Payment Terms in African Agri Trade: LC, TT and Escrow

Every payment structure in this trade is an answer to the same question: who is exposed, for how much, for how long? The buyer fears paying for goods that never arrive; the seller fears shipping goods that are never paid for. Letters of credit, telegraphic transfer splits and escrow are three different ways of slicing that exposure, and each has a place — along with a few arrangements that should end the conversation on the spot.

Letters of credit: paper against payment

An irrevocable sight LC works like this on an agri shipment: the buyer's bank promises to pay when presented with documents that exactly match the credit's terms — typically the bill of lading, invoice, packing list, phytosanitary certificate and certificate of origin. We ship, present the documents through our bank, and payment follows document checking. The bank's promise replaces the buyer's, which is the whole point: we are no longer exposed to the buyer's willingness to pay, only to our own ability to produce compliant paper.

The catches are practical. Banks check documents, not cargo — an LC guarantees payment against paper, and quality assurance still lives in inspection and specification, not in the credit. Discrepancies are the daily reality: a typo between invoice and credit text can hold up payment and trigger fees, which is why we insist on reviewing the draft LC before it is issued. And LCs carry real bank charges at both ends — issuance, advising, confirmation if the seller's bank requires it — which is why they make most sense on larger contracts and first-time relationships, less on a repeat trial container.

Telegraphic transfer: the 30/70 working norm

Most repeat business in African agri trade runs on a TT split, and 30/70 is the working norm: 30 per cent on contract against the proforma invoice, which funds procurement and commits both sides, and 70 per cent against the shipping documents — normally the scanned bill of lading and certificate set, with originals couriered or released on receipt of the balance. The split is a compromise both sides can live with: the buyer is never exposed for the full value before evidence of shipment, and the seller is never shipping entirely on faith.

Escrow: the niche option

True third-party escrow — an independent agent holding funds until agreed release conditions are met — is rare in bulk agri trade, mostly because the LC already does that job inside the banking system. Where escrow genuinely appears is on small trial orders through trade platforms that offer payment protection, and occasionally through lawyers on structured first deals. If a counterparty proposes an 'escrow agent' you have never heard of, on a website registered last month, that is not escrow; that is the scam wearing escrow's coat.

“A payment structure is a trust instrument. The moment one side demands all the protection and offers none, you have learned everything you need to know about the deal.”

— Neema Kessy

Red flags that end the negotiation

• A demand for 100 per cent advance payment from a first-time counterparty — no legitimate structure needs it.
• A receiving account that does not match the contracting company's name, or a switch of bank details by email mid-deal — verify any change by voice on a known number.
• Payment requested through personal accounts, money-transfer services or cryptocurrency for a bulk commodity contract.
• Prices far enough below the market to make the maths of the deal impossible — the discount is the bait.
• Refusal of LC and refusal of any split terms at once: a counterparty who accepts no structure that protects you is telling you why.

Our own position, plainly: we work LC at sight for new relationships and larger contracts, 30/70 TT for established ones, and we put the terms in writing before a dollar moves in either direction. A counterparty who wants your money before your protection is not offering you a trade — only a lesson.