Insight & Analysis

Africa is alive with possibilities for treasurers

Published: Mar 2018

With operations in 48 countries across sub-Saharan Africa, the treasury team at MultiChoice are well placed to provide a true assessment of what it is like to do treasury in Africa. Here MultiChoice’s Andrew Mills and Ande Olivier provide an overview of the current trends.

To many living outside the continent, Africa is a ‘great unknown’ and a place that is easy to talk about with sweeping generalisations. The truth, of course, is that Africa is a truly diverse place that is home to over 1.2bn people living in 54 countries.

Economically, Africa is also extremely diverse. It is home to giant markets like Nigeria, a scattering of smaller economies, and countries with tremendous economic potential like Côte d’Ivoire and the Democratic Republic of the Congo.

Managing corporate treasury in Africa is also an incredibly diverse affair and was once seen as an almost impossible job. However, several recent developments across the continent have presented ample opportunity for treasury teams to build best in class operations that align with international standards, whilst accounting for the uniqueness of this great continent.

Under control

That is not to say that challenges don’t exist. “One of the great inhibitors to free trade and flow of cash in and out of many African states is exchange control – a mechanism which many countries use to manage the value of their currencies,” says Andrew Mills, Group Treasury Manager at MultiChoice.

“Many central banks also still manage their currencies actively, most notably Angola, South Sudan and Rwanda. However, the overdependency on foreign export proceeds, primarily from commodity-based revenue, to fund large import requirements has forced some fiscal and monetary changes.”

Mills points towards Nigeria and Egypt as being the most recent examples of this with both having shown a positive effect of moving to free-floating or adopting a managed float. “Foreign currency liquidity remains a key risk, however,” he says. “Corporates therefore have to use forward cover as a means of securing currency, rather than as a hedging method – and this generally comes at a steep premium,” he says. “The availability of effective hedge instruments, particularly in times of illiquidity, also remains a challenge, with treasurers often having to resort to quasi-hedges.”


Broadly speaking though, these monetary reforms have been well received by the investor community, resulting in increased foreign portfolio flows and foreign direct investment into Africa. This is propelling greater economic transformation, diversification and growth across the continent.

Elsewhere, government stimulus has also seen an increase but budget deficits continue to be funded primarily by foreign debt – although public debt interest is growing, as emerging market yield is still seen to be very attractive in real terms. Nevertheless, undiversified revenue streams, generally low tax collections and a lack of political will to implement budgets effectively continues to hamper structural growth.

“Because of this, there are many multinational companies operating throughout Africa who bring the need for some level of sophistication in treasury management,” says Andre Olivier, Treasurer – Rest of Africa at MultiChoice. “Given the low GDP per-capita across Africa, many collections-based businesses use relatively low-tech solutions which are often cash based. These require extensive branch banking networks in order to be close to the customer. The notable exception to this is Kenya, where the electronic wallet – m-Pesa – has flourished and very much revolutionised banking in that country.”

The need to use banks that are close to the customer creates a complex situation for many large businesses. “This is because it is typically the local banks that have these branch networks,” says Olivier. “The issue is these banks often have a very weak credit rating, creating elevated risks around capital security and visibility.”

African cash management

Regional cash management remains a dream for treasury teams in Africa, given the exchange controls in many countries that prohibit cross-border pooling. However, Mills notes that this does not mean that treasury cannot manage its cash effectively.

“Within some countries, it is possible to sweep funds across various banks allowing cash to be concentrated in a single point,” he says. “The sophistication of these products is ever increasing with banks enabling sweeps to be automated or manual. Corporates can also use zero-balance or target balance sweeping.”

In some of Africa’s more sophisticated markets, the use of SWIFT messaging for payments and balance and transaction reporting is generally feasible as well, whilst in some underdeveloped markets even simple operational execution can be a challenge.

“Increasingly though the influence of international and regional banks, and indeed cross-state collaboration, is contributing to the development of the financial sector across Africa. This is leading to the increasing development and availability of best in class products and services for treasury teams to utilise,” adds Mills.

Value-adding treasury

Like elsewhere in the world, corporate treasury in Africa is seeing a general uptick in responsibility and prominence with the organisation. “Corporate treasury on the continent has undoubtedly responded to the VUCA environment it operates in by being a strategic partner to the executive leadership and helping it navigate the often volatile and unpredictable markets,” says Olivier.

The use of treasury technology is aiding this markedly. “Leveraging technology to provide value-add though is no longer considered a nice-to-have but seen as an essential part of treasury’s armoury,” he says. “Technology enables treasury to more effectively manage core priorities such as effective cash, liquidity and risk management whilst also being able to provide meaningful reporting to the CFO.”

So, through all the challenges brought on from the ‘Africa Rising’ narratives at the turn of the decade to one of ‘Rebalancing’, the now seasoned treasuries across the continent are ready to embrace the next chapter of this exciting frontier which is alive with possibilities, concludes Olivier.

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