Photo of Geoff Gursel, Citi, Hadi El-Amaary and Tenzing Bomratsang, ABB.
The attention to detail that has been followed to create an efficient treasury management solution in Africa is the key differentiator of ABB’s solution here. For ABB to have developed a regional treasury solution that is both compliant with local regulations and efficient in servicing day-to-day business requirements highlights the true value of this infrastructure spanning 13 markets in the African continent.
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Andreas Krause
CFO
ABB is a pioneering technology leader that works closely with utility, industry, transport and infrastructure customers in roughly 100 countries. With more than four decades at the forefront of digital technologies, it is a leader in digitally connected and enabled industrial equipment and systems with an installed base of more than 70,000 control systems connecting 70m devices.
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ABB implements solution in 13 countries across Africa
The challenge
ABB had four key challenges:
- Enhancing regional liquidity management, optimising working capital, consolidating risk exposure across banks and markets as well as achieving operational efficiency and control through a centralised treasury structure. Fundamental to the first objective of ensuring optimal treasury management for ABB was improved liquidity management and cash visibility over 13 African markets where it had multiple banking relationships, numerous local and foreign currency accounts and minimal governance over local cash flows.
- Improving working capital through unique and cost-effective financing solutions.
- Consolidating risk and exposure management through a holistic treasury solution in Africa. A recurring theme for many multi-national corporations over the past 12 months is reviewing counterparty risk amongst banking partners in the region.
- Achieving operational efficiency and control in its treasury management across the region.
The solution
ABB adopted Citi’s domestic cash management solution to effectively aggregate single-entity cash balances for ABB South Africa (Pty) Ltd accounts in South Africa – these consolidated funds are pooled to a central header account via an automated, end-of-day target balancing mechanism. To ensure end-to-end visibility, ABB is fully integrated with CitiDirect BE to allow for real-time oversight.
Andreas Krause, CFO explains, “We replicated the supply chain finance solution that was rolled out in Brazil, China and Thailand for South Africa which was sourced at a market-leading rate to support financing for 56 key suppliers that are currently on the local programme.”
Citi was a natural fit for ABB as a core relationship bank globally through over US$1.6bn of committed credit facilities and maintaining a stable investment-grade credit rating in Africa. Through Citi’s pan-African footprint, globally-standardised banking platform and superior balance sheet capacity, it was able to serve as ABB’s core banking partner in the region. This resulted in a significant reduction of bank accounts and relationships as well as optimising transactional pricing and connectivity for ABB which translated into US$48,000 in estimated cost savings.
ABB integrated its transactional banking across 13 markets into one centralised payment factory via a secure host-to-host channel that accommodates multiple payment types in a standardised file format, XML v3.
Best practice and innovation
Best practice is showcased in this deal by leveraging years of knowledge and acquired expertise through ABB’s global relationship with Citi. This has resulted in an extensive understanding of how both parties operate when it comes to product fit, implementation and service delivery on a local, regional and global level. ABB was one of Citi’s first clients to leverage innovative technology such as the SAP ERP integrator when setting up their host-to-host channel which built off existing SAP capabilities and reduced the implementation timeframe, thereby eliminating unnecessary technical costs, time and allocation of resources.
Krause concludes, “Taking into account the variety of corporate regulatory hurdles, the nascent development of payment infrastructure and currency controls embedded in many African markets – for ABB to have developed a regional treasury solution that is both compliant with local regulations and efficient in servicing day-to-day business requirements highlights the true value of this infrastructure.”
Key benefits
- Centralised visibility of funds.
- Automation gains.
- Modular and scalable ERP infrastructure.
- Risk exposure reduced.
- Bank relationships consolidated from over ten to a single core bank.
- Market leading rate in SCF programme backed by a US$15m facility which supports 56 key local suppliers.
- Technical implementation time reduced by around 60%.
