The first SWIFT Business Forum East Africa took place in Nairobi and brought together close to 300 prominent members of the financial community and policy makers to discuss the many opportunities and challenges the region faces.
“The theme for this year’s Business Forum is ‘Unleashing growth through regional collaboration’; by opening an office in one of Africa’s most dynamic markets, SWIFT will be better placed to support this growth,” said Hugo Smit, Head, Sub Sahara Africa, SWIFT.
“It is through events such as the Business Forum East Africa and the annual African Regional Conference -which first took place in Kenya 22 years ago – that we are able to provide a platform for discussion on topics such as financial market development, regulation and regional harmonisation with key decision makers from across East Africa,” added Smit.
The keynote speaker was Ehoumann Kassi, Managing Director, Ecobank East Africa highlighted the importance of regional harmonisation projects and the need for collaboration to address the challenges – and capitalise on the opportunities – that are present in the region.
“There is still a lot to achieve, but the momentum for regional trade is building,” said Kassi.“Four of the East African Community, Rwanda, Uganda, Kenya and Burundi, do more trade with each other than any other countries in Africa. We already have a young and growing population, and with Ethiopia and South Sudan, that brings an even more dynamic demographic to the EAC. This, the investment in infrastructure and increasing integration, are a good basis for future growth.”
However, there are a lot of challenges too, added Kassi. “We have overlapping of trade blocks. Each member of EAC belongs to another trade block. These may have different trade tariffs and other rules, so this adds layers of complexity. Also, the cost is higher in Africa than in other countries. When you lift a container in Africa, it costs $2000; the same container cost in Asia is $900, we have a long way to go to be more competitive.”
Empower regional payments; reduce reliance on the dollar
Kassi also highlighted the region’s reliance on the dollar and the additional costs that this adds to business. “We have to find a way to reduce reliance on the dollar and instead bridge the gap between deals conducted in the Burundi franc and Kenyan shilling, for example. The East African Payment System can play a growing role in resolving this challenge for the region.”
One session on financial inclusion highlighted it key role as a driver for economic development. Panellists shared examples of where progress has been made in East Africa and how regional players are harnessing technology to drive up financial inclusion rates. However, they also highlighted the gaps in extending financial services to the region’s smallholder farmers and extending the reach of mobile microfinance.
Stephen Mwaura, Head, National Payments System, Central Bank of Kenya, said that the start of successful financial inclusion begins with the access to banking services. The industry is doing something wrong, he cautioned. “In the 100 years that we have been doing banking in Kenya, only 20% of the population has gained access to banking. It makes you wonder whether the system is working properly. When 80% of the population is unbanked you cannot effectively implement monetary policy either,” he said. “Access to financial services and inclusion will be the best way of eliminating poverty and banks will to be more innovative. Perhaps one of biggest impacts of mobile money and mobile payments has been to force banks to be more creative in response.”
Natalie Baatjies, Senior Director, Financial Inclusion, Visa, outlined the company’s ambitions project in Rwanda. Through a public-private partnership with the government of Rwanda, the company has taken a holistic approach. “We are working to enable a government and empower a whole nation,” said Baatjies.
For example, Visa has put in place a financial literacy programme, established a payment acceptance network – in shops, hotels, garages and supermarkets – and helped the government to increase the number of ATMs from 15 in 2011 to 2015 today. All the systems are interoperable and accessible by customers of multiple banks.
ATMs & Mobile not the solution for financial exclusion
John Staley, CFO and Executive Director, Equity Bank, holds a different viewpoint. “ATMs are not the solution for Africa…and neither is mobile the only answer. In the home of mobile money, 98% of transactions are still happening in cash. Mpesa is largely digitising transactions of $30-40 upwards. Poor people are transacting from $5 down. This is a huge gap,” said Staley.
“We made an assumption that poor people have electronic money; they do not. We have found more success with agents in Kenya and at the moment there are 20 000 throughout the country. This is having a huge impact on transactions which are rising significantly. People enjoy this accessibility. It’s not just about giving people accounts, it’s about giving people accounts that they can use.”
The securities markets panel brought together capital market experts from across East Africa who discussed what role cross-listings could play to encourage greater levels of intra-regional investment. Financial market infrastructures are essential in creating a virtuous circle: making markets more accessible and more efficient, reducing transaction costs and eliminating settlement risks.
African capital markets and the need for intra-regional investment is just one area where African financial institutions can begin to collaborate. Panel moderator and head of Business Development Ian Bessarabia said: “The securities markets in East Africa are growing rapidly, but in order this growth to be sustainable, it is critical that all stakeholders and market players collaborate in an effective way to ensure that they can create deeper liquidity and improve the efficiency of the markets for the benefits of the listed companies and the investors.”
Securities market conversion will support capital markets growth
Caleb Musau, Head of Operations and Technology, Nairobi Securities Exchange, argued that African capital markets can learn lessons from other successful markets – greater convergence.
Musau said: “The African Securities Exchange Association (ASEA) is a forum for exchanges and it helps us to see that we need each other more than we thought we did. There is pride in having a national exchange, but probably, that is not the way to go. In developed markets, the strategy is convergence. Euro next comprises five different national markets. If those have found value in unifying, we have every reason to find value in converging our capital markets in Africa. It will make our markets more attractive and more visible, helping will bring more investors into our markets.”
At the start of the event, SWIFT conducted an audience poll around some of the themes that would be discussed. Almost half of delegates said the biggest priority for supporting economic growth in Africa was to improve financial inclusion. A further 27% said it was attracting investments and strengthening capital markets.
Nearly half of delegates viewed interoperability between mobile operators, countries and payment systems as the industry’s biggest priority, to support financial inclusion, to support economic growth and expand regional trade corridors. On a related question, almost 80% of delegates believed that regional harmonisation projects are critical to furthering African economic growth. (For the full results, see below.)
Celebrating new SWIFT office in Nairobi
Christian Sarafidis, Deputy Chief Executive EMEA, SWIFT, noted that the first ever Business Forum East Africa provided a great forum for the region’s financial sector, policy makers and industry thinkers to share experiences and look for solutions to their common challenges. “The quality of the speakers and the level of discussion here today and the engagement from the audience has set the benchmark for future events and we look forward to supporting all the markets in East Africa as they continue to grow and develop,” said Sarafidis.
SWIFT recently opened a new office in Nairobi in order to service the region’s vibrant economic growth and future potential. SWIFT has supported the market in Kenya for the last 30 years and has a deep understanding of the financial market requirements across the region. Furthermore, SWIFT will be opening an office in Accra, Ghana, reflecting the organisation’s ongoing commitment to get closer to its customers in these crucial regions.