Industry communique

Growth in Africa outperforms SWIFT global growth and data shows rising intra-Africa volumes

Figures released on the eve of the 22nd SWIFT African Regional Conference provide evidence of Africa’s growth and development of intra-Africa corridors

The main domestic hurdles to growth have been strikes and power supply disruptions.

Cape Town, 4 May 2015 – Data from SWIFT shows that its payment business in Africa has outperformed the total growth of the business globally. In the year to date, African payment traffic volumes grew by 13.2% versus 8.8% growth for SWIFT worldwide, highlighting the sustainable growth in the region. Africa in fact was the fastest growing region for payments traffic, surpassing EMEA at 6.9%, the Americas at 12.1% and Apac at 12.6% growth.

In addition, SWIFT traffic between African countries recorded its highest ever growth rate underpinning the evolution of the intra-African transaction corridors.

Looking at SWIFT traffic at a country level, many African countries have experienced a staggering pace of growth. In Angola, for example, payments traffic grew by more than 78% in the year to day, versus the same period last year. In West Africa, Ghana payments traffic rose by almost 30% and securities by almost 55%.

East Africa has witnessed particular growth. In Kenya, payment message traffic rose by 23.1% while securities related growth was a startling 122.3%. In Tanzania, payments rose by 32.9% and securities by 45%, and in Uganda, payments were up by 17.5% and securities rose by 31.6%.

Christian Sarafidis, Deputy Chief Executive EMEA, SWIFT, highlighted the value of SWIFT data in the story it tells about African economies. “Through the development of the SWIFT index*, we know that SWIFT data is closely correlated to economic activity,” says Sarafidis. “Rising SWIFT traffic volumes are therefore an indicator of economic growth. The figures revealed today show strong organic growth across Africa and in East Africa particularly, and serve as validation of the positive growth trends we are witnessing in the region.”

Hugo Smit, Head of Sub-Sahara Africa, SWIFT, says: "Africa is an important market for SWIFT. Once again it has outperformed most of our other regions and has proven itself a critical component of our global business. Because the continent has such huge growth potential, we are continuing to invest more resources to support the local financial community. It is very heartening to see such impressive growth in West and East Africa, where are currently opening new SWIFT offices.”

The growth figures are the latest data showing a long-term growth trajectory, with Africa’s total SWIFT traffic rising by 44% over the last three years. Payments have been the main engine of this term growth, with a 42% rise over three years; securities too have outperformed, with a growth of 37% across Africa in the same time period.

There is an ongoing rebalancing between South Africa and other African nations in terms of SWIFT traffic levels. In 2003, FIN traffic from South Africa represented 72% of total African volumes; as of Q1 2015, this had decreased to 53% if total traffic, with other African nations representing a larger proportion of total activity. The highest growth is recorded in Nigeria, which has an average yearly growth of 29.1% since 2013, and Ghana, with average growth of 27.2%.

African corridors are becoming stronger. For the full year 2014, SWIFT data shows that 52% of the traffic sent from Africa stayed within the African zone, up by 15.8% on the year before. This is the highest ever recorded growth rate for the intra-African traffic corridor.

The trend was even more pronounced in the SADC region, where 55% of the traffic sent from SADC stays within the SADC area. Again, this region is recording record growth, with volumes up by 16.2% for the full year 2014, versus the previous year.

SWIFT’s African Regional Conference (ARC) 2015 will take place from 5-7 May 2015 at the Westin Hotel in Cape Town, South Africa. ARC, now in its 22nd year, brings together policy makers, industry leaders and the broader financial community from across the African continent. Typically attracting up to 500 delegates from around 40 countries, ARC is a unique forum for networking, education, discussion and debate.

This year, for the first time, ARC will partner with Innotribe, SWIFT’s financial technology innovation initiative, to bring Innotribe’s fintech Startup Challenge to Africa. The Startup Challenge introduces the world’s brightest startups to highly qualified financial service experts, angel investors, venture capitalists, and global leading fintech and financial decision makers. In the 2015 Challenge, SWIFT Innotribe will have a round dedicated to fintech companies from across the African continent. These will come to Cape Town in order to pitch to investors.

Source: SWIFT

6 May 2015


Capital market standardization can boost intra-African investment

Africa has enjoyed more than a decade of sustained economic growth, often outstripping many other parts of the world. However, Africans are not reaping the rewards of that growth as much as they should. It will take more than the mass export of commodities to effectively facilitate the 'trickle-down' effect of wealth. Many argue that it is largely foreign companies and foreign investors instead of Africans who are benefiting most from the continent’s tremendous growth.

Attracting foreign investment plays an important role in financing Africa’s development, but it is crucial that local companies, savers and investors should also benefit. Some data suggests that this is already happening, with intra-African investment said to be rising by more than 30% a year. However, this is heavily skewed to only a handful of markets, with South Africa accounting for 35% of this investment, followed by Kenya with 16% and Nigeria with 11.6%.

To spread the benefits of African growth and unlock the power of the savings culture in the growing middle classes, investment must be easy and reliable. Companies more used to relying on debt funding need to be persuaded of the benefits of equity capital and the risk sharing provided by a stock market listing. At the same time, the legal and regulatory frameworks which protect investment need to be robust and companies seeking investment must meet minimum levels of governance and transparency.

But just as important is the financial market infrastructure that underpins the buying and selling of securities. The right infrastructure ensures that access to financial markets is easy, transparent and robust; poor infrastructure acts as a constraint on the growth and vitality of equity markets and inhibits liquidity due to the heightened levels of operational risk.

Many investors argue that it will be the ability to trade in and out of securities easily and not stock valuations and economic climate that are likely to shape Africa’s equity prospects in the coming years. Beyond a handful of markets like South Africa, Nigeria and Kenya is what many call a “liquidity cliff” – where even shares in quite large companies can be hard to buy and sell.

Robust infrastructures (such as central securities depositories) make buying and selling easier. They reassure investors that the ownership of securities is registered correctly at the time of sale, and that payments are cleared and transactions settled. These unseen processes minimise risk and play a critical role in giving investors the confidence to invest. As confidence grows, so do trading volumes and liquidity; this attracts more activity in the market and convinces more companies that stock market listings are an efficient and effective way to raise growth capital.

Financial market infrastructures therefore play an essential role in creating this virtuous circle: making markets more accessible and more efficient, reducing transaction costs and eliminating settlement risks.

Currently, there are many small exchanges dotted across the African landscape. There is, of course, an important place for national stock markets, but with few listed companies, low trading volumes and manual or non-standardised clearing and settlement processes, it can be difficult to encourage higher levels of participation, particularly by investors in other African markets. If small exchanges could operate in a harmonised and standardised way or interlink with each other, investors would have easier access to these markets and more companies could be persuaded to list.

While there is willingness to invest in improved securities market infrastructure the implementation has often proved time consuming and costly due to the challenges of collaboration and the tendency to operate in country-silos. The next stage of evolution in African securities markets may well be the development of interoperability between the different platforms using international standards supported by companies like SWIFT.

Here, securities markets can learn valuable lessons from the successful harmonization already under way in various regional payments markets.

The Southern African Development Community (SADC) is leading the way where payments are concerned. The third phase of SADC’s SIRESS payment system went live September 2014, with almost 70 commercial banks from nine countries now participating. In practical terms, this facilitates cross-border commercial activity which will drive economic growth in the region.

African securities markets do not have to reinvent the wheel – there are common standards and market practices that will help to speed and ease the process. The win-win solution is one where all stakeholders work collectively to develop Africa’s capital markets to the benefit of African companies, investors and savers.

Source:Ian Bessarabia, Business Development Manager, SWIFT

6 May 2015


FOREIGNERS PURCHASED NET R199m SOUTH AFRICAN BONDS ON MONDAY

Following are data for South African bonds sales/purchases by foreigners on Monday.

Net foreign purchases including repo transactions: R199m

Year to date net sales by foreigners including repo transactions: R3.948bn

Net foreign purchases excluding repo transactions: R274m

Source: BDpro

03 February 2015