In fact, if you’re a startup that big order can be the end of you.
It’s a great deal because if they pay you on time, you’re in cashflow heaven. But they rarely do hey. Their payment cycles are 30 days if you’re lucky, otherwise it’s 60 or even 90 days. And even then, they almost always never stick to it. They are elephants, and it’s deadly business hunting them.
Limbikani Makani
This is the problem that ZRM seeks to solve. How will they do it you ask. Well, ZSEs press release claims the ZRM will make use of a Trade Receivables Discounting System.
I won’t give the ZSEs explanation for what this system does because it’s extremely hard to understand. This is the tweet they shared explaining;
PRESS RELEASE; LAUNCH OF ZIMBABWE RECEIVABLES MARKETPLACE pic.twitter.com/7pGnCzM1ry
— Zimbabwe Stock Exchange (@ZSE_ZW) August 19, 2020
Here’s a simpler explanation I’ve given before. Let’s say an SME supplies Pick N Pay with a fruit juice and they are told they’ll get their money in 40 days. If the SME is on the receivables financing platform they can take this invoice to ZSE and a financier (after agreeing with Pick N Pay the debtor) can pay the SME in three days instead of the initially proposed waiting period.
What will be the advantages for small businesses?
ZSE says parties participating in the marketplace will benefit in the following ways:
- SMEs get greater access to finance, at competitive rates without providing collateral;
- Corporates save on procurement cost through an improved negotiation of financing terms for their vendors;
- Investors such as asset managers and pension funds get an opportunity to build alternative asset portfolios.
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