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Treasury capabilities in Africa arematuring at a rapid pace. Yet manycorporates have not updated theirregional strategies or set-ups at the samespeed. Moreover, Africa’s growth story

continues to be full of twists and turns –and 2017 was no exception. After severalyears, Nigeria is emerging from recession,and much to the relief of the treasurycommunity, the country’s restrictive

A s treasury capabilities continue to mature in 2018, regularly re-evaluatingcorporate strategies and counterparties will be imperative. Only bycapitalising on increasingly sophisticated developments such as instant

payment systems, data analytic tools and by working with the right partners tosupport growth, can the new era of corporate treasury in Africa truly take shape.Geoffrey Gursel, Sub-Saharan Africa Sales and Implementations Head, Treasuryand Trade Solutions, Citi, explains why 2018 is the perfect time to review and refinetreasury operations in Africa, whilst maximising the value of bank relationshipsacross the continent.

By Geoffrey Gursel, Sub-Saharan Africa Salesand ImplementationsHead, Treasury and TradeSolutions, Citi

Africa Corporate Treasury– Who is Your Catalyst for Innovation?

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foreign exchange policies are easing,revitalising dollar flows and freeing uptrapped cash. Nigeria continues to be thelargest economy in Africa and the countryis gradually learning to thrive, despite lowoil prices. South Africa, meanwhile, has faced

numerous challenges. Fitch and Standard& Poor’s downgraded the nation’s long-term debt to Sub-Investment Gradestatus in November 2017. Politicalupheaval in the country has alsosignificantly dented confidence levels. Inaddition, the oil exporting economies inSub-Saharan Africa (SSA) experiencedlow and often sharply falling growth (seeFigure 1) – not helped by rising inflation,weakening exchange rates, and slowexchange rate policy responses by somecentral banks. Conversely, the oil importing nations

in SSA experienced real GDP growth ofcirca 4% in 2017, confirming that the sub-continent is no longer rising in aconsistent manner. This economicdisparity between the oil exporters andimporters looks set to continuethroughout 2018, and corporates will

understandably be keen to follow pocketsof growth.

Ideas, not just solutionsAgainst this mixed macroeconomic andpolitical backdrop, bank relationships arecoming sharply into focus. You’ve heardthe benefits before of rationalising banksand accounts – and the cost-efficienciesthat follow – but the asks on the continentfrom corporate treasuries have nowevolved past traditional bankingdiscussions. The advisory and idea-generation discussions and workshops –rather than just products or solutions –are becoming more commonplace, whichchanges the traditional role of the banks. For example, Citi has developed new

tools to analyse large amounts of data andmatch your findings to your goals andobjectives and advise how to be moreefficient, less risky or more cost-effective.It may have made sense 18 months ago tohave as many bank relationships inNigeria as possible in order to accesssufficient dollars in the country, but thatstrategy is no longer entirely relevant,

Box 1 Oil exporters in SSA

� Angola� Cameroon� Chad� Republic of Congo� Equatorial Guinea� Gabon� Nigeria� South Sudan

Fig 1 Africa's distinction between oil exporters and oil importers

Sources: IMF and Citi Research forecasts for 2017-18

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2012 2013 2014 2015 2016 2017 2018

Real

GDP g

rowth

(%)

SSA oil exportersSSA oil exporters, excluding NigeriaSSA oil importersSSA oil importers, excluding South Africa

Advisory and ideageneration

discussions andworkshops –

rather than justproducts or

solutions – arebecoming morecommonplace,

which changes thetraditional role of

the banks.

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since the country’s foreign exchangepolicy is significantly improving. Utilisingnew sector benchmarking tools canenable corporates in this situation to seehow others manage the exposure risks,compare working capital means and get abetter understanding of where their peersmatch up. Forward-thinking treasurers are also

looking for banking partners to embraceinnovation in Africa and be plugged in tothe African central banks’ latest paymentupgrades and offer these through theircorporate banking portals. Suchinnovations include Nigeria InterbankSettlement System’s (NIBSS) InstantPayment solution, which is a point-to-point funds transfer service thatguarantees instant value to thebeneficiary. Another example is the Kenya

Interparticipant Transaction Switch(KITS) payments platform which allowsany customer of a Kenya BankersAssociation (KBA) member bank to sendand receive funds in real time from theiraccounts. A similar project called theNational Financial Switch is under way inZambia, which will upgrade the paymentsinfrastructure, making it far moreinterconnected and rapid. The reason why many corporates are

looking for this kind of functionality isquite simply because the consumer sectorare demanding it. Payments innovation,and the willingness of banking partners toembrace it, is therefore likely to featuremuch more highly in requests forproposal (RFPs) in 2018 and beyond, ascorporates become more exacting of theirbanking partners in Africa – and rightly so.

Expanding horizons andgeographic shiftsIn addition to reassessing their bankingpartners, a handful of progressivecorporates are starting to think outsidethe box on where to establish or relocatetheir Africa treasury operations. SouthAfrica was once the go-to location for atreasury hub on the continent, butcorporates are now considering countriessuch as Senegal, Kenya and Moroccoinstead. Likewise, the fallout from the election

in Kenya has prompted some corporateswho had their treasury operations in thecountry to consider moving theircentralised operations away fromEnglish-speaking Africa into francophonenations such as Senegal, Côte D’Ivoire orCameroon. We expect this trend tostrengthen throughout 2018 as morecorporates begin to question the statusquo of their Africa operations andconsider the potential of new locations tobe their gateway to the continent.The rise of monetary zones across

Africa will only reinforce this trend. TheCentral African Economic and MonetaryCommunity (CEMAC), which comprisessix countries who use the Central AfricanCFA franc (XAF) is already well-established. The West African Economicand Monetary Union (UEMOA), whichcovers eight countries that use the WestAfrican CFA franc (XOF), is equally deep-rooted.For treasurers, these monetary zones

offer numerous potential benefits. Ratherlike the rise of the Single Euro PaymentsArea (SEPA) across the Eurozone,CEMAC and UEMOA enable treasurers toset up a single payment hub, from wherethey can conduct borderless banking –and create a much more efficient cashmanagement structure. Corporates thatonce had liquidity spread across multiplebanks in the XAF 6-country zone, forexample, are now consolidating thatliquidity to a single payment accountlimiting counter-party exposure.

Taking (back) controlElsewhere, cyber fraud awareness andprevention will be paramount across thecorporate treasury world in 2018, but evenmore so in Africa, where the centralbanks and federal governments arepaying acute attention to the recentattacks, ensuring there is collaborationand awareness training with financialinstitutions. This is precisely why, on top of

developing transactional securitymeasures and biometrics, Citi is lookingto roll out a new pilot called ‘PaymentOutlier Detection’ in Africa after testingoutside the continent. This solutionapplies machine learning techniques toanalyse a corporate’s payment data and

A handful ofprogressive

corporates arestarting to think

outside the box onwhere to establish

or relocate theirAfrica treasury

operations.

Box 2 CEMAC and UEMOA at a glance

The CEMAC consists of: Gabon,Cameroon, the Central African Republic,Chad, the Republic of the Congo andEquatorial Guinea.

UEMOA comprises: Benin, Burkina Faso,Cote d'Ivoire, Guinea-Bissau, Mali, Niger,Senegal, and Togo.

Both CEMAC and UEMOA have thesupport of the Bank of France, whichmaintains close ties with the centralbanks in these franc zones to ensure thesmooth functioning of the areas’ sharedinstitutions.

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behaviours for any unusual activity andenables the corporate to take actionaround any potential fraud. In essence, ittransforms fraud monitoring from areactive process within a corporate into aproactive one. While bank initiatives such as this will

help corporates to have more robustoperations, corporates must take the timeto get their own fraud and cybersecuritypolicies and procedures up to scratch aswell. All too often, multinationals haveextremely thorough action plans in placefor their headquarters that follow the‘prevent, detect, respond, recover’mantra, but the same doesn’t necessarilyapply to their subsidiaries in Africa.As technology becomes more

pervasive in the treasury function, it isvital that Africa-based subsidiaries havethe same rigour around cybersecurity asthose anywhere else in the world. Thatmeans knowing what the protocol iswhen an attack happens, whether it isransomware, malware, payment cardtheft, CEO fraud or a sensitiveinformation breach. What should your first move be? Who

do you call? Is there a kill switch? Thoseare all questions that need answeringbefore an attack happens. Having a planfor restoring service and being able toprocess payments after an attack isequally important, especially since thefinancial flows going through thesesubsidiaries are only likely to increase inthe years ahead.

Combining technology andanalytical reviews Just as there is a tendency to think thatAfrica is somehow lower down the peckingorder when it comes to the need forcybersecurity policies and procedures,misconceptions still exist about thesophistication of the treasury market inAfrica too.Even today, it is not uncommon for

global companies to believe that they willnot be able to transpose a model for ashared service centre (SSC) that they’vesuccessfully used in another region intoAfrica, for example. While there arenuances to take into account for every localmarket, Africa is more than capable ofhandling the level of treasury

sophistication that we are seeing in otherdeveloped markets. The central banks areready; the clearing systems are ready; andthe range of transaction banking productsand solutions on offer is impressive. Yes, there may still be challenges

around moving money out of thecontinent and solutions such as cross-border sweeping may still be in theirinfancy in Africa, but thecommercialisation and sophistication oftreasury operations in Africa should not beunderestimated. In fact, any company thathas not benchmarked its Africa bankingpartners in the last 24-36 months may besurprised to discover what they are nowcapable of.Citi, for example, is providing a host of

new data analytics solutions to corporatesin Africa. We see this as a hugeopportunity for treasurers in 2018 as theylook for ways to work smarter, such asleveraging functionalities to analyse thecompany’s use of payment and workingcapital methods per market and highlightwhere there is scope to improve paymentoutcomes – and benchmark themselvesagainst other corporates in Africaspecifically. This is just one example ofdata-driven innovation, but it showcasesthe new level of questions being asked onthe continent, how banks are respondingto them, and how sophisticated thecorporate treasury market in Africa isbecoming. �

Geoffrey Gursel

Director, Sub-Saharan Africa Sales andImplementations Head, Treasury and TradeSolutions, Citi

Geoffrey Gursel has worked with Citi for over 13 years.Located in Johannesburg, South Africa, he is responsible forstreamlining working capital solutions for corporate andpublic sector organisations looking to enter, expand and re-strategise in Africa. Geoffrey's focus is to help showcaserelevant regulatory, government, banking andtechnological changes and themes across the continentthat affect the treasury and banking relationship framework for Citi's clients. Prior to his current role, Geoffrey worked with Citi in Nairobi, London and New York in

various sales and marketing roles within Citi's transactional banking division.

In fact, anycompany that hasnot benchmarkedits Africa bankingpartners in the

last 24-36 monthsmay be surprisedto discover whatthey are nowcapable of.

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