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Africa

The vision of Satoshi Nakamoto for Bitcoin to promote financial inclusivity has more likely been met considering the boom of the crypto market in third world countries such as those in Africa. It is noteworthy that the daddy of all cryptocurrencies was created so that there would be a chance for outsiders to gain access to an informal financial system with a digital platform. No wonder it has opened investment opportunities on trading platforms such as the BitiQ website for the African people renowned for using cryptocurrencies.

A report has recently claimed that Africa has become the global leader in terms of cryptocurrency adoption. Despite attempts of the government to restrict operations by mandating banking institutions to cut ties with crypto exchanges, the market was able to survive with a shift into a platform that no longer needs local banks as intermediaries. And the crypto market has flourished since then, away from state regulations. It appears that the free market is working at the advantage of African investors. 

East Asia

While Africa is still in the phase of adopting cryptocurrencies, perhaps it would be fair to say that Asia has already been immersed in this market. A study conducted last year claimed that over 30% of crypto transactions took place in East Asia, which includes China, Japan and South Korea. The trend is expected to carry on as countries in other parts of Asia are being drawn into the market. It would buffer the impact of China now shutting its doors to foreign cryptocurrencies.

Moreover, Japan has been among the most progressive countries in Asia to embrace opportunities brought about by crypto trading. It has managed to strengthen laws to protect the local crypto market from cybercrimes in the likes of hacking and money laundering. There has also been a regulation of crypto exchanges through documentary requirements that would prove legitimacy. More likely, this will be an additional layer of protection taken as a preventive measure to deter cyber crypto heists. 

Latin America 

It can be recalled that the founder of this cryptocurrency originally intended the use of virtual money as a medium of exchange. Following the historic move of El Salvador declaring Bitcoin as an official legal tender in the country, there is so much expectation hanging over its shoulders. The government anticipates economic growth brought about by overseas remittances in the form of Bitcoin. Besides, it is a practical approach for a developing country with people devoid of access to the financial system.  

Paraguay is set to follow in the footsteps of its neighbour with the intention recently made known by one of its lawmakers. A bill has been submitted in Congress to legitimise the use of Bitcoin as an official legal tender. The legislation intends to bank on the financial opportunities drawn by the crypto market. Like El Salvador, the nation is poised to become the next crypto hub in the region. 

United States of America

America has been the ultimate hub of cryptocurrencies, with Bitcoin finding its roots in San Diego, California.  From paying for some Papa John’s pizza, there is no doubt that the father of all cryptocurrencies has come a long way. It is considered the market leader after gaining a huge number of followers still on board. The United States is now facing challenges on how to best regulate the crypto market to protect investors. As the SEC Chairperson has put it, he is neutral in terms of technology but not in terms of consumer protection. 

Consequently, the Chairman of the Federal Reserve has already expressed his intention to promote crypto regulations. He is advocating for the possibility of digital banknotes and stable coins to compete with cryptocurrencies. These virtual currencies would be backed by the government’s financial system to draw the interest of investors, given the relatively low risks. 

Conclusion

This is how the crypto market has taken the world one region after another all through the years from the United States, Latin America, East Asia, and Africa.

Dare Okoudjou, Founder and CEO of MFS Africa, looks at the fallout of the COVID-19 pandemic and how the world economy can become more adaptable in its wake.

The relentless spread of COVID-19 throughout 2020 has underlined the importance of financial resilience in disasters and unforeseen events. The United Nations Sustainable Development Goals Report 2020 estimated that some 71 million people would be pushed back into extreme poverty in 2020 due to the pandemic, while some 1.6 billion precarious workers in the informal economy – half the global workforce – may be significantly affected.

But while the aggregate reporting may be global, the rapid advance of COVID-19 across the world has also highlighted how economic interconnectedness means that the worst would hit everyone at the same time. Often where one region or country was subject to severe restrictions on movement or activity, another was more open. People have therefore felt the effects of the pandemic at different paces and to different degrees according to where they are in the world. This dynamic provided a path to greater resilience – we can offset economic damage to a badly affected area by funnelling support from one that is doing better. But it depended on the availability of convenient and low-cost solutions that could reach the poorest where they were.

With incomes squeezed and jobs lost due to COVID-19, it has become increasingly important for this group to be able to easily access support from family back home, and likewise to be able to provide this support to family where needed. Remittances can be a lifeline for people in precarious situations and provide flexibility in the face of disaster by enabling money to easily move to where it’s most needed.

Remittances are more than a lifeline

The virus halted all movement of people and cash. As regions put in place different states of lockdown and movement restrictions to curb the spread of COVID-19 – this prevented customers from accessing cash. The virus also rendered cash a less hygienic option, thus states also restricted the opportunities to make in-person transactions. All of this made mobile money infrastructure more important.

The relentless spread of COVID-19 throughout 2020 has underlined the importance of financial resilience in disasters and unforeseen events.

Since remittance payments account for a significant portion of sub-Saharan Africa’s GDP (2.8% in 2019), it was vital to ensure they could be made easily to send money. The pandemic led many African countries to strengthen their mobile money ecosystems and address specific constraints. For example, Ethiopia relaxed its rules for mobile banking and money transfers – opening the market to all local businesses to encourage people to go cashless and control the spread of coronavirus. The Central Bank of Kenya raised its transition limits and Safaricom has lowered their fees, all in an effort to encourage people to ditch cash during the COVID-19 pandemic. These are only a few examples of how the financial services regulators in Africa adapted their thinking to put the safety of citizens at the heart of its operations, whilst also ensuring they have access to the wider global economy. In a few short weeks, a pandemic helped shift perspectives on the role of appropriate regulation in building financial solutions that strengthen consumer resilience.

Digital payments and financial resilience

The pandemic has emphasised the urgency and importance of these digital ecosystems to governments and decision-makers. With restrictions on physical contact and movement during an economic crisis, it has underlined the importance of being able to move money about seamlessly and highlighted the role that digital technology can play when it comes to keeping consumers and businesses connected during a crisis. Just because we have (physically) come to a standstill, doesn’t mean that the economy has to as well.

Although we are continuing record-breaking new cases, there is a silver lining. Recent announcements on successful vaccination trials are signalling the beginning of the end for this pandemic. What is important now is that we don’t retract the positive steps made to support vulnerable senders and recipients of remittances. Unfortunately, we are starting to see some reversals. In my country, Benin, revisions in regulation of cross-border payments have stripped away proportionality in payments, meaning that very small payments are being treated on the same regulatory terms as larger payments.

Africa provides an intriguing vision for what digitally-enabled resilience looks like – and the barriers that stand in its way. The continent is a leader in mobile money, with over 400 million registered mobile money accounts; the technological tools to support its widespread adoption have been in place for over a decade.

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Mobile payments provide a fantastic example of how digital technologies can help us build a more resilient and adaptable world, one that can better see through crises and pandemics and mitigate the economic and social damage of these rare but impactful events. Policymakers, regulators, and businesspeople need to recognise the opportunity: to build a new normal, where digital infrastructure such as mobile payments future-proof our world.

The project represents a $56 million investment, of which $40 million will be provided in the form of debt by Agence Française de Développement (AFD) and its subsidiary Proparco. Efacec, a Portuguese group established in Mozambique for several decades, will build the facility.

This is the solar project with the highest installed capacity to reach financial close in Mozambique and is an important milestone in the country’s energy strategy. The energy produced by the Metoro Power Plant is sold under a long term Power Purchase Agreement to EDM, Mozambique’s electricity utility and also a sponsor of the project.

Francisco Ferraz de Carvalho, partner in Linklaters' Global Energy and Infrastructure Group said:  “Linklaters is delighted to having advised on one more project to successfully achieve financial close in Mozambique. The Metoro solar plant is a testimony to the country’s commitment to renewables energy and its structure sends the right sign for projects to come." 

The power generated by the facility, which is due to enter service in late 2020, will be delivered at Metoro (Ancuabe district), the main transmission and distribution substation in northern Mozambique. It will supply the national grid and boost the power grid in the Provinces of Cabo Delgado and Nampula.

The Linklaters team was led by partners Francisco Ferraz de Carvalho  (Lisbon) and Francois April  (Paris). The core members of the team included Alex Bluett (managing associate, Paris), Samuel Bordeleau (managing associate, Paris), Rita Ferreira dos Santos (senior consultant, Lisbon) and Laura Vicente (associate, Lisbon).

Linklaters has been at the forefront of the Mozambican market for the past twenty years, having advised on the Mozal aluminium smelter, the Cahora Bassa hydroelectric plant, the Coral South FLNG plant and the Nacala transport corridor as well as on numerous transaction in the energy and infrastructure, mining and financial services sectors

Linklaters has 40 years’ experience of working on matters throughout Africa, helped by its unique ability to cover all of the principal legal systems through its offices in London, Lisbon and Paris and its alliance with Webber Wentzel in South Africa. These core offices are complemented by Africa experts across Linklaters’ other offices in Europe, Asia-Pacific, the Middle East and the Americas allowing the alliance to service investors into Africa worldwide as well as African companies investing globally.

Mobile payment solution M-Pesa is widely adopted in Kenya and across the wider continent, with over 30 million people using the service to send and receive money. TymeBank is also hoping to become a household name in South Africa. It claims to be South Africa’s “first fully digital bank”, and recently launched its EveryDay account.

However, the big traditional branches are also getting in on the digital action and Standard Chartered is making a big play. A multitude of digital banks have been launched, and there are more to come. Jaydeep Gupta, region head of retail banking, Africa and Middle East at Standard Chartered, tells Global Data’s Retail Banker International that this is just the beginning.

“We have now launched digital banks in eight markets within 15 months as we have seen a growing demand for convenient banking in Africa. In line with this, we will be launching our digital bank in Nigeria which follows the eight digital banks which we have already launched so far. We are also working on the roll-out of the SC Keyboard to additional markets in Africa. This includes launches in Botswana, Zambia, Zimbabwe and Nigeria throughout the rest of the year.

“The SC Keyboard platform allows customers to access a variety of financial services from within any social or messaging platform without having to open the banking app. It can be configured as the default keyboard on any smartphone, making banking quick and seamless for customers who no longer need to log into their SC Mobile app for basic banking services.”

Africa is generally perceived as a cash focused continent, and while cash is still popular mobile money is catching up fast.

Gupta says: “There is still quite a high prevalence of cash usage on the continent, but you just need to look at how well mobile money has taken off over the past decade to know that Africa is moving away from cash. Mobile money is now active in 31 countries in Africa, with 84 million active mobile money accounts.”

This massive expansion in digital begs the question of whether there is still a need for the old brick and mortar establishments?

Gupta concludes: “Retaining the ‘human’ element in banking remains crucial. While digital channels are undoubtedly more efficient, hold lower error rates and have decreased cost-to-serve ratios, finding the balance between traditional and digital banking services is the key to providing exceptional customer service. Customers will always require an element of human interaction and, at Standard Chartered, we are focusing on fusing these offerings in order to provide a seamless customer experience.”

According to Bloomberg's Billionaires Index, in 2018, Jeff Bezos, Founder and CEO of Amazon, took up the throne as richest man alive, having crossed the $150 billion mark and replacing Bill Gates, Co-Founder or Microsoft, who held the position for several years, and whose all-time high net worth was valued at just above $100 billion in 1999.

However, throughout history, there have been richer men. Yet sadly, no richer women. Taking into account inflation and the value of wealth held, Jeff Bezos actually sits much further down in the richest people ever list, with the likes of Genghis Khan and John D. Rockefeller taking precedence.

But who is truly the richest person that ever lived?

At an estimated value of $400 billion, Mansa Musa I of Mali is the richest person who ever lived. Born in 1280, Mansa Musa was ruler of the Malian empire, and acquired the most part of his wealth from the production and trade of salt and gold; more than half of the world’s supply at the time in fact.

You’ve likely never heard of this ruler, unless of course you live in a country that was heavily influenced by his rule, which would be several African countries with Muslim heritage. Still today there are mosques standing that were built on the back of Musa’s immense wealth.

Dying in 1337, Musa left his huge amount of money to his heirs, who not only squandered the best part, but failed to protect the family worth just two generations down the line, when the empire was overturned in civil war and conquered by invading foreign nations. Musa was the tenth Mansa of the Malian empire and ruled over the better part of what was previously the Ghana empire, today known as Mauritania and Mali.

His titles, surprisingly unrelated to his stacks of cash, include among others: "Emir of Melle," "Lord of the Mines of Wangara," and "Conqueror of Ghanata." According to David C. Conrad's "Empires of Medieval West Africa: Ghana, Mali, and Songhay," during his rule, Musa conquered 24 cities and their surrounding districts, amassing wealth left, right and centre. On top of this, he was the world’s biggest gold producer and distributor, as gold was a highly sought commodity at the time, and an important indication of status and affluence.

TED Ed reports that in order to fulfill one of the five pillars of Islam, Mansa Musa made a 4,000 mile pilgrimage to Mecca, and spent silly amounts of cash in doing so, as of course a Mansa as such had to travel in both style and luxury. TED Ed writer Jessica Smith says: "Not one to travel on a budget, he brought a caravan stretching as far as the eye could see.” The 60,000 strong caravan was rumoured to have included 1,000 helpers, 100 gold-packed camels, endless musicians the Mansa enjoyed, and 500 or more slaves with golden staffs.

Alongside his heritage Musa’s assets are estimated to be worth an inconceivable amount, and although historians and economists have rounded said value to around $400 billion, according to Time magazine: "There's really no way to put an accurate number on his wealth." In fact, some believe that Mansa Musa’s incredible fortune may have been slightly exaggerated by his contemporaries, and that the Rothschild Family, the most successful banking family in history, may be in fact the front runner for the richest person/persons who ever lived.

"There's really no way to put an accurate number on his wealth."

- Time Magazine

Nonetheless, this legendary ruler stands among the richest of the rich, and while today’s generations may have forgotten him, time remembers him through the many monuments, mosques and madrasas that he had built and still stand in Gao and Timbuktu, but more notably, the Sankoré University, which today is a fully staffed university with over 25,000 students and one of the largest libraries in the world at roughly 1,000,000 historical manuscripts.

Bill Gates and Jeff Bezos are names we hear daily nowadays, and names we most associate with real billionaires, but these guys aren’t much in comparison to Mansa Musa, the richest person who ever lived.

Sources:

http://time.com/money/3977798/the-10-richest-people-of-all-time-2/

https://en.wikipedia.org/wiki/List_of_wealthiest_historical_figures

https://www.celebritynetworth.com/articles/entertainment-articles/25-richest-people-lived-inflation-adjusted/

https://worldpolicy.org/2012/04/10/lessons-from-timbuktu-what-malis-manuscripts-teach-about-peace/

https://ed.ted.com/lessons/mansa-musa-one-of-the-wealthiest-people-who-ever-lived-jessica-smith#watch

https://www.amazon.com/dp/B00BT68Q2I/ref=dp-kindle-redirect?_encoding=UTF8&btkr=1&tag=bisafetynet2-20

https://www.bloomberg.com/billionaires/

In Africa, the want for cryptocurrency is growing, and according to Iggi Vargas at Paxful, this could affect the wider markets.

The interest in bitcoin has continued to grow at a rapid pace. Exchanges are reporting that a lot of Africans, especially millennials, are taking over the platforms.

The “Cheetah generation”

The term “Cheetah generation” was coined by Ghanaian economist and author George Ayittey. It refers to the young and hungry generation of African graduates and professionals. This is the generation that is trying to change the status quo for the better.

“The Cheetahs do not look for excuses for government failure by wailing over the legacies of the slave trade, Western colonialism, imperialism, the World Bank or an unjust international economic system… To the Cheetahs, this ‘colonialism-imperialism” paradigm, in which every African problem is analyzed, is obsolete and kaput. Unencumbered by the old shibboleths, Cheetahs can analyze issues with remarkable clarity and objectivity.” (Ayittey, 2010)

The Cheetahs offer the people of Africa a new way of thinking. Ayittey says that their outlooks and perspectives are “refreshingly different” from past African leaders, intellectuals, and/or elites.

Ayittey compares them to what he calls the “Hippo generation”. This refers to the generation before the Cheetahs.

“ [The Hippo generation] lacks vision - hippos are near-sighted - and sit tight in their air-conditioned government offices, comfortable in their belief that the state can solve all of Africa’s problems.” (Ayittey, 2010)

According to Ayittey, the Hippos are the ones that “are lazily stuck complaining about colonialism, yet not doing anything to change the status quo.”

With that being said, how does the Cheetah generation translate to the Africans’ new-found passion for crypto?

Hunger for crypto

When it comes to cryptocurrency, Africa is a shining star. This is because of one major factor: peer-to-peer finance. Africans have joined the peer-to-peer revolution. It is doing wonders not only for their economy but also their culture. The Cheetahs seem to be embracing this as a good number of African millennials have been joining peer-to-peer marketplaces. This is important for many reasons.

First, it shows that peer-to-peer platforms have an amazing reach. Africa does not have, by any means, cutting-edge technology but they find a way to make a living off of cryptocurrency. Being able to send money around the world without the bank’s high fees are a big deal. Whether it be to a sibling halfway around the world or to your neighbor, being able to send money anywhere is an advantage for Africans.

Second, it shows that peer-to-peer platforms are easy to use. Many non-users will find bitcoin intimidating at first and give up on learning. This shows not only that everyone can use peer-to-peer platforms, but also that it's easy to learn if you’re willing.

Third, it shows that the underbanked aren’t a lost cause. With Africa being so underbanked, bitcoin serves multiple purposes for them. It serves as both a way to hold your money and a way to send out money.

Fourth, it shows that everyone has the power to take control of their own finances. Some Africans actually make a living by trading cryptocurrency, and you can too.

Lastly, it shows that a revolution is in the works; a peer-to-peer revolution. The benefits of peer-to-peer exchanges are being seen all over Africa. The idea of fast transactions and innovation flawlessly aligns with the Cheetah Generation. Clearly cryptocurrency and peer-to-peer finance are the right tools for the new generation of Africans to get ahead and prosper. But it doesn’t just have to be Africa. All over the world, peer-to-peer platforms are showing significant amounts of growth. They are also becoming a popular method to buy bitcoin.

The time is now

It seems like we can learn a lot from the Cheetah generation, including how to make money with bitcoin. If they can have the right set of mind, the world can follow suit. The drive of these young prodigies is something to look up to. They have the attitude that can conquer and inspire the world. Taking control over your own finances is a big deal, and it seems the Cheetahs have figured it out. The peer-to-peer revolution is here and it’s time to get in on it.

Tajudeen Akande is Senior Partner at PKF Nigeria (PKF Professional Services) and a member of PKF International - a global network of legally independent accounting/business advisory firms bound together by a shared commitment to quality, integrity and the creation of clarity in a complex regulatory environment. Here, Mr. Akande tells us about the transformation of the tax system in Nigeria, as well as the challenges of providing tax advice in the African country.

 

What would you say are the challenges of providing effective accounting and tax advice in Nigeria?

The main challenges of providing effective accounting and tax services in Nigeria include:

 

How has the tax system in Nigeria transformed throughout the years?

Nigeria’s tax system has evolved a lot over the years - from the pre-colonial era to the latest tax reform codified into a National Tax Policy.

In the traditional Nigerian society, the formalisation of taxation was practically non-existent. Citizens were only exposed to a variety of levies as dictated by paramount rulers and different traditional rulers created their different forms of taxes and levies.

To achieve conformity and uniformity in taxation, Raisman Commission was set up in 1958 by the colonial Government, which advised that basic income tax principles should be introduced and standardised across the country, which was accepted by the Government. Thus, direct taxation was incorporated into the constitution of the Federal Republic of Nigeria, after which the Companies Income Tax Act and Income Management Act of 1961 were established. This marked the foundation of Nigeria’s modern tax laws.

As a result of the increasing complexities in commercial transactions and glaring issues relating to practical interpretations of the laws, the Acts were repealed and reenacted giving rise to Companies Income tax Act CAP C21 LFN 2004 and the Personal Income tax Act CAP P8 LFN 2004, as well as other tax regulations which have changed the face of tax administration and practice in Nigeria.

Nigerian taxes are currently administered through the three levels of Government, as outlined in the Taxes and Levies (Approved List for Collection) Act (Amendment) Order of 2015.

The National Tax Policy (NTP) was first published in 2012, as part of the efforts to entrench a robust and efficient tax system in Nigeria. This was reviewed in 2016 in response to the rapidly changing commercial environment and persistent low tax to Gross Domestic Product (GDP) ratio.

Recently, Nigerian tax administration has been reshaped and expanded to focus on international tax. Various measures have been put in place to curb base erosion and profit shifting, so as to improve government revenue. Some of these measures include Transfer Pricing Regulations, Double Tax Treaties and Multilateral Agreements. Also, the tax payment system has been automated. Tax payers can now pay, generate receipts and even file tax returns and obtain Tax Clearance Certificate (TCC) online.

 

What are PFK Professional Services’ philosophy and top priorities towards its clients? How has this evolved over the years?

PKF is a global family of entrepreneurial minds working together, pooling our collective resources, experience and skillsets to add significant value to clients. We combine our understanding of local regulations, international perspectives and grasp of niche markets to create a simple, seamlessly executed approach. When you engage with PKF, you can be confident that the work will be carried out by dedicated and experienced professionals. We know the importance of having teams who have real sector experience.

The PKF ethos is about working together. We believe in giving teams the same encouragement as the individuals within them. We pursue a philosophy of shared responsibility and shared success. The most distinctive feature of PKF practice is our attitude towards our clients. Our people are good at building and developing relationships. This means getting to know our client’s organisation to understand their long-term needs.

 

Website: https://www.pkf.com/pkf-offices/africa/nigeria/pkf-professional-services-ng-lagos/

Contactless and online banking have pulled cash out of the pockets of most people, and while there are those that believe cash will always be a vital part of the international economy, there are some parts of the world that are borderline cashless. Below Shane Leahy, CEO of Tola Mobile, elves into the possibilities of cashless countries around the world.

With more digital payment options now readily available to consumers than ever before, the depreciation in use of traditional forms of payment, such as bank notes and the humble coin, has been inevitable. When we would once delve into our pockets for some cash, consumers today are now increasingly reaching for their mobile devices to complete purchases quickly and conveniently.

The rise of mobile payments technology over the last few years has played a particularly huge hand in enabling both merchants and customers worldwide to facilitate more cashless transactions. With the global mobile payment transaction market forecast to reach US$2.89 trillion in revenue by 2020, the rapid uptake of mobile-centric methods and the resulting shift towards a more cashless consumer culture is showing no signs of slowing.

Yet, not only have these technologies made fast digital payments accessible for smartphone owners in the more technologically advanced areas of the world; it has also empowered consumers in many emerging markets around the world to undertake instant and secure payments through their mobiles, without the need for physical cash or a registered bank accounts. In fact, it is these same developing regions in which we are now seeing the most widespread and advanced adoptions of mobile payment solutions, which are rapidly eliminating cash as a dominant form of payment amongst consumers within these markets.

One particular area of the world in which cashless payments have broken down many of the previous barriers to entry for both merchants and consumers is Sub-Saharan Africa. It has been demonstrating a rapid mass-market adoption of mobile money services of late and has so far outstripped the rest of the world in terms of its approach to cashless payments. So much so that it now accounts for more than half of the total 277 mobile money deployments worldwide.

One of the biggest driving forces behind this development has been mPesa, the mobile phone based money transfer service which now boasts over 30 million subscribers across various African countries, including Kenya, Congo, Tanzania, Mozambique and Ghana. Unlike apps such as Paypal and NFC-based mobile enabled credit card methods like Apple Pay and Samsung Pay which have been gaining traction in Western regions, the sheer simplicity of the technology required to conduct cashless payments across Africa has contributed to its growing uptake of mobile money options.

In contrast to these methods, which require users to invest in a modern and more expensive smartphones to utilise the technology, mobile money transactions across Africa can be carried out using the most basic handset and without needing an internet or data connection. By leveraging a low-level service menu provided on every GSM phone, this technology is widely accessible and therefore able to support the region’s current technological infrastructure.

What’s more, services such as Apple Pay and Paypal still also require users to link a bank account in order to complete mobile payments, making these methods largely inaccessible for the millions of unbanked consumers in developing regions. These factors also have an impact on merchants as they will have to pay more to process transactions conducted through a linked bank account, than they would if it was made directly through a physical credit or debit card.

With this and the growing preference towards cashless payment methods globally combined, it is unsurprising that the rate at which Sub-Saharan Africa is adopting mobile money is much faster than that of any other region. At the end of 2016, there were over 500m registered mobile money accounts in the region alone, a figure which has undoubtedly now significantly increased.

The establishment of mobile money across Sub-Saharan Africa is now giving much of its previously unbanked population unprecedented levels of financial inclusion and freedom to make purchases anywhere, at any time, a move which has undoubtedly played a significant role in the growth of cashless transactions and gradual decline in other payment methods. What’s more, these services have significantly reduced the concerns over carrying physical cash for consumers within these countries and have replaced them with a simple and secure means for them to instantly access funds and pay for goods and services.

Not only has this rise in mobile money use facilitated an increase in consumer empowerment; it has also paved way for merchants who have previously combatted against the region’s developing infrastructure, in which periods of downtime and network outages cause huge disruption and can often lead to lost funds when payments are made via credit cards. By ensuring a seamless and instant digital transfer of funds from customers to the merchants, the appeal of cashless options has increased dramatically, providing merchants with more business continuity and offering these countries an opportunity to drive economic growth.

While there is still some way to go before cash is rendered expendable globally, there are various countries Sub-Saharan Africa, such as Kenya and Tanzania which are currently leading the way in terms of changing consumer behaviour and quickly adopting a cashless approach. For now, cash still remains king across most Western and other countries. However, as consumers continue to seek convenience and security, it is certain that we will see a growing shift towards digital payment methods and a continued demise of physical cash worldwide.

Most conversations about doing business in Africa will include words such as “challenges,” “instability” and “risk.” Nat Davison, Partner at foreign exchange and international payments firm, Frontierpay, explains for Finance Monthly the promises and pitfalls behind payments across the African continent.

The same three words are often applied to managing currency risk and making payments throughout Africa. Costly transmission fees, unestablished banking systems, central bank restrictions and market volatility are all obstacles keeping treasury managers and payroll teams up at night.

That said, Africa also has a lot to offer from a payments perspective. The continent is becoming a hub of new payments technology, same-day payments are possible in countries such as Nigeria and there is a booming mobile payments landscape.

In short, while there is some volatility, if payroll teams are aware of the potential pitfalls and how best to avoid them, there are plenty of rewards to be reaped in the continent.

Finding the right supplier

When looking at currency markets, risk is a constant. Before even considering how currency fluctuations could affect your business though, you first need to gain access to any of Africa’s local currencies; a process which isn’t always as straightforward as it might sound.

In an ideal world, a single supplier would be able to meet most, if not all, of a business’ currency requirements. The reality though, is that many high street banks have a limited or restricted offering and are unable to provide a solution that covers multiple African nations. It’s important, therefore, when preparing to do business in the continent, to find a partner who can cover as many currencies as possible. Not only will this help to smooth internal processes, but it will also enable more effective currency hedging.

Companies often try to get around liquidity limitations in Africa by making payments in US dollars instead. The problem in doing so is that unless the beneficiary bank account is denominated in USD, the payment will be converted to the local currency before crediting at an arbitrary and more than likely unfavourable rate of exchange. Furthermore, it’s impossible to pay a supplier or employee a fixed amount using this system.

Currency volatility

Markets can be fickle beasts and to use even a commonly traded currency such as the South African rand can require a thick skin and heightened awareness of risk. Last year, the currency dropped 7.5% in the last four days of March, only to rise by the same amount in a nine-day stretch in April. Shifts of this nature are more than capable of affecting your payment costs and can hit with little warning.

On the flip-side, anyone with the nerve to have played the rand over the long term will have seen a downward slide of more than 50% in its value between 2011 and 2015, only for it to rise by 13% in 2016 and outperform every EM currency except Brazil’s real and Russia’s rouble.

To remove a degree of the uncertainty from trading the rand, I would advise anyone who hopes to do business with South Africa to have an understanding of the carry trade; a strategy that involves borrowing a currency with a low interest rate in order to fund the purchase of another with a higher rate.

Payment risk

As a result of the combined political and currency volatility in the region, knowledge and experience of South Africa’s local markets are key to successfully negotiating the pitfalls that could cost you time and money.

Where possible, work with partners who can demonstrate a strong track record and broad network within the region, to speed up the delivery of payments and avoid overblown fees. Some banks and payment partners may be able to deliver funds to Nigeria, for example, but not all will have access to local banking systems. Having this capability would open up the possibility of naira crediting bank accounts within hours rather than days.

Pricing is affected in the same way. A deeper knowledge of local market conditions, parallel markets and FX volatility will allow you access to much more favourable currency rates and the most efficient processes available within the rapidly developing continent.

Banking requirements are also fluid, with differing beneficiary data needed in different countries – in stark contrast with the EU and Single European Payment Area. Specialist experience when it comes to making payments in less-developed regions, such as Mozambique or Lesotho, will help to avoid lengthy delays, payment rejections and administration charges.

Volatility in Chinese economy

Africa’s prosperity increasingly depends on China. Over the past 20 years, China has become its largest trading partner and a significant source of investment and lending, paving the way for deep economic ties between the two countries.

As a result, recent signs of a slowdown in the Chinese economy are likely to be a very bad omen for Africa, which is massively dependent on China to not only purchase its natural resources, but also to upgrade its decaying national infrastructure.

Ultimately, a slowing China will hinder Africa’s ability to grow. However, as a decelerated China is looking ever more like an inevitability than a possibility, any business with exposure to Africa must ensure they are monitoring the landscape in China just as closely.

In conclusion

As a market to do business in, Africa is gathering global interest. Widespread urbanisation is fostering large cities in which to set up shop and readily available workforces to recruit from. New consumer markets, such as a growing middle class, are presenting previously untold opportunities to trade and the region is seeing strong growth, both economically and from a perspective of technological innovation.

However, for any new business, success on the currency and payments front needs to be an immediate concern. Failure to manage currency risk can fundamentally jeopardise your business, while holes in your liquidity provision may even leave you unable to pay suppliers or employees. Familiarise yourself with your required currencies and the local banking infrastructure, and invest time in finding a partner with the knowledge to keep any potential risk under control.

To hear about real estate and construction in Africa, Finance Monthly reached out to the Executive Director of Tanzania-based Epitome Architects Ltd. - Nuru Susan Nyerere – Inyangete. Established in 1998, the company provides architectural, interior design, planning, contract administration and project management consultancy services. At Epitome, Nuru is in charge of design, procurement (especially international), quality assurance, whilst she also heads the company’s Real Estate Development wing in Nigeria.

 

What would you say are the most common types of projects that you work on?

We are not geared for a specific building type as in Tanzania, like many African countries, the economy is not big enough to sustain architects who are specialised in a specific building type. Thus, we have built a team with the capacity to successfully undertake a variety of projects.

We are very fortunate to work on a wide variety of building types i.e. corporate buildings (for both private and public clients); commercial and mixed use. We’ve also worked on petrol stations, banks, schools and universities, residential buildings – and the list goes on. We are one of the few Architectural firms in Tanzania that have worked on a number of health related projects.

Additionally, our portfolio also includes international projects such as Utako Bus Terminal in Abuja, Nigeria and Rwanda People’s Bank in Kigali.

Our work ethic and drive to satisfy our clients have enabled us to get numerous word-of-mouth referrals.

 

What specific tactics do you implement when assisting clients with development strategies?

 

What are the challenges that your clients typically face prior to embarking on a new project, in relation to laws and regulations?

A key challenge for our clients is matching their expectations and needs to the resources available, the regulatory requirements and the cost of compliance.

Processing of Statutory approvals like building permits, change of use (where change of developments use is required) is long drawn out and bureaucratic. In addition, every project needs to register with various regulatory bodies like AQRB, ERB, CRB and also undertake studies such as Environmental Impact Assessments (EIA), all of which are costly. Additionally, if the project involves acquisition of funds, the process may take longer than the client’s timeframe.

In regards to building laws and regulations, a potential challenge can relate to gaps in legislation, such as the absence of building codes for example. Change in policies can also cause numerous issues for our clients.

 

Do you have a mantra or motto you live by when it comes to helping your clients with the development of a project?

Our Motto is: ‘Strive for excellence regardless of project size’. Our business ethos is built on being loyal to our clients and the profession in our advice from the outset and our clients appreciates this.

You wouldn’t think that poverty stricken lands in the huge continent of Africa are actually rich with communications technologies, and in particular mobile phones. Below, Michael Brown at Credit Angel sheds a light on what this looks like, and how in fact, the proliferation of mobile technology is helping eradicate poverty in some areas.

The mobile market has thrived for some two decades now, and all signs point to further expansion. The industry will continue to grow globally, as consumers seek further convenience in their day-to-day lives.

It’s also a lucrative market financially, for banks, monetary institutions and innovators. Alongside mobile growth, financial technology (FinTech) is thriving alongside it as a natural consequence of increasing users and use. And payment systems that prove both convenient to the consumer and profitable for the providers will only expand until the next big innovation comes along.

However, alongside the global appeal of profit and convenience, the mobile market is thriving as an enabling tool in parts of the world where profit does not come first.

Background

It may surprise people to learn that mobile phones are thriving in parts of rural Africa. In villages distant from major towns and cities, where most people do not have bank accounts or secure ways of storing their money, it’s here where perhaps the biggest benefit of mobile use can be found. In fact, whilst the West has been dipping its toe into the combination of mobile and FinTech, rural African communities have been miles ahead in their acceptance of the new technology.

The lack of a bank account is clearly a security concern for all individuals. Any income made by those in rural settings once had to be carried or guarded by the individual. Cash, as we know, is perhaps the least secure of currency forms worldwide. It’s easy to steal, and virtually impossible to claim back once lost. Such a rural economy makes life incredibly difficult for everyone. Not only is there little money to go around in the first place, but any amount lost or stolen can quickly mean extreme poverty for individuals.

The Contactless Revolution

Whilst the West has been debating the safety of contactless cards in recent times, the United Bank of Africa (UBA) had already mobilised the facility across much of Nigeria. Most of us have reaped the benefits of contactless payments when we’ve found ourselves short of cash and far from a bank. But the UBA extended the benefits to include the likes of public transport and even taxis, and all this whilst Western buses remained cash-only, and Uber was nothing more than a German word meaning ‘above’. The gradual shift from contactless cards to mobile payments is simple common sense – why carry two devices when one will do?

The African economy as a whole is reaping the benefits of making its citizens mobile. In a society without landline telecommunications, it’s estimated that the continent gains a 0.5% rise in gross domestic profit, every time it enables a further 10% of its population to access mobile technology.

Beyond FinTech

The mobile market is thriving in rural Africa, and not just for directly-financial reasons. As farmers the world over know, the weather plays a huge part in their success. Instead of having to play a guessing game and potentially losing one’s whole crop and income, rural African farmers are using their mobiles for weather reports via the internet.

With such information at their fingertips, farmers know the best times to plant crops, sow seeds and harvest. The situation of families having no products to sell and thus no food for themselves has been greatly reduced as a result. Judge this against a rural economy in which around half the people are small-scale farmers and the difference mobile phones have made in fighting poverty is clear to see.

The introduction of mobile devices to the region have also helped with healthcare. Many people are too distant from hospitals and surgeries in emergency situations, meaning a high mortality rate, particularly amongst the young. Infections and diseases that are easily-treatable often claim lives in rural Africa, and it’s often for reasons of accessibility and remoteness. Many can now contact healthcare professionals for diagnoses and advice thanks to their handheld companions.

It’s a similar situation regarding education. There are now apps set up allowing teacher-pupil communication online, as well as online course, not dissimilar to the Open University. The economic opportunities for those living in rural economies have been increased tenfold, and the figures say it all. Mobile payment app M-Pesa is one company that has invested in rural Africa, and its innovations have brought nearly 200,000 Kenyans alone out of poverty over the last decade.

The Future

The relationship between FinTech and mobile tech is inexplicably linked, and the two are set to continue to grow together. Given that the number of mobile users will increase as time ticks on, this naturally means an increase in app-users and all other mobile mod-cons.

It’s estimated that 90% of smartphone users will have made a mobile payment by 2020. The world as a whole is moving away from cash-based transactions towards more convenient, secure and profitable ways of paying.

FinTech in Africa shows how a cashless society can work, as well as the untold benefits and freedoms such a set-up can provide for the individual. As it stands, the introduction of mobile phones to rural Africa ranks highly amongst factors credited with reducing poverty in the region, and it may well prove to be the number one factor in years to come. Discover more about mobile innovations and the future of spending.

Despite its significant economic growth and vast oil riches, Nigeria has struggled to fight poverty in the past three decades. Finance Monthly had the privilege to speak to Godwin Ehigiamusoe, a man who’s devoted his career to helping the poor and the vulnerable people of Nigeria.

 

LAPO (Lift Above Poverty Organization) is a non-profit community development organization committed to the social, health and economic empowerment of the poor and vulnerable. Please tell us about the company’s beginnings.

Lift Above Poverty Organization (LAPO) was initiated to address the challenges that the poor and the vulnerable are facing. I established the company in Ogwashi-Uku, Delta State in late 1980s in response to the increasing level of poverty arising from the implementation of the central components of the Structural Adjustment Programme (SAP). These components of SAP were the first devaluation of the national currency - the Naira; and rationalization of workforce in the public sector. The impact of programme implementation on poverty was enormous. For example, the number of Nigerians living below the poverty line rose from 18 million in 1980 to 67 million in 1996[1].

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In mid-2010, we established LAPO Microfinance Bank- a premium Microfinance Bank. LAPO has also capitalized LAPO Microfinance Company in Sierra-Leone. The bank’s superior performance has been powered by flexible institutional structures and processes which effectively engage members of low-income households; owners of micro and small enterprises.

 

What are LAPO Microfinance Bank’s key priorities towards its clients? How has this evolved over the years?

LAPO Microfinance Bank prioritizes access to a range of responsive financial services particularly, micro loans. It has also committed enormous investments in client support activities and clean energy lending. LAPO Microfinance Bank provides basic micro-business management services to clients who are owners of micro and small scale enterprise. It facilitates access to insurance policies for poor clients. Its credit plus approach to service delivery is informed by the fact that low income people, particularly women contend with challenges beside lack of access to finance. Over the years, LAPO has expanded its loan portfolio from few products to a basket of responsive products. They range from farming to affordable housing and education loans.

 

How have the LAPO Microfinance Bank’s service offerings evolved?

Like most microfinance institutions, LAPO at inception started with mono-product which was a working capital loan for micro and small businesses. In its 5-year plan (2013-2017), LAPO Microfinance Bank prioritised product diversification. As a result, a number of credit and deposit products have been developed and offered to meet the varied financial needs of low-income people, micro and small businesses. LAPO Microfinance Bank is currently deploying alternative financial delivery channels to expand its outreach.

 

As CEO, how do you advise your team to make the correct decisions for the company alongside clients?

I emphasize client engagement which consists of regular interaction and assessment of their current and emerging needs. Other steps include efficient service delivery and effective performance management. I also prioritize innovations with the creation of Innovation Lab. Staff members are empowered with various training and capacity development programmes. They are encouraged and indeed involved in goal setting and a periodic performance review.

 

What are your plans for the company for the rest of 2017 and beyond?

LAPO Microfinance Bank shall seek to extend its range of services to actors in the rural economy. This is understandable; Microfinance should be made relevant to agriculture in Africa, given the fact that a large number of Africans engage in agriculture and allied activities. A range of products will be offered to meet the financial needs of the various segments in the agriculture value chain. We plan to deepen our cleaning energy lending in the coming years.

 

Your job must be very rewarding. Is this the motivation that drives you?

 Indeed – the past three decades of engagement with poverty lending have been full of excitement. There is certainly a sense of fulfillment.

I am driven largely by the desire to address the scourge of poverty. This informed my decision to set up the organization in the first place, and has continued to propel my desire to scale up to reach a large number of low-income people and offer them a range of empowering products and services.

 

Website: http://www.lapo-nigeria.org/

[1] In Poverty and Microfinance in Nigeria (2000) by Godwin Ehigiamusoe

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