OPERATING IN AFRICA MEANS ANTICIPATING CURRENCY LIQUIDITY RISKS

By Olivier Carrolaggi, Manager, EBI (Ecobank) international treasury platform

Difficulties accessing liquidity could potentially jeopardize the sustainability of the presence of companies or NGO’s in some African countries.

Olivier Carrolaggi
Olivier Carrolaggi

Many companies wanting to invest in sub-Saharan Africa have seen their development hampered for lack of available cash in local currency or dollars. Managing this risk is an ongoing concern.

Access to liquidity depends on the financial situation of each country and the ability of its central bank to provide money to a company investing locally. However, in African countries feeling the effect of a drop in oil prices, foreign exchange reserves are under pressure. Central banks therefore have to decide on the distribution of cash according to available resources.

The liquidity risk is a factor for volatility, but it can usually be anticipated. It should not deter international investors and organizations from operating on Africa, which has considerable potential, despite representing at present only 4% of global GDP. With strong economic prospects in the medium term, some executives may be overestimating the risks associated with investment in the continent.

Whether an investor, a business or an NGO, access to local currencies can involve complex and time consuming applications to authorities. It is essential to have a reliable local intermediary aware of these procedures, and able to offer a guiding hand.

A platform covering 26 African currencies

Via its electronic platform, Ecobank processes at least US$1.5 billion of orders from customers in 26 African currencies each month, with transparency and speed. It caters both to international customers who trade in Africa and to local customers requiring cash requirements for international activities, including intra-Africa transactions.

Ecobank supports its customers, even in extreme situations. At the outbreak of the Ebola epidemic, its capabilities allowed NGOs based in Sierra Leone, Liberia and Guinea-Conakry to cope with the emergency, and continue to pay their staff. It has a complete presence in even the most under-served markets such as Burundi and the Central African Republic.

The Ecobank platform is a reliable facility and an expert local partner for companies and NGOs across the continent, where it operates in 33 countries, combined with a unique network of 125 African bank partners.