Africa Winners: The Drive to Diversify

“As anyone who has worked in Africa will know,” explains Sachin Shah, head of cash management products, transactional products and services at Standard Bank, which won Best Overall Bank for Cash Management in Africa in this year’s awards, “one of the key requirements is to be able to understand and navigate a rapidly changing landscape from an interest [rate], exchange [rate] and other benchmark perspective.” Shah says African companies are more prepared to deal with volatility than companies in more-mature, stable economies.

The World Bank predicted lower levels of growth in Sub-Saharan Africa in 2016, with growth falling from 3% in 2015 to 1.6% in 2016. Growth has suffered—in part due to lower prices for resources and commodities—but there is still optimism that growth will remain higher than levels seen in other regions, says Shah. “The drive to diversify dependency away from resource-heavy sectors into the consumer, infrastructure and manufacturing sectors continues across the continent,” he notes, “and will set markets up for improved growth rates as the resource environment improves.”

Volatility and regulatory uncertainty play a role, but not all key developments in the region are negative, says Shah. “With the advent of increased innovation, we continue to work with our clients to evolve their approach to payments and collections, with a view to both reaching more clients and [reducing] their working-capital cycle.” Shah points to digitization, disruption and innovation as key themes that will resonate across most regions this year.

The development of regulations surrounding foreign currency payments and “trapped cash” present a challenge for fully harmonized, regional treasury centers; but “there are some opportunities emerging that will [ultimately] contribute to improved payments outsourcing and processing,” says Shah. “On a positive note, East Africa continues to be one of the regions at the forefront of driving the adoption of electronic and alternative payments mechanisms.”

Mobile payments and collections are a key driver for change in Africa, as companies “positively disrupt their own value chains within a region where more people have mobile wallets compared to bank accounts,” notes Shah. “This enables access to more clients for [the companies’] own products and services, as well as improvements to their working-capital cycles through direct client engagement.”

In conjunction with this payments revolution, African companies are increasingly taking advantage of improved infrastructure to set up shared service centers, and they are making better use of data to improve treasury visibility and forecasting.

“Concerted efforts and partnerships between the public and private sectors in these markets continue to diversify growth into new sectors, sustain job creation and spur the growth of small and medium-size enterprises, which is encouraging,” says Shah.

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