Supply Chain Finance: Optimising Liquidity in South African Business

Supply Chain Finance: Optimising Liquidity in South African Business

In an increasingly uncertain operating environment—marked by shifting exchange rates, load shedding, and supply chain delays—liquidity has become one of the most critical tools in a company’s arsenal. One underused solution in South Africa? Supply Chain Finance (SCF).

This financing model helps both buyers and suppliers strengthen cash flow, reduce cost of capital, and keep supply chains running without additional debt.

What Is Supply Chain Finance?

Supply Chain Finance, also known as reverse factoring, flips the traditional funding model. Instead of suppliers chasing early payment at high interest rates, the buyer works with a finance provider to offer early payment at better terms.

Here’s how it works:

1. A supplier delivers goods or services and issues an invoice.
2. The buyer approves the invoice.
3. A financial institution pays the supplier early—often within a few days.
4. The buyer pays the financial institution later, on the original due date.

Everyone wins: suppliers get faster access to cash, and buyers extend their working capital cycles, all while preserving supplier relationships.

Why It Matters in the South African Market

Many suppliers in South Africa—especially SMEs—face challenges accessing affordable finance. High borrowing costs, limited credit access, and payment delays often put pressure on their operations.

With SCF:

• Suppliers can access funds at lower rates, based on the buyer’s credit profile rather than their own.
• Buyers can negotiate better terms and strengthen supplier loyalty, which is crucial when continuity and resilience are at risk.
• Both parties can manage liquidity more effectively, especially in sectors affected by currency volatility or seasonal demand shifts.

A Real-World Example

Let’s say a major South African retailer regularly sources from local agricultural producers. Instead of waiting 60+ days for payment, a farmer could receive early payment from a funder at a discount rate of, say, Prime minus 1%, because the funder is confident in the retailer’s credit quality. The retailer then pays the funder after 60 days—freeing up working capital without putting pressure on the farmer.

Who Should Consider SCF?

SCF is most effective when:

• You’re a buyer with strong credit standing and regular, high-volume purchases.
• You want to free up liquidity without taking on new debt.
• Your suppliers—especially small or mid-sized businesses—are under working capital strain or reliant on expensive short-term loans.

Even for companies with turnover above R500 million, SCF can be a lever to improve Days Payable Outstanding (DPO) and ensure stability across their value chain.

Technology Makes It Easy

Modern SCF platforms automate much of the process—integrating into your ERP system, handling invoice approvals, and giving both buyer and supplier real-time visibility.

TreasuryONE works with these platforms to design and implement the right setup for your needs. Whether it’s a bank-led, fintech-powered, or multi-funder structure, we ensure supplier onboarding is smooth and governance is robust.

How TreasuryONE Supports SCF in South Africa

We help South African businesses unlock SCF with:

• Liquidity strategy design aligned with your broader treasury and cash management goals.
• Platform selection and integration, ensuring seamless ERP connectivity and low admin burden.
• Supplier engagement and onboarding support.
• Ongoing performance monitoring, so you can track benefits over time.

Whether you’re navigating growth, managing local supply chain constraints, or optimising working capital, SCF is a powerful lever to keep cash moving—and business stable.