Sub-Saharan Africa is a vibrant, forward-looking continent where innovation and early digital adoption is practically the norm. There are opportunities to progress at a pace that could outstrip other regions. Esther Chibesa, TTS Head for Sub-Saharan Africa, Citi, and Sheetal Shah, TTS Sales Head for Sub-Saharan Africa, Citi, explain how this region is adapting and advancing.
Like almost everywhere else on the planet, Sub-Saharan Africa is now emerging from the impact of the Covid-19 pandemic.Thankfully, due to the readiness of the population to be early digital adopters, the region is bouncing back quickly and strongly. With the digital-first mindset prevailing across many Sub-Saharan Africa countries, there is a real opportunity to show other regions how it can be done.
For instance, South Africa removed cheque books from its menu of payment mechanisms in 2020, whereas the UK and, in particular, the US still cling to this legacy format. Payments on mobile phones are now perhaps more embedded across Africa than in any other geography. There are many more examples, and for Shah, Citi has been taking on a key role in the digitalisation journey, as treasuries across the continent evolve to embrace the new digital normal.
While the appetite for new financial technologies has evidently increased in recent times, the push for digitalisation has been gathering momentum for quite some time, says Shah. One of the key levers for this desire to progress, she explains, has been the region’s widespread lack of legacy tools and systems. Being unencumbered by ageing tools has meant it can adopt new technology easily and effectively to its advantage.
While digitalisation in general continues to be important, Chibesa adds that perhaps the most pressing call from a treasury perspective is for a real-time set-up.
The elevation of immediate data accessibility to a central role in treasury is also driving real-time digital solutions to the fore as treasurers seek more timely and accurate analytics to enhance their decision-making.
“In markets with capital controls [such as Angola, Equatorial Guinea, Gabon, Nigeria, and Zambia] that are highly dependent on inflows from single commodity exports, clients need forecasting tools that can combine historical cash behaviours with externally sourced live market activities,” explains Chibesa.
Businesses in crisis mode obviously have to change the cadence at which decisions are made, with biweekly or monthly forecasts shifting to a daily or intraday activity. “While the decision-making patterns of our clients changed during the pandemic, as we begin to think in post- crisis terms, there are other global events continuing to impact corporate treasuries in Africa,” notes Chibesa. “This ensures crisis decision-making, and thus the need for real-time systems, lives on.”
Drivers for change
Taking a wider perspective on the rise of real-time to the top of the agenda, Shah says businesses have changed the way they behave because of consumer demand.
With circumstances seemingly dictating the need for progress, smart businesses are doing more than just reacting and keeping up; they are seeking opportunities to leverage the real-time environment.
The importance of accurate cash flow forecasting is highlighted as the number one priority in PwC’s 2021 Global Treasury Survey, notes Shah. This clearly reflects ongoing market volatility. But technology and digital innovation is also high on the priority list, with treasurers seeking new ways to navigate payments and collections processes. In Africa, the real star of the show is mobile money. “It’s changing the landscape of collections and how businesses manage liquidity,” she comments.
In addition to cash flow forecasting, Chibesa says technology is presenting a good opportunity for treasurers to reassess their approach to finance. “Treasurers are beginning to think carefully about ways to optimise their financing structures, and they are considering how they can support suppliers,” she notes. With a marked regional uplift in payables finance programmes, she explains that Citi customers are increasingly seeking ways to de-risk their value and supply chains.
As well as steering suppliers to Citi’s payables finance platform, while corporates will continue to leverage value chains with a strong global component, Chibesa notes that many are exploring options such as near-shoring supplier bases as a longer-term security consideration, and as part of their contingency planning.
Most companies have experienced some challenges in recent times and Chibesa notes that this has encouraged more reflective thinking on the role of treasury. “I don’t think there is a company that came out of the crisis less appreciative of the fact that they are part and parcel of a greater ecosystem, and that they play a pivotal role in supporting that whole structure, its efficiency, and even its survival.”
As part of the responsibility to support these ecosystems, where for example current economic circumstances have pressurised cash flows, adoption of digital receivables financing solutions can help optimise working capital, suggests Chibesa. “By rolling this out in a number of our markets – with more to come – we are enabling businesses to gain easier access to good-quality funding.”
Ecosystem awareness and the wider adoption of Supply Chain Finance (SCF) dovetails with the rising ESG agenda, says Shah. “We’ve seen buyers on Citi’s SCF programmes express greater interest in supporting marginalised and smaller-scale suppliers, creating access to finance, and generating new opportunities for them. It’s a win-win because every stakeholder is looking for supply chain security.”
Indeed, she continues, one of the lessons of the pandemic and the following crisis in Ukraine has been the realisation that new ways must be found to ensure supply chains are not disrupted – and that means looking out for every participant. In addition to the shift from a just in time (JIT) to a just in case (JIC) inventory model, to near-shoring production and supply lines, many of the larger corporate buyers now understand that protecting less powerful suppliers is key to supporting supply-chain security and their own success.
“In South Africa, the government-backed Black Economic Empowerment programme is a way of visibly demonstrating which suppliers a corporate is supporting in terms of its whole enterprise value chain,” Shah comments. “It really is about finding innovative ways to support the entire ecosystem.”