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Looking to a Brighter African Horizon Doing business in Africa is a marathon not a sprint, which is why global volatility and uncertainty means that corporates taking the long view on their strategy is now even more important.

Looking to a Brighter African Horizon
Looking to a Brighter African Horizon 
By Geoffrey Gursel, Director, Sales and Implementation Head Sub-Saharan Africa, Treasury and Trade Solutions, Citi

If 2016 shows us anything, it is that volatility and uncertainty has become the ‘new normal’. When I last published an article in TMI a year ago, I emphasised that doing business in Africa was a marathon not a sprint, and that corporations may therefore take a long view when shaping their strategy. In 2017, this is even more important, and the trends, challenges and opportunities that characterised 2016 are likely to prevail for the year ahead. 

Strength amidst volatility

Unexpected political outcomes in the UK and the US resulted in uncertainty in developed markets, but even greater unpredictability in emerging markets. It is not yet clear, for example, how trade and aid to Africa will change under Donald Trump’s presidency, and how supportive the new administration will be of US corporations operating in Africa, particularly with regards to repatriation policies. Bearing in mind the reliance of commodity-producing nations in Africa on USD, and large FDI flows from USA to Africa, the continent’s fortunes are very vulnerable to future US policies, with these vulnerabilities exacerbated by economic and regulatory policy within the region. 

In this environment, we have seen a picture of ‘two Africas’ emerging. Half of the continent, Africa’s 23 commodity-producing nations, including Nigeria and Angola, have seen a sharp slowdown in growth and commodity exporters are finding it difficult to anticipate the end of the current cycle, which is being shaped by event risk to a degree rarely seen before. Some corporations and governments that depend on commodities have delayed investment decisions and realigned their growth expectations, exacerbated by the rising inflation. For companies that rely on low oil prices operating in these countries, the immediate prospects are more favourable; however, they need to consider the overall health of the economy, the regulatory environment and the level of infrastructure investment.

For the remaining 22 countries in Africa, however, growth remains highly respectable at an average of 6.5% in 2016 (source: IMF). Similarly, the IMF forecasts that countries such as Côte d’Ivoire, Ethiopia, Kenya and Senegal in West Africa, and Ethiopia and Kenya in East Africa could see growth of 6 to 8% over the next two years (source: IMF), amongst the highest rates of growth globally.

In this environment, corporations in all industries need to hold their nerve. Africa continues to offer huge potential for growth and opportunity, even if it is taking a little longer for this potential to reach fruition in some industries. We may now have reached the bottom of the cycle for many commodities, and governments and corporations alike will benefit from the efficiencies they have made during leaner times as revenues recover. With a growing urban population, a rapidly expanding consumer base and accelerating digitisation, Africa should remain firmly on corporations’ strategic horizon.

A changing banking landscape

In an environment of challenge and opportunity, treasurers need to understand and manage the changing dynamics of banking in Africa. For example, real-time payments are now live in Nigeria, Africa’s second largest economy, with Kenya coming shortly and more countries to follow. More rapid, secure and automated payment mechanisms are creating opportunities for new business models and faster working capital cycles, both in the B2B and B2C space.


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