Mobile banking and card payments are replacing cash.
Author: Gilly Wright
In 2018, six of the 10 fastest-growing economies in the world were in Africa, according to the World Bank, with Ghana leading the pack. And with GDP growth for the continent projected to accelerate to 4% in 2019 and 4.1% in 2020, the African economic growth story is far from over. Meanwhile, the World Bank’s 2019 Doing Business index reveals that five of the 10 most-improved countries are in Africa, and one-third of all reforms recorded globally were in sub-Saharan Africa.
For businesses to thrive, however, cash needs to be optimized to deliver greater efficiencies. Idrees Kolabhai, head of Cash Management, Transactional Product Services at Standard Bank—which won Best Bank for Cash and Liquidity Management in Africa in this year’s awards—says internal liquidity management has become a key of source of funding as companies look to diversify their funding sources. “Trapped cash is a reality for many businesses operating in Africa,” he explains. “Restrictive exchange-control regimes mean that businesses can’t move money between their various operations easily. This presents challenges for the operation of regional and global treasuries, especially the repatriation of funds to parent companies abroad.” While it is legislatively possible to remit funds in many African markets, Kolabhai says businesses often have to wait for long periods to source foreign exchange in the domestic market.
Given the real-time nature of modern business, treasurers need information that enables them to manage cash flows, credit facilities and working capital quickly and easily across multiple accounts and subsidiaries. Standard Bank’s Global Liquidity Management System (GLMS) gives corporates the tools to view and manage their cash management schemes with Standard Bank in real time, so treasurers can better manage their intraday liquidity risk and optimize interest earned from investing their surplus cash overnight.
Kolahbai says technologies such as artificial intelligence and machine learning are also changing the way treasurers manage their cash. The immediate and intuitive nature of these technologies, he explains, lets the modern treasurer instantaneously track cash balances so they can optimize working capital and manage liquidity risk. In addition, he says, advanced algorithms that derive patterns for predicting behavior and prices allow for more precise outcomes.
The World Economic Forum states that approximately 70% of Sub-Saharan Africa’s population lacks a bank account, and a large percentage of all retail payment transactions across Africa are still conducted using cash. Kolahbai says central banks are focused on discouraging the use of cash and promoting electronic channels, with mobile banking and payment applications proving popular across the continent.
Nontraditional players, including telecommunications companies, have helped drive financial inclusion on the continent. “It is not only the imperative of governments but also of corporates to drive inclusion,” adds Kolahbai. “The benefits are obvious for corporates looking to grow into new markets, which in turn drives profitability.”
For corporates trying to reach beneficiaries without bank accounts, Ecobank has built a capability for making payments using prepaid cards issued by the bank or a third party. Voucher cards can be used in remote areas where there is no network coverage. Africa’s economic growth story is attractive, but businesses must learn to be creative in order to keep the money moving.