Middle East and Africa corporate treasurers forge ahead into the digital era

Once seen as latecomers in the adoption of technology, swathes of Africa and the Middle East are now surging forward.

As national economies in both regions expand and companies become more global, accelerating digitisation offers corporate treasuries the opportunity to streamline their businesses in often-complex environments, offering benefits such as reduced clearing times and enhanced cash-flow visibility.

The perception of Africa as a laggard is misplaced. It is already a global leader in mobile money. The sub-Saharan region alone is responsible for over 45 per cent of mobile money payments in the world, with transactions valued at about USD456 billion1 in 2019 – three times that of South Asia, the second-biggest region.

Across the continent, countries are laying the foundations for a digital future. In Nigeria, the implementation of the government’s Vision 2020 strategy has triggered several transformations in a heavily cash and paper-based economy. An automated and interoperable payment clearing system is now in use between major financial institutions, and even cheque clearing times have been cut from 21 days to just 24 hours.

In South Africa, use of cheques has dropped2 from 80 per cent in 2012 to just 1 per cent today. One of the country’s banks reported two-thirds of its transactions were made through host-to-host platforms in 2019, while elsewhere mobile platform M-Pesa has transformed payments in Kenya, Tanzania and other African countries.

Middle East and Africa corporate treasurers forge ahead into the digital era

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Outward bound

At the same time as many parts of Africa are accelerating domestic digital adoption; the continent is also increasingly looking outward. Trading links that once followed ex-colonial patterns are branching out. The largest trading partners of countrie3 such as Cameroon, Angola, Mali and Tanzania are no longer just France or Belgium, but China, India and several  Southeast Asian nations.

Managing this growing complexity of business networks creates additional challenges for treasurers in Africa in areas such as foreign currency exposure, trade finance and cash-flow forecasting. It also creates opportunities to forge ahead and often leapfrog more developed markets, as more and more companies acknowledge that digitisation is the only sustainable way forward.

Both in Africa and the Middle East, we see a lot of adoption of APIs,” said Viplav Rathore, Head of Cash Products AME and MENA at Standard Chartered. “African treasuries have actually been faster at adoption of technology, and the leapfrogging concept has worked very well in Africa.

In West Africa, for example, we worked with a cement company that needed an ordering platform. Together with a third-party aggregator, Standard Chartered created an API-powered platform that enables distributors to order electronically from the cement company, which then ships from its manufacturing sites. This creates greater transparency and ease of access in a part of the world where cement is a prized commodity that isn’t always readily available.”

Fertile ground

In the Middle East, there has also been significant progress. The United Arab Emirates has emerged as a regional treasury hub for many multinationals. At the regulatory level, government-led programmes such as the UAE’s Vision 2021 and Abu Dhabi’s Vision 2030 are pushing the development of digital treasury operations, while the introduction of a digital gateway for government payments and the UAE Banks Federation’s mobile wallet4 are helping to create the necessary infrastructure.

The story is similar elsewhere in the region, where digital transformation programmes have seen the introduction of payment gateways such as EBPP in Bahrain and BKM in Turkey.

These and other initiatives are creating fertile ground for treasurers in the region to push digital transformation to the forefront of their company’s strategic plans. The atmosphere among corporates is broadly receptive. A 2020 survey by Finastra5 found that 88 per cent of banks in the UAE expect to implement APIs and Open Banking in the next 12 months, and that appetite is being reflected across the region.

“In the past, there was a broad reluctance in the Middle East to spend money on technology,” said Motasim Iqbal, Regional Head of Transaction Banking Sales AME at Standard Chartered. “Corporates would be happy with the processes that were running and technology spend was not a top priority. After the pandemic struck, that changed dramatically overnight, across the board – both in the public and corporate sector. People are realising that it’s not just about cost and efficiency, it’s about resilience.”

Obstacles ahead

Challenges remain, however. In the Middle East, company structures in many countries have traditionally featured diverse businesses centred around a holding entity. Though more and more companies are moving towards centralised corporate treasuries, this is a crucial first step many companies still need to take before effective digitization can be implemented.

Cash, cheques and a preference for documentary trade still predominate in many of the region’s markets, and companies wanting to digitise treasury operations face the difficult task of matching progress with demand.

Despite the widening spread of official “Vision” policies for digitisation, regulatory challenges are still a bugbear. In jurisdictions where commercial and capital-control rules can change suddenly and unexpectedly, it can be difficult for treasurers to perform key tasks like cash management and forecasting to protect businesses. Even in the more digitally progressive markets, about half of banks cited regulatory complexity as a significant obstacle to digitisation.

Liquidity and volatility hurdles also beset many markets. In countries such as South Africa, where about USD10 billion6 moves through onshore and offshore markets every day, managing liquidity and hedging are relatively simple. In smaller markets where flows are a fraction of that amount, even basic functions like currency conversion and liquidity management become more challenging.

Equally, even treasurers who are turning to digital tools to deal with widening global trade links face the problem managing the multiple portals and apps of different local and international banking partners.

The solution often lies in finding the right partnerships.

“While the political, regulatory and forex landscape can be complex in Africa and the Middle East, there’s one clear thread that can weave its way through that complexity: the distinct importance of forming deep partnerships with regional banks and regulatory institutions,” said Syed Khurrum Zaeem, MD and Head of Trade and Transaction Banking AME at Standard Chartered. “This, more than anything else, is the key to successfully navigating opportunities.”

Produced by Bloomberg Media Studios in partnership with Standard Chartered.

This article is part of our ‘Digital Transformation’ series, exploring digitalisation trends to build resilience, efficiency and achieve transformative growth.

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