The centralisation of treasury operations is a significant focus for treasurers across Africa, aimed at enhancing efficiencies in cash and liquidity management through advanced technologies. However, the necessity for localised treasury operations to support in-country business entities, local suppliers, and banking relationships remains crucial.
Speaking at the 2024 Effective Treasury & Finance in Africa, Esther Chibesa, Managing Director, Treasury and Trade Solutions for Sub-Saharan Africa at Citi, and Jyoti Jiwani, treasury transformation consultant for global multinational clients including Anglo American, explored the following strategic approaches while weighing the benefits of centralised services against the needs for local operational support.
Impact of economic challenges on treasury
The economic landscape in Africa, characterised by significant local currency devaluations and escalating balance of payments deficits, presents unique challenges for treasury operations in the region. These economic shifts, influenced by fluctuating commodity prices, political instability, and diverse economic policies across the continent, have led to increased volatility in foreign exchange rates.
Centralisation: A strategic imperative
The advancement of centralisation in treasury operations has emerged as a strategic response to the increasing complexity within MNCs operating across African markets. This move towards centralisation is primarily driven by the need to enhance control over financial resources, optimise liquidity management, and improve operational efficiencies.
Compliance and regulation
In essence, while the strategic drive towards centralisation aims to consolidate treasury activities for better oversight and risk management, it also calls for a balanced approach that respects the nuances of local markets, ensuring that centralised policies can be effectively implemented with sufficient flexibility for decentralised execution. This hybrid model appears to be particularly effective in regions like Sub-Saharan Africa, where economic and regulatory diversity requires a more nuanced approach to treasury management.
Predictions for future treasury management
Looking ahead, both panelists predicted increasing sophistication in treasury operations across Africa, driven by advancements in technology and financial market infrastructures. Chibesa highlighted the growing interest in API integrations and real-time data analytics, which are set to transform traditional treasury functions into more dynamic and strategic operations.
Previously published by EuroFinance on 7th May 2024 – click here to read more