November 2017


INVESTING IN SOUTH AFRICA: THE ROAD TO 2025 BANKING & FINANCE IN AFRICA FEATURE November 2017

Since the downgrade of South Africa's credit rating to "junk" status by Standard & Poor's and Fitch Ratings earlier this year, investors have been wary of Africa's second largest economy. Many reputable institutions, including UBS, claim to prefer Russia or even Brazil, in spite of political scandal and corruption in those jurisdictions. This may be due to a perception that the worst is behind these economies, while the worst may be yet to come for South Africa. The average time for an economy's credit rating to spring back to investment grade is seven to eight years, taking us to 2025. We argue that although political risk remains a concern in South Africa, there are positive signs that could hasten recovery.

Read More

THE RISE OF OPEN ACCOUNT FINANCE BANKING & FINANCE IN AFRICA FEATURE November 2017

Traditionally, banks have financed the short-term working capital needs of traders, typically in the form of traditional trade instruments such as letters of credit and payment guarantees. With the financial crisis in 2008, where liquidity became an issue for many trading firms, the focus shifted to obtaining alternative forms of financing to manage their balance sheet better and to reduce financing costs. Open Account products, such as Receivables Finance and Supply Chain Finance, although they have been around for decades, are two alternative forms of financing that have been increasing in popularity in the trade space since the financial crisis.

Read More

CHALLENGES FACED IN TRADE FINANCE BANKING & FINANCE IN AFRICA FEATURE November 2017

Intra-African trade has been described as the key to sustainable economic development in Africa. However, the past few years have been challenging for African trade. Merchandise exports declined by 8% in 2014, the largest decline since 2009. This was caused by falling commodity prices, as well as the weak economic prospects for Africa's top trading partners, particularly the European Union (EU) and China. Further contributions to the low levels of intra- African trade are a result of the amount of commodities exported by African countries versus the amount of imports into African countries. It is estimated that out of the US$555 billion total merchandise exports by Africa, only US$98 billion are intra-African trade (Rethinking Trade & Finance (ICC) re: Trade finance landscape in Africa, African Development Bank Contribution).

Read More

ARE WE DOING ENOUGH? BANKING & FINANCE IN AFRICA FEATURE November 2017

The recent news cycle surrounding a global audit firm and its links to the story of South African state capture has shone the spotlight on the world of auditing. Auditing has been always been viewed as a profession with the highest of integrities, which bears testimony to the important role auditors play in society. This role has now been brought into question as the profession and the Independent Regulatory Board for Auditors (IRBA) have to again fiercely protect the good name of one of the oldest professions, a name which is cemented in trust.

Read More

THE DIGITAL DISRUPTION REVOLUTION IN AFRICA BANKING & FINANCE IN AFRICA FEATURE November 2017

Digital technology in the banking and financial services (which now very much includes the provision of third party financing) arena - or Fintech in more common parlance - is rapidly reshaping the banking and financial services landscape, not only internationally but also in South Africa and across the African continent. In fact, South Africa, with its vibrant technology sector, is seen in some circles as the Fintech hub for Africa, and traditional banks and financial institutions are scrambling to react to the threats, and indeed exploit the opportunities, with which they are faced due to the ever-increasing disruption of their traditional business models.

Read More

FINTECH – OVERVIEW AND PAYMENTS Accounting November 2017

Financial technology (Fintech) is a financial industry that applies technology to improve financial activities and is positioned to disrupt traditional banking and financial services. There are indicators in the market suggestingt hat financial services may be provided without the capital and vast infrastructure traditionally seen in banking. However, rigid enforcement of outdated regulations and slow or non-existent internet connections pose a significant threat to Fintech companies and their development in the financial industry.

Read More

IS THERE A SILVER LINING TO THE AFRICAN ECONOMY? BANKING & FINANCE IN AFRICA FEATURE November 2017

Across the African continent, several countries have experienced or are experiencing a distinct slow-down in their economic growth. With this slow-down, market liquidity (that is, access to loans and foreign currency) for the ordinary consumer in several domestic markets has shrunk significantly. And, along with access to capital becoming harder or more expensive, there has been a slow-down in consumer transactions.

Read More

BLOCKCHAIN IS NOT DISRUPTIVE BANKING & FINANCE IN AFRICA FEATURE November 2017

What do you do when Africa's richest man, Aliko Dangote, publicly says that he is not in favour of investing in a fintech start-up and would rather invest in agriculture? Well, you find yourself re-examining the role of financial technology and its punted disruptive nature. All of this thinking is somewhat problematic, especially since wherever you look there is an increased and heightened focus on blockchain, initial coin offerings, virtual card payments, in addition to social and political uprisings that vocalise a pressing need for financial inclusion.

Read More

TWO SIDES OF THE DEVELOPMENT COIN BANKING & FINANCE IN AFRICA FEATURE November 2017

It is widely accepted that the banking and financial systems play a key role in economic growth and social development. This idea is not disputed by the excesses shown in financial crisis, local or global, individual or systemic. This historical role has been underway in Africa, at different paces and levels of development across different sub-regions or countries in the continent.

Read More

LEGISLATIVE REFORM FOR FORMS OF CREDIT SUPPORT BANKING & FINANCE IN AFRICA FEATURE November 2017

Common forms of security that are taken by financiers in African jurisdictions include mortgages, debentures, fixed and floating charges, assignments, pledges and liens. A large number of African countries are also former colonies of the United Kingdom and, as a result, the legal regimes in respect of taking security are very similar to English law. However, the legal systems of many African countries are based on civil law. During the past year, various African countries have actively taken steps towards legislative reform with a view to creating new forms of security specific to the economic climate of borrowers on the African continent. This article shares some insight into the developments in the laws of Zambia, Kenya and Uganda to promote greater access to credit facilities in these countries.

Read More

PARLEZ-VOUS FRANCOPHONE AFRICA? BANKING & FINANCE IN AFRICA FEATURE November 2017

While Francophone Africa – made up of 25 predominantly French speaking countries – may seem shrouded in mystery to South Africans interested in doing business in these countries, the extensive opportunities in the region make it worthwhile overcoming the language and legal differences.

Read More

A MAJOR BOOST FOR AFRICAN CORPORATE FINANCING CAPABILITIES BANKING & FINANCE IN AFRICA FEATURE November 2017

With the exception of South Africa, debt and equity markets in Sub-Saharan Africa have been comparatively undeveloped, but that is changing – and profoundly so. Kenya's largest debt and equity restructuring transaction is nearing completion and opening up new possibilities for corporate financing on the sub-continent. The transaction concerned is the record-breaking USD 2.2 billion restructuring of Kenya Airways PLC. Once the last loose ends have been tied up, this transaction will safeguard the value of a Kenyan national asset and key player in the air transport sector in Africa, while demonstrating the growing corporate financing capabilities available on the continent, and particularly in East Africa.

Read More

LATEST DEVELOPMENTS IN UGANDA’S BANKING AND FINANCE SECTOR BANKING & FINANCE IN AFRICA FEATURE November 2017

The financial services industry in Uganda comprises banking, insurance, capital markets/investments, pensions and microfinance institutions. It is dominated by the banking sector, the majority being multinational banks. The sector has a mixture of formal, semi-formal and informal institutions. Notable players include, among others, Stanbic Bank (a member of the Standard Bank Group), Barclays Bank, Standard Chartered, Citibank, Centenary Bank, DFCU Bank and Bank of Baroda.

Read More

PAYMENT SYSTEM REGULATIONS BANKING & FINANCE IN AFRICA FEATURE November 2017

A payment system, as defined by the Bank for International Settlements (BIS)1, consists of a set of instruments, procedures, and rules for the transfer of funds between or among participants; the system includes the participants and the entity operating the arrangement.

Read More

Tales from the US of A... - November 2017 International November 2017

Seven days in jail for mom who ignored order to vaccinate her son

A Michigan mother has been sentenced to seven days in jail for contempt of court for failing to obey a consent order to vaccinate her 9-year old son. The mother had agreed to vaccinate the boy in November 2016 in a consent order. There was no appeal or motion for reconsideration and yet she failed to comply. The event happened as part of a court battle with her ex-husband. The court gave temporary custody of the boy to the ex-husband whilst the mother is in jail and enough time has passed to update the boy's vaccinations. - Debra Cassens Weiss October 5

Read More