An innovative collaboration between Absa and Addendum Financial Services has helped to build a resilient Supply Chain Finance solution to support some of the biggest industrial businesses in South Africa. To date this initiative has managed to unlock more than R40bn in working capital, by processing more than 20 000 invoices for more than 450 suppliers.
“The events of 2020 put enormous strain on both operational cashflow as well as fulfilment activities across supply chains and it was critical that we as a bank were able to offer flexible solutions for our corporate clients,” says Sudeera Harduth, Pan African Open Account Finance Product Management Head at Absa Group.
In 2014, after doing extensive market research along with years of experience in the finance industry, Emuel Schoeman and Willem le Roux started Addendum Financial Technologies and with this, started marketing PrimeRevenue’s global, market-leading supply chain finance solution to businesses in South Africa.
Coincidentally, at the same time, Absa identified supply chain finance as a strategic product offering in the South African market. Absa came to the same conclusion as Addendum in that the PrimeRevenue software was streets ahead of its competitors, but it required specific expertise and extensive local support to roll out supply chain finance.
“The capability, support and expertise provided by the Addendum team was a perfect fit from a strategic perspective and positioning in our presence markets. This has allowed us to offer a seamless fully automated value proposition for our clients, providing exceptional service levels to our clients and scalability ambitions for the business” says Harduth.
Not long after the partnership was solidified, Addendum and Absa implemented a supply chain finance solution for ArcelorMittal South Africa (AMSA) in 2015. At this time, steel input costs were escalating rapidly, and steel prices were under pressure, which created massive distress in the industry. As a result, AMSA’s whole steel supply chain was under severe pressure which is where the Addendum Supply Chain Finance solution proved to be incredibly valuable.
Addendum and Absa implemented a fully automated supply chain finance program in just 47 days. The program allowed AMSA suppliers to receive immediate payment on all approved invoices at a competitive interest rate. The solution also allowed AMSA to negotiate longer payment terms, in line with international competitors, without impacting suppliers’ working capital. The working capital challenges of all parties were solved by Addendum and Absa through the program. Supplier participation in the program is totally voluntary.
The program was well received and the R1.3b funding line was fully utilised within 6 months. This provided massive relief for AMSA and many of their suppliers.
A senior ArcelorMittal executive at the time said: “This is not an IT implementation, it’s not a financial implementation, it’s not a legal implementation. It’s all of it: it’s a total business implementation done by Addendum.”
Not only was this program recognised and celebrated by the ArcelorMittal Group, in November 2016, less than 18 months after the program was launched, it was recognised by the Global Supply Chain Finance community as the Global supply chain finance program of the year in the manufacturing industry.
Off the back of this success, Addendum and Absa rolled out another successful supply chain finance program, this time in the retail sector for Dis-Chem Pharmacies. Within 9 months, more than 200 Dis-Chem suppliers joined the program, making it the largest program in Africa by supplier numbers and to this day it continues to grow and evolve.
In November 2017, the Global Supply Chain Finance community celebrated this success when Dis-Chem won the Global supply chain finance program of the year in the Retail sector.
Rui Morais, CFO of Dis-Chem sums up Dis-Chem’s supply chain finance program implementation: “This is truly an unmatched enterprise financial procurement solution.”
The supply chain finance solution has been successfully extended to other Absa clients and their suppliers in South Africa. Through expertly implemented supply chain finance programs, Addendum and Absa have freed up billions in working capital for highly creditworthy customers and hundreds of their suppliers, across a variety of sectors, without accruing any new debt.
“We are very proud of our Supply Chain Finance offerings at Absa. Our teams are continually looking at ways to drive our digital strategy, which allows us to optimize our payments to suppliers and offer value adds such as maturing payment capabilities for all our clients looking to streamline their payments even further. It is always encouraging to work with a partner like Addendum who support these initiatives making the lives of our clients easier” says Harduth.
Absa and Addendum are currently in the process of extending their solution to other countries in Africa where Absa clients are looking for 100% digital and paperless working capital solutions. A combination of cutting-edge technology from Addendum, coupled with the backing of the Absa industry know-how means that all stakeholders have the opportunity to do more high-quality business and better service their clients.