The hidden strain in mid-corporate supply chains

Increasingly, he spends his time worrying about when inputs will arrive, how they will move through the country’s logistics network, and whether the next payment cycle will free enough cash to start the next production run.

His experience reflects a broader shift across South Africa’s mid-corporate sector. Businesses that once built supply chains around efficiency are now redesigning them around resilience. Global geopolitics, logistics constraints and changing supplier relationships are reshaping how companies source materials and manage liquidity. For many firms, the operational pressure ultimately shows up in 1 place: working capital.

Trade and working capital finance has always been central to industrial growth. Manufacturers need raw materials, distributors need inventory, and exporters rely on stable corridors to global markets. Yet the mechanics supporting these flows have become more complex as companies fund imports earlier in the cycle, hold inventory longer and manage payment terms that evolve as supplier relationships change. These pressures often begin with sourcing.

Geopolitical tensions – in the form of heightened tariffs tensions, sanctions and military actions – have forced many firms to reconsider where they obtain critical inputs. One client that had historically sourced materials from Russia had to rebuild that supply chain almost overnight when sanctions disrupted established routes. Alternative suppliers can be found, but new relationships rarely carry the same credit terms as long-standing ones. Where suppliers once offered deferred payment arrangements, buyers may now be asked to settle invoices upfront or provide bank-backed letters of credit or payment guarantees until trust is established. That shift places immediate strain on working capital because cash leaves the business well before finished goods are sold.

Similarly, our export clients have had to look at alternate markets where they sell their products, given the heightened and unpredictable tariffs dynamics. Establishing new markets and building customer relationships takes time. These dynamics result in longer inventory turnover periods and have a potential to strangle clients’ working capital cycles. Infrastructure constraints compound the challenge.

South African firms in the export-import market depend heavily on ports and inland transport networks to move goods through the economy. When congestion develops or rail capacity falls short, inventory can remain stranded for extended periods. Companies have experienced this during periods when port backlogs forced cargo onto road transport instead of rail.

The financial consequences are immediate as transport costs rise, fuel levies affect margins, and insurance costs increase as goods move by road. What begins as a logistical delay quickly becomes a balance sheet issue as cash remains tied up in inventory that cannot yet generate revenue.

Trade and working capital finance, therefore, plays a more strategic role than many businesses realise.

Traditionally, documentary trade finance instruments such as letters of credit and guarantees were viewed mainly as tools to manage counterparty risk. Their broader value lies in keeping liquidity circulating through a company’s operating cycle. Funding can be linked to purchase orders, inventory or receivables, allowing businesses to release cash at several points along the trade journey. A shipment can be financed while in transit. Inventory can generate liquidity while awaiting sale. Receivables can be monetised through discounts, so companies receive cash before customers settle their accounts.

Rather than relying solely on conventional credit facilities, finance can be structured around the assets embedded in the trade cycle itself. Goods, invoices and purchase orders become the basis for liquidity, allowing companies to navigate supply chain disruptions and longer payment cycles with greater flexibility.

There is also a broader structural challenge. A significant trade finance gap persists globally, particularly in emerging markets, where businesses often struggle to access the liquidity required to support growing trade flows. For mid-sized firms operating in complex supply chains, bridging that gap can determine whether opportunities are captured or lost.

The security profile of trade and working capital finance is another factor that is often overlooked. Transactions are typically tied to identifiable goods moving through a supply chain, which historically has resulted in relatively low loss ratios compared with many forms of conventional corporate lending. This makes trade and working capital not only a more attractive asset class, but also one that shows much better returns and lower loan loss ratios.

Digitisation is also beginning to change that perception as banks work to digitise documentary trade finance instruments such as guarantees and letters of credit, which reduces paperwork and accelerates transaction processing.

Historically, many mid-sized firms relied largely on conventional lending structures. The mid-corporate approach introduces more specialised financing solutions designed around the realities of trading businesses, recognising that working capital often sits at the centre of operational resilience. For banks serving this segment, understanding the working capital cycle has become a necessity.

This is precisely where Nedbank’s mid-corporate model focuses. Rather than treating credit as a stand-alone facility, we structure funding around the client’s working capital cycle. This needs an understanding of how businesses convert inputs into finished goods, how inventory moves through warehouses and how receivables are settled. By aligning financing structures with these cycles, liquidity can be introduced when operational pressure rises.

In practice, this means structuring finance around the flow of trade rather than the static position of a balance sheet. When funding is aligned with purchase orders, inventory, receivables and payables, companies gain the flexibility to navigate supply chain disruptions and shifting payment terms without constraining growth.

In the broader economy, there are early signals of renewed industrial activity. One banker recently described looking out across Johannesburg and Cape Town from an office tower and noticed cranes returning to the skyline.

The same principle applies within supply chains. When finance mirrors how businesses actually operate, trade flows become more resilient, and goods keep moving through the system.

For the mid-corporate sector, resilience increasingly depends on the effectiveness of working capital management. Structuring finance around the realities of trade will determine whether companies keep goods moving, sustain production and continue investing across the economy. DM

Author: Ovizikhungo Sicwetsha, Head of Transactional Banking: Mid Corporate, Nedbank Business and Commercial Banking