Cash, trade and securities innovations connecting Africa to the world
JOHANNESBURG The message that it was time to get back to basics resonated in the industry and meant sound transactional banking principles, like the management of payments, receivables, reconciliation and trade risk instruments found their place on corporate clients’ business agenda. This shift in focus meant clients’ expectations from transactional banks also increased and this in turn engendered competition in the market for better product offerings. The visibility of information became critical and clients wanted real-time access to their global cash positions so as to to manage their working capital requirements and liquidity carefully. In addition, clients wanted the ability to manage risk in their business through the use of international trade products. Banks in turn, desired more annuity-based revenue with lower capital costs and less capital consumption. Regulators drafted a raft of compliance and regulatory changes in a bid to clean up the financial sector and bring about more stability and prevent another collapse. The response to this change in business environment did not exclude Africa and both corporate clients and banks alike have had to make significant investments in both technology and operations to align to the move towards centralisation of treasury functions and the need to deliver integrated standardised end-to-end solutions for transaction management. An additional force that is disrupting the industry is some of the major technological innovations that are also coming to the fore, many of these being provided by non-banks in the form of “Fin Tech” companies. Physical cash is still considered king in most parts of Africa. However, with the rise of technology solutions, such as Mobile Money, coupled with regulatory moves in some markets towards moving cash into electronic forms, this will be a key area in which banks need to carefully manage their response, whether it is competing head-on, partnering or simply monitoring developments. Industry forums, meanwhile, are driving standardisation of client interactions with their banks and how regions clear payments in real-time across borders. Banks face the challenge of balancing these new dynamics at a time when Africa’s fortunes have turned. Africa was, until recently, one of the fastest growing regions in the world as it benefitted from a rapidly expanding and resource-hungry Chinese economy. However, the high commodity prices, low interest rates in the West and an appetite to invest in emerging markets that underpinned much of the growth are beginning to reverse, which is placing tremendous pressure on transactional flows in Africa. The plunge in internationally traded Brent crude, from USD115 a barrel in June 2014 to below USD30 in January 2015, has coincided with a number of factors weakening the gains made by certain regions in the African continent. Declining commodity prices and a lack of liquidity placed pressure on trade flows in many African countries and regions. Challenges, such as the lack of infrastructure, access to power still exist, however, with this comes opportunity. The facilitation of intra-African trade will help boost economic growth and assist in alleviating some of these continental challenges. There are still exceptional growth stories, especially in non-resource sectors. In fact, Africa is expected to be the second fastest growing continent within 10 years, behind emerging Asia, but ahead of the Middle East, with more than 50 percent of countries growing in excess of 5 percent annually until 2025. As this growth takes shape clients will increasingly look to their bank to deliver specialist solutions for African conditions to manage associated risks through the right level of product capability across cash, trade, custody and securities. Winning a client relationship in Africa and delivering on the commitments made earns a bank a flow business that grows as the client grows; this is why getting it right in Africa for corporate clients is crucial. As a bank that has more than 150 years’ experience of banking across the continent, we have the knowledge, skill and relationships to assist our clients negotiate the complex financial and regulatory cross-border environments in Africa and beyond. As the largest lender by assets in Africa, Standard Bank remains resolute on its Africa strategy and will continue to play a leading role in facilitating trade and capital flows in multiple currencies between African countries themselves, as well as between Africa and prominent international trade corridors. * Hasan Khan is head of transactional products and services at Standard Bank South Africa.
2016-04-07 10:19:06 2 years ago