Optimism over growth in Africa

Post was last updated: March 7, 2018

Standard Bank Group Head of Trade, Vinod Madhvan, forecasts that Africa has high chances of returning to growth in 2018, if the risks of doing business in and with Africa can be managed.

Madhvan said digitally integrating Africa’s higher risks trade transaction ecosystem into a global economy returning to growth offers Africa a unique opportunity to drive inclusive and sustainable development.

He said African trade is built on the unique understanding of the broader landscape of challenges and risks that define the scale of the opportunity presented by trade to transform African growth.

“With broad-based growth expected across 120 world economies this year, 2018 is currently presenting potential for a globally synchronised return to growth. Significantly this growth is, for the first time in decades, expected to occur across both mature economies such as the United States, Germany and Japan, as well as emerging economies such as Mexico, Brazil, India and China.

“Africa is no exception. The African Development Bank (AfDB), for instance, is predicting the average growth rate across 54 African markets to reach 4.1 percent in 2018. This represents a 30-basis point increase over 2017’s estimated average growth rate,” a statement from Standard Bank quotes Madhvan as saying.

He further said optimism and some green shoots are emerging on the continent, following years of low growth and poor commodity prices.

“From Nigeria to Mozambique, Ghana and Zambia, improved commodity prices are combining with new global growth opportunities to drive positive emerging market sentiment.

“At the same time, political stability appears to be returning to Kenya and other leading African economies. Even growth-challenged South Africa is currently experiencing a bout of optimism as political events point to the prospect of improved policy certainty,” the statement reads.

In a globally generalised growth environment, Africa’s demand for trade finance is only likely to increase and the expert said this means that 2018 is likely to see Africa’s bank-intermediated trade finance deficit significantly exceed the AfDB’s estimation of a $100 million shortfall.

“Given these numbers, using digitisation to increase the efficiency and reduce the cost of trade will be essential, if Africa is to quickly leverage the full potential of this historically unique instance of synchronised global growth.

“In particular, access to trade finance remains a challenge for Africa’s small and medium-sized enterprises (SMEs). Developing effective SME financing able to support the rapid expansion of intra-African trade remains critical to both growth as well as social and political stability,” Madhvan is quoted as saying.

The statement gives an example of the Kenya tea industry, which has adopted a platform that brings buyers and sellers together.

“Other similar digital platforms in Kenya, Ghana and Tanzania provide services to businesses in the bulk oil importation space. What is immediately obvious is that Africa is being transformed by digitisation on three levels, namely digitisation of the physical supply, the financial supply and also via the documents chain.

“Standard Bank has been most directly involved in digitising the financial supply chain for some time now. For example, the bank has worked with regulators supporting price discovery and risk management in the tea industry in Kenya.

“Standard Bank has also been working hard to digitise the documents chains, including proof of concept tests using blockchain, to digitise bills of lading, for example,” the statement reads.

Standard Bank is focusing on developing digital solutions that simplify and broaden access to trade finance amongst Africa’s SME segments in key markets. This is to be the bank’s strategic focus for the next 12 to 18 months.

Standard Bank provides support and strategic guidance to regional organisations working to reduce trade barriers, speed up the clearing and release of goods, increase the predictability of landing costs and support compliance— so as to minimise the disruption and costs of legitimate trade.

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