The rationale behind the Commodity and Trade Finance platform is the mere fact that the traditional banking industry does not have the appetite nor the systems to facilitate commodity trading on a daily basis with solid businesses in the coal, chrome and energy sectors. 

This left a very big gap for alternative funders to enter into this very lucrative, highly cash generative sector with relatively low risk associated with the trades because of the solid offtake agreements with blue chip clients such as Anglos, Sasol, Eskom etc. 

The executives of the Rihlat GP have hand-picked a few solid companies in each sector with which they already have had a very successful history of funding into these businesses and knows the quality of the trading experience and capabilities of the executives and the quality of their operational controls and trading protocols.

The rationale behind the trade finance trading platform is that the traditional banking industry does not have the appetite nor the systems to facilitate volumes of small purchase orders on a daily basis for SME’s. 

Large corporates such as the mining houses and large government institutions are issuing several purchase orders to SMEs in South Africa to comply with their stated objectives to give SME’s almost 30% of their annual procurement budget. This runs into billions of rands per annum. The SME’s, however, win the tenders and receive the purchase orders, but they cannot perform on it because of a lack of funding.

The gap in the trade finance market is to enter into an agreement with the large corporates and mining houses to acknowledge the funding vehicle and to pay the funding vehicle for the purchase order facility to the large corporate client base.

The Partnership’s mandate will be as follows:
• Minimum individual trades: R200 000
• Maximum combined trades with one party: R40million
• Maximum payment terms: 30 days
• Profit share: minimum 13% and maximum 20%.

The investment product is based on a 12 month lock-in period, but the investor will be allowed to sell, exit or trade in their partnership portfolio after a period of 12 months with the consent of the General Partner.

The investment from the investor will have the following criteria and expected returns:
• Lock in period: 12 months
• Withdrawal notice: 2 months only after 12 months
• Minimum investment: R50 000
• Expected profit returns: 15-20%

Rihlat will distribute the profits to the investors based on the trading profits on a monthly basis.