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This article was initially produced for the NTU-SBF Centre for African Studies on the Nanyang Business School in Singapore.
Every day, hundreds of containers of cargo destined for the landlocked international locations of Uganda, Rwanda and Burundi enter by the ports in Kenya and Tanzania. These 5 nations are all a part of the East African Community, which launched the only customs territory in 2013. It is meant to simplify trade between the member states and slash prices by clearing shipments at their first port of arrival or departure, however inefficient flows of customs information have handicapped its effectiveness. Up till not too long ago, importing cargo and shifting it between member states required merchants to submit a slew of paperwork – together with delivery information, invoices, permits and certificates – to the respective customs authorities in every nation.
For occasion, if a Rwandan importer needed to herald a consignment from China by the port of Mombasa in Kenya, after which transported overland by way of Uganda, it will have to submit paperwork to not solely the Rwanda Revenue Authority but additionally to its counterparts in Uganda and Kenya. If the importer didn’t have a presence in Uganda and Kenya, it had to pay somebody to bodily submit the required paperwork on the places of work of the related authorities companies, a expensive and time-consuming course of.
Singapore-headquartered trade expertise firm GUUD, based by entrepreneur Desmond Tay, has, nevertheless, streamlined this complete course of by the implementation of a Single Customs Territory platform which integrates customs clearance processes throughout the 5 international locations. All the documentation is now shared digitally between the assorted income authorities, ports and border posts. With GUUD’s system, an importer in Rwanda subsequently solely wants to submit the related paperwork to their native authorities, and it’s then shared with the related companies in all the opposite international locations. “This project helped to cut down a lot of the time previously required for import-export clearance,” explains Tay.
Entrepreneurial foundations
Born in Singapore, Tay says he grew up in an “average Singaporean household, living a simple life”. His father was a policeman and his mom helped out in a restaurant. During faculty holidays, Tay took on part-time jobs working in a automobile wash and as a salesman in a division retailer. He graduated from Ngee Ann Polytechnic with {an electrical} engineering diploma. After serving his time within the military (nationwide service within the armed forces is necessary for all Singaporean males), he began his profession at an engineering firm specialising in manufacturing unit automation. Once Tay accomplished a subsequent laptop science diploma, he moved on to an IT firm at present often called CrimsonLogic that specialises in e-government options. The expertise at CrimsonLogic would come in useful later in Tay’s profession: one of many tasks he labored on whereas on the firm within the late Nineteen Nineties was to implement a digital trade facilitation system in Mauritius.
Tay obtained his first style of what it’s like to be an entrepreneur when he joined his earlier boss at CrimsonLogic on a brand new enterprise, which constructed on-line platforms for monetary establishments. “I was the first employee at that company, so essentially I was doing everything from programming to helping out with sales and a lot of other stuff.”
A couple of years later, in 2003, Tay took the plunge and began his personal enterprise. In the start, the main target was on growing enterprise useful resource planning (ERP) software program, like gross sales and stock administration merchandise, for small- and medium-sized companies. The firm was offering software-as-a-service options earlier than it turned mainstream. Tay ultimately pivoted the corporate to constructing software program for governments, a subject he was acquainted with from his time at CrimsonLogic. He admits that he discovered growing ERP options “boring” and that digitising authorities methods had a a lot better influence.
One of the tasks the corporate was concerned in was the digitalisation of Singapore’s air cargo processes. After this project, Tay determined to focus particularly on constructing trade and logistics options. “That project made us realise there are a lot of opportunities in the area of trade and logistics. Air cargo is just one part of the ecosystem. From there we started to look into different parts of the ecosystem.”
Today the corporate employs shut to 200 folks with places of work positioned in Singapore, China, Indonesia and Kenya, and tasks spanning greater than 17 international locations.
Entering the African market
GUUD’s first African venture was in Mauritius, the place it upgraded the TradeWeb digital trade facilitation system, a venture Tay was concerned with all these years in the past at CrimsonLogic. “The operator of TradeNet in Mauritius wanted to upgrade the system and contacted us. That project gave us an initial footprint in Africa,” he says.
The TradeWeb platform permits merchants, customs brokers, delivery brokers, and freight forwarders to submit trade paperwork like manifests, declarations, certificates of origin, import/export permits to varied authorities. Commercial banks are additionally linked, enabling digital fee of duties and taxes. The advantages of TradeWeb have been to tremendously cut back trade declarations processing occasions, minimise travelling, and get rid of duplication of knowledge seize by completely different companies. “When I initially worked on the project in the 1990s, the internet was still in its infancy. The software had to be installed on a PC. We came in and replaced the system with up-to-date technology,” Tay explains.
After finishing the venture in Mauritius, GUUD began scouting for different tasks in Africa. It registered an organization in Kenya, and appointed a Singaporean common supervisor. The Kenyan workplace’s first huge win was the Single Customs Territory venture for the East African Community (EAC). Tay says GUUD landed the work by pitching its resolution to the EAC Secretariat. Once it landed the venture, the corporate started to construct its group by native hires.
Executing the East African Single Customs Territory venture was something however easy as GUUD had to hyperlink the methods of 5 international locations that each one had completely different ranges of digitisation, and ranging necessities for customs documentation. The venture took a few yr to implement earlier than it went stay. GUUD is at present within the technique of growing the second part, which includes integrating instruments equivalent to cargo scanners with the customs methods and linking with logistics operators.
West Africa and past
Over the years, GUUD has been concerned in a number of different tasks in Africa. In the West African nation of Togo it launched a digital trade certification system. “Exporters need certain certifications in order to export their products. In Togo, these were all issued through a very manual process. Exporters went through the whole application process, including laboratory testing of their products, and eventually a paper certificate was issued. This system was open to fraud. Together with the Togolese government we looked at this whole certification process. First of all we brought it online so that people don’t have to go to government agency offices to apply for the certificates. We also brought in the concept of digital certificates. So apart from the paper certificate, a digital certificate is also issued,” Tay says.
GUUD landed the Togo venture after figuring out inefficiencies in Togo’s trade system after which presenting an answer to the federal government. “Togo is helping their producers to export their products overseas. One of the key aspects to export more is assuring buyers of the quality of products, and certification plays an important role in that. We spoke to the government and then we pitched them the idea of a national e-certificate platform.”
The African Continental Free Trade Area (AfCFTA) may doubtlessly additionally open up alternatives for GUUD. AfCFTA, which in principle formally got here into impact in 2021, will deliver collectively a market of greater than a billion folks however is but to be absolutely applied on particular person nation degree. “We are closely monitoring AfCFTA and have spoken to a few organisations about how it will impact intra-African trade. However, at this point AfCFTA is largely conceptual and it will take some time to gain traction. But we don’t want to miss out on a good opportunity,” Tay says.
Operating in Africa requires persistence, significantly when coping with governments, in accordance to Tay. “In Asia we tend to be quite impatient. However, doing business in Africa takes a lot of patience because creating trust and understanding with our clients is very important. Culturally we are different, the way we do things are different. So it requires a lot of patience from both sides in order to understand one another.”
As to not waste its time operating after useless ends, GUUD sometimes seems to be for the buy-in from senior officers earlier than it’s going to go all out to pitch its options to a specific authorities. “You need to have the endorsement from a senior government official who sees the value of bringing in digitalisation. Without their endorsement you will just run around in circles without getting anywhere.” Tay provides it will be significant to set up if governments have the funds for these tasks, and in the event that they don’t, if it may be funded by donors.
GUUD additionally works carefully with organisations just like the Singapore Cooperation Enterprise (SCE), Enterprise Singapore, USAID and TradeMark East Africa. For occasion, Enterprise Singapore helped GUUD to interact with non-public sector stakeholders for a venture in Mauritius, whereas SCE has assisted with government-related enterprise in locations like Djibouti. “These are very good partners because they have contacts in governments and they know which projects are serious and which ones we should probably not waste our time on. Working with the right partners in Africa is very important. It is not just about culture but understanding the market itself, because each of Africa’s 54 countries is different,” Tay notes.
He highlights language as one other problem in sure markets. “In Singapore we are more fluent in English, so typically anglophone African countries are easier for us to navigate. French-speaking countries are always a challenge in terms of communication. For example, in countries like Togo and Djibouti you can’t survive without a translator. However, we do have some French-speaking staff.”
Financing African trade
Apart from implementing methods for governments, Tay additionally desires to launch among the firm’s non-public sector-focused options in Africa. Its trade finance merchandise, for instance. Trade finance is a vital aspect of worldwide trade. By involving industrial banks within the transaction, sellers and patrons mitigate towards the dangers of not getting paid or the cargo not arriving. “Trade finance instruments are premised on an existing credit relationship between counterparty banks. As such, trade finance is essential to cross-border payments, and even more so during crises, when both real and perceived cross-border risk increases while, simultaneously, much-needed capital and liquidity can dry up from the financial sector on both sides of the border,” notes the IFC.
According to an African Development Bank report, participation in trade finance actions on the continent by banks has decreased over the earlier decade, main to an estimated trade finance gap of US$82 billion in 2019. “Competition, new banking regulations on know-your-customer/anti-money laundering, and strict capital requirements introduced after the global financial crises have increased due diligence costs and decreased margins, making small transactions, particularly for SMEs, unprofitable for banks,” reads the doc.
In Singapore, GUUD has constructed a multi-bank trade finance portal, referred to as RYTETFAP, which offers a full suite of trade financing utility choices for companies. Instead of bodily couriering paperwork equivalent to payments of lading and invoices to banks when making use of for trade finance, importers and exporters can full the whole course of on-line.
The firm has launched the idea of transaction-based trade finance, the place the credit score is prolonged utilizing the cargo as collateral as opposed to making creditworthiness choices primarily based on a enterprise’ stability sheet and money flows. “If something happens, and the importer defaults on his payment, we are able to recover the money by selling the cargo,” Tay explains. He says with this method, new sources of trade financing, other than conventional banks, will be introduced in, and companies that previously wouldn’t have been accredited by the banks can obtain credit score. “We have been operating on this model of trade finance for the past two-and-a-half years – financing products like coffee, palm oil, seafood and milk powder – and it has proven successful. We can bring this to Africa. For instance, we are currently talking to partners regarding importing building materials into Mozambique using this trade financing concept.”
Online marketplaces
GUUD has developed Singapore’s first on-line business-to-business (B2B) seafood market that helps merchants promote their items extra successfully. Tay believes there may be potential for comparable platforms in Africa, and the corporate is already in discussions with stakeholders in a number of West and Southern African international locations with massive fishing industries.
GUUD’s marketplaces are differentiated from platforms like Alibaba, in that they aim particular industries. “Our take on B2B platforms is to focus on an industry and then bring all the stakeholders in that industry together and create a community.”
In addition to connecting patrons and sellers, GUUD integrates the whole ecosystem – together with the certification course of and logistics – into its marketplaces. “Seafood trade is not as simple as someone sells the fish and someone buys the fish. For example, supplying seafood to a retail chain is very different from selling seafood to a processing plant that makes fish filet or fish fingers. There are also different stakeholders for farmed seafood versus wild caught seafood. Likewise for logistics – there is frozen seafood, there is fresh seafood, there is live seafood and all of these have different logistics requirements,” Tay explains.
Beyond seafood, he sees potential for comparable marketplaces for varied different commodities. For occasion, GUUD is engaged on launching a market for the espresso trade.
Overall, Tay is upbeat about the way forward for Africa-Asia commerce. “One of our company’s focus areas is to connect trade between Africa and Asia. This is why we are pushing for platforms like the seafood and coffee marketplaces in both Asia and Africa. We want to connect the two continents together.”
According to the African Import-Export Bank, the rising trade ties between Africa and Asia reached a turning level in 2018, when Asia’s share of Africa’s exports reached 27%, exceeding for the primary time the share of Africa’s exports to Europe.
“From a long-term perspective, we believe trade between Asia and Africa has a lot of potential and will continue to grow. Agricultural commodities, especially, are big in Africa and Asia has growing consumption. There will be a lot of opportunities in this area,” Tay provides.
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