Since African societies are largely cash-based it is not surprising that companies doing business on the continent cite payment systems as a bigger business challenge than infrastructure, corruption or poor governance.
As such, companies which have access to an on-the-ground system able to manage cash-based transactions, are king. “Yet this only works for corporates doing business across Africa if, their overarching pooled cash positions can be made visible across the continent through an effective automated treasury service,” says Richard Southey, Head of Cash Management, Africa at the Corporate and Investment Banking division of Absa.
Africa represents a truly diverse payments environment. Its legendary complexity of payment systems is compounded by constantly changing payments landscapes as the SADC region moves to a single currency by 2018, and West African countries, led by Ghana and Nigeria, for example, work to expand their regional payments system.
“Given this environment we believe the development of financial services markets in Africa will not follow the same path as other emerging markets,” says Southey.
Instead, in Africa, four forces, distinct from those seen anywhere else, will combine to drive a new form of financial market development on the continent.
Firstly, Leap Frogging will see the development of a different financial services market based on new infrastructure, tools and processes. Since, for example, many African countries never developed fixed line telecommunications systems, Southey explains Africa’s financial services market will leap frog fixed line technology, to the rapid and widespread adoption of mobile phone-based financial services.
Secondly, Industry Convergence will see non-financial services companies, especially retailers and communications operators, providing financial services through their networks – boosting revenues from their customer base. Examples of cross-sector entrants include telecommunication companies such as Safaricom, MTN, Zain and Airtel.
Thirdly, The Development Agenda is spurring a high level of private sector interest in international and regional development organisations encouraging common standards, processes and markets in financial services. Examples include Barclays partnership with Plan International (an international development charity working in 45 communities to alleviate child poverty) and Rabobank’s investment in banks with strong micro-financing offerings.
Finally, Business Model Innovation will see new low-cost technology-based approaches to service and distribution. “Examples include, in-store distribution and innovations such as biometric ATMs, capable of voice or finger print recognition, more attuned to African realities,” says Southey.
Africa’s 1 billion consumers are growing up with a further 220 million economically active adults expected by 2015.
“Accessing this market requires an entirely new take on the mechanics of liquidity management, visibility and reconciliation, tailored networks and regional account administration,” says Southey.
African realities dictate that these systems will evolve very differently, requiring that corporates interested in Africa partner with on-the-ground networks fluent in the operation of Africa’s uniquely evolving financial services environment.
Note to the editor:
About the Corporate and Investment Banking division of Absa
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