African economies are under greater stress than ever before, as they struggle with unsustainable debt burdens and the increasing effects of climate change. The New Global Financial Pact is seeking to address the economic imbalance for countries in the Southern Hemisphere and it could be that climate change also gives Africa leverage in its calls for financial reform. The first ever African Climate Summit in September made much of Africa’s having 60% of the world’s renewable energy assets and more than 30% of the minerals key to renewable and low-carbon technologies.
So, what are the region’s treasurers thinking? Charmaine Swanepoel, Head of Treasury Management for the Alexander Forbes Group is optimistic that positive change is coming. “The proposal for the New Global Financial Pact covers two key aspects for our company – liquidity management and debt restructuring,” she said. “We are always looking into ways to improve our working capital, especially optimising the cash flow between the various entities within the group. Hand in hand with liquidity management goes cash flow management and the ability to predict the future flows of cash. Debt structuring plays a key part in the process as well.”
Others remain focused on banking partners and liquidity. Good working relationships with all business partners is front of mind for Kobus Volschenk, Group Treasurer at Motus, a South Africa-based automotive group. “The key to liquidity in our world is close working relationships with all our transactional and financial business partners,” he said, “The ability to utilise the fully approved facility requires careful planning and being nimble, together with a willing partner.”
Edward Collis, Treasurer for Save The Children (STC) is concerned moving money around the continent is getting harder and key changes need to be made now to reduce stress. One of the challenges STC is facing is a reduction in corresponding banking routes. “De-banking in this context is a huge issue for us,” he said. “It results in unreliable and longer payment routes with longer settlement times. Moving money around is challenging and associated problems are only increasing.”
“Liquidity in African economies is not just an African problem, it is something the international community needs to help with,” he continued. “For instance, there could be more done to support the mechanics of global funds flows to countries outside of the G20. We would welcome more international regulatory support.”
Collis also pointed out that moving money around on behalf of large organisations needs to be made fairer for local banking partners. “Correspondent banks only make a small fee when sending money to a high-risk country, meaning they are shouldering a material risk for little return,” he said. “That is not fair and we need to think about how we can solve that. In some of our countries our suppliers/ partners also face high interest rates on their working capital and we are looking at ways to partner with them to ease some of that burden.”