A healthy body and healthy mind. This is what keeps Vasu Reddy, Treasury Leader, Sub Saharan Africa, for GE Capital, in touch with his expansive 25-country territory. And with his fair share of challenging conditions to tackle, he needs to be ready with the right solutions.
Treasury Leader, GE Africa
General Electric (GE) is a NYSE-listed American multinational conglomerate. Founded some 125 years ago, today the company operates through a diversified portfolio that includes aviation, healthcare, power, renewable energy, digital, additive manufacturing, venture capital and finance, lighting, transportation, and oil and gas. With revenues of US$122bn (2017) its operations employ around 295,000 people across 130 countries.
When your day-to-day activities are focused on a moving target, the levels of concentration needed are high. But for Vasu Reddy, Treasury Leader for Sub-Saharan Africa, part of GE Capital for GE based in South Africa, having some of the most challenging regulatory and commercial environments under his watch is part of what keeps it interesting.
GE’s Africa business had previously been divided into the four finance hubs of Nigeria, South Africa, Angola and Kenya, with the latter harbouring the region’s Centre of Excellence. Reporting into corporate treasury in Dublin, and the Africa CFO in Kenya, former accountant Reddy acts as the conduit between corporate treasury, the local businesses and the banks.
With a remit currently spanning 25 countries, his core responsibilities include cash management and funding, bank relationships and FX management. Of the latter, with 21 of the 25 countries subject to exchange control regulations, advising the businesses on hedging strategy, repatriation opportunities and optimal investments is a vital element of his day-to-day work. Of course, funding plays a major part here too, further advising, for example, on the suitability of capital injections and how best to optimise working capital for the businesses.
Reddy joined GE from multinational energy corporation, Chevron, where he was Senior Financial Manager – Treasury, covering South and Central Africa. Prior to that, he had spent a year in banking, and six years in various finance functions at South African multinational retailer, Woolworths. He started his career earning a Bachelor of Commerce (Accounting) and Honours degree in Financial Management from University of Cape Town, following on with a Postgraduate Diploma in Accounting from University of Kwazulu Natal, South Africa, also completing the Leadership Executive Programme from the Graduate School of Business, Cape Town.
“Today, it is very much about combining my finance and market knowledge and working with our partners and banks to put solutions in place to support the business.”
With such an early emphasis on accounting, the transition to pure treasury has been progressive for Reddy but it is one that has increasingly fulfilled his professional interests. For him, the processes of accounting had become “mundane”.
Treasury appeared to be a deeply specialised area at first look, but it also presented a more exciting opportunity for him, being both forward and outward looking. This, he explains, enables both exposure to market change and closer interactions with banks and other third parties. “Today, it is very much about combining my finance and market knowledge and working with our partners and banks to put solutions in place to support the business.”
Although a member of the Association of Corporate Treasurers, South Africa (ACTSA), formal training has not been a major feature of Reddy’s career progression; this despite its specialist needs. “Treasury training can give you a solid grounding in the concepts but in this region, experience is more important,” he explains. He adds that it’s essential to know what the banks can do for treasuries. Indeed, whilst anyone can learn what a hedge is, knowing what can and can’t be done to mitigate currency risk in Angola, for example, comes from close involvement with key players.
With a depth of finance and accounting knowledge upon which to draw, being immersed in the region means Reddy has been able to take a hands-on approach, seizing every opportunity to keep learning in his varied commercial and banking roles to date.
Banking work, in particular, he says, has positioned him well to manage the interactions between partners, the inside view giving him at least an equal footing in many conversations. The in-depth treasury knowledge he gained within Chevron has been further refined and taken to a more granular ‘expert’ level within GE. Here, Reddy has been able to gain a more profound understanding of treasury from his corporate colleagues on a global platform.
Having worked in retail, oil and gas, banking, and now a diversified industrial setting, Reddy is able to see that whilst the treasury principles are the same in most organisations, the way the different sectors operate generates nuances for each; these must be understood if the function is to add value.
Taking the challenge
Africa is a tough region in which to operate. “It is still an emerging market, so currency volatility is strong,” comments Reddy. “Many of the local banks suffer from poor credit ratings, rendering them difficult to work with, from a risk perspective.” What’s more, he says, “the local banking environment is still generally unsophisticated”. With a largely under-developed technology infrastructure, it seems that manual processes are rife. This contributes to generally “quite poor” service levels from many local players. The markets are highly commodity-dependent too and so not only is there a limited banking product set available, any market downturn immediately puts pressure on foreign currency flows and liquidity.
With relatively high banking costs with which to contend, treasurers may find this a difficult setting in which to operate. What’s more, Reddy knows only too well that “the gate will not be automatically opened” by the authorities for every large corporate that enters the region. As such, strict rules are imposed, and documentary processes are demanding.
With multi-million dollar deals for equipment and services par for the course for GE in Africa, the challenge of navigating this different and changeable environment is outweighed by the opportunities. However, with deals of such magnitude at stake, bank finance is often required; herein exists one of Reddy’s key obstacles.
GE has a preferred-bank list based on global relationships, this being derived in part from mutual counterparty risk assessment. However, many of these banks do not have a presence in Africa. Subsequently, few are entirely comfortable with the risk presented by sizeable long-term deals in certain countries.
With a limited number of opportunities for the sale of gas turbine equipment, for example, the company is sometimes faced with the challenge of finding alternative sources of funding. “If you want to bid for local business, in many cases you must try and bid with a local bank,” says Reddy. Indeed, in parts of Africa, he adds that there is “a focus on localisation”, Ethiopia, for example, having closed its market to foreign banks.
Risk management, it will be no surprise to learn, is a vital function of GE’s Africa presence. Whenever a deal is sought, this team will carry out a detailed country analysis. This will define the maximum appetite for risk, taking into account the customer, the tenor and value of the deal, the likelihood of any guarantees being provided by the customer, and even the management team behind the deal.
There is little or no FX liquidity in the market and in recent times reliance on oil revenues has seen a country’s foreign currency inflows hit by the downturn in global market prices of that commodity. As a result, the relevant central bank has taken control of the FX market. Last years’ allocation was minimal.
Keeping up with the rules
With the possibility of regulatory and political change occurring quite quickly in some countries, the need to stay up to speed is essential. If, for example, an allocation of currency is made available by the central bank, the local team can respond if it is in the normal course of business; anything outside must be authorised by Global Treasury. For Reddy, this means ‘ears to the ground’ to ensure all opportunities are known and decisions are made in good time.
“Technology takes away most of the manual interventions and the risks this creates. It’s very important in terms of simplification, cost-containment and the creation of an efficient and structured organisation.”
GE sees its African operations as part of a long-term plan, says Reddy. Regulation and compliance are complicated, but the firm consciously abides by the rules. It works closely with its banking partners and the central banks, following due process but at the same time seeking to manage its cash optimally.
Meetings with the central banks will typically highlight the depth of investment and commitment the company has made in-country. “Where possible we will work with the authorities to try to improve the market or open it up further for foreign corporates,” says Reddy. Where a country is reliant upon FDI flows, its authorities are usually open to conversations with key global players. “We do understand that they are constrained if their reserves have been depleted so we are trying to push all buttons, looking for solutions to keep moving forward.”
One of the driving forces of treasury in all GE operations is technology. With the aim of centralising as much as possible – where the tools and local skills enable it – “technology takes away most of the manual interventions and the risks this creates”, says Reddy. “It’s very important in terms of simplification, cost-containment and the creation of an efficient and structured organisation,” he says.
There is only so far this can reach though. Although GE’s FX trades are largely monitored and executed automatically from corporate treasury, FX is still necessarily a manual process in terms of booking trades locally. This is because Africa is still largely manual and has exchange controls, with the region’s central banks taking a somewhat “diverse” approach to their management. For treasury, Nigeria offers a hedging choice of spots, forwards and NDFs but three different dollar rates; Angola offers spots only and the rate is managed by the central bank.
Despite these anomalies, technology has enabled GE’s African operations to be included in the general roll-out of its standard processing models. A global banking administration team, for example, has as part of its remit the responsibility to execute all the necessary bank account opening processes, including those of its African operations. This desire for a worldwide system is driven in part by the quest for efficiency but, in this context, it is also a means of enabling corporate treasury to fully control bank account opening.
Finger on the pulse
Taking a view across so many diverse and sometimes extremely challenging country operations requires technical competence, strong communication skills and some very close allies. Whether researching for advice on local hedging execution, or for corporate transactions such as a loan or funding, “we must always be abreast of what is happening in each market,” states Reddy.
For this to be possible, he says close banking relationships are vital. “We have bi-weekly calls with our banking partners to help us understand what’s happening in each market, what’s causing rates to move and where they are going,” he says. Without this source of intelligence, treasury in Africa he feels, would be so much more difficult.
Reddy also holds regular meetings with the various treasury outposts, corporate treasury and its local partners and global support functions to help him understand any changes in the business. This enables him to meet the advisory and practical needs of functions throughout the business.
All good experience
Having built a career on a solid foundation of academia and experience, Reddy’s advice to up-and-coming treasurers is to similarly establish a strong accounting and finance background. But he also believes everyone seeking a career in treasury would benefit from time spent in a relevant banking role, not least as it offers insight into how banks view and treat their corporate clients.
With his own moves from retail, to oil and gas, to banking, to a diversified industrial setting, he has had the opportunity to learn how different sectors apply the fundamentals of the profession, and how the different approaches to hedging, for example, are executed. “If you can get the proper exposure, then I suggest also spending time in different industries,” he suggests.
Getting the job done well is about more than knowledge and experience though. Keeping up with the pace of change in Africa requires a keen eye and a healthy mind and body. Outside of treasury, Reddy is a sport and fitness enthusiast. He also harbours a penchant for stock market activity which, he says, offers him a “different perspective on life”.
The demands of treasury and the need to travel for work are always going to be a challenge, he notes, but he is a firm believer that a healthy life and work balance are essential “to stay focused and calm so nothing falls through the gaps”. Amidst the complexity and pace of change that running a successful African treasury encompasses, this is a simple lesson from which we all can learn.