Richard Willsher
Richard Willsher

Regional e-FX perspective on Sub-Saharan Africa: Giving power to the people

Sub-Saharan Africa is experiencing an e-driven democratisation of foreign exchange services on a continental scale.

To fully appreciate what this means you have to look at the numbers. The World Bank’s definition of the sub-Saharan market embraces 48 countries including various outlying islands and excludes Algeria, Djibouti, Egypt, Libya, Morocco, Tunisia and Western Sahara. The Bank’s 2016 census data puts the region’s population at just over one billion people. It calculates annual total gross domestic product in the region as USD1.5 trillion. 

This is a huge overall region with massive foreign exchange needs but is driven by different currencies, languages, political regimes, regulations and wealth disparities. But it also represents 13 per cent of the world’s population, which has a generally high birth rate as compared to most of the rest of the world. Moreover, this collection of young populations has grown up in a wired world. They have tasted the convenience of a smart phone, Internet-enabled life and whether in their businesses or their private lives, they now expect e-convenience, just like most of the rest of the world.

Annette Smyth

Annette Smyth

“You can’t roll out a German treasury management system in an African market and expect it to work. You have to take that sleek German machine, put 4x4 tyres on it, and then take it cross country”

Against this backdrop, there are the negativities of poor physical infrastructures such as roads and railways. They have to contend with and manage restricted currencies and the distances that separate cities and countries can be vast. There is civil strife somewhere on the African continent at all times and some countries are more corrupt than others. Unsurprisingly, African solutions have to be developed to solve these African problems and this is not necessarily as plain sailing as those commonly in use in Europe or North Africa. These needs are elegantly described by Annette Smyth, Managing Director of Johannesburg based treasury systems consultants Sale Capital, who has worked in a number of senior roles in South Africa’s FX market. Her firm is the regional partner of Bellin, a German consulting and software business. “When I speak to Martin Bellin I say to him that you can’t roll out a German treasury management system in an African market and expect it to work. You have to take that sleek German machine, put 4x4 tyres on it, and then take it cross-country. That,” she adds, “is what we’re doing and it’s working.”

Tim Hutchinson

Tim Hutchinson

“If you marry new technologies… and the young and technology savvy populations, it stands to reason that Africa is primed to lead.”

Take a walk on the buy-side

Having said that it is important to remember that the South African banks play a dominant role in FX business across Sub-Saharan Africa. Led by Standard Bank, ABSA, Nedbank and FirstRand Bank they have their fingers firmly on the pulse of the buy-side needs of corporates, institutions and smaller, regional banks.

“Demand depends on the type of profile of client and the market that is being transacted in,” explains Tim Hutchinson Head of Global Markets Digital and eCommerce at Standard Bank. “One of the main execution methods for a number of years has been the bilateral execution service done via manual request for quote (RFQ). This has been changing, with many of the larger banks offering their single dealer platforms to their buy-side clients for execution in non-local currency with very few (Standard Bank being one) that are able to show executable local currency on a single dealer platform.  A local buy-side client has most of their demand being in their local currency, which sounds obvious but important to stress, as their ability to do anything in terms of electronic execution would mean there would be the ability for the market makers to offer up meaningful liquidity on the platform.”

“In the local currency the spill over from electronic to voice happens far quicker than in G10, which is purely a factor of liquidity and the factors associated with pricing and managing risk in an emerging market,” says  Hutchinson.

“From a demand perspective we definitely see the usual request of being able to offer and prove best execution. This naturally leads to the request of algorithms for the buy-side. We have seen the market start to be opened up for this although naturally the main stumbling block for this being the access to true liquidity as a factor of where the true liquidity lies.”

Absa’s Head of eCommerce Global Markets Paul Fenwick adds, “Treasuries within corporates and financial institutions in the African space have always lagged have been conservative somewhat in their electronic demands compared to that of international counterparts of more developed markets. This is due to factors such as lack of liquidity, number of participants and general size of these markets prohibiting electronic channels from realizing their full potential across all asset classes. However, there is definitely a shift happening in foreign exchange where the number of players offering online solutions in this space is on the rise with local banks starting to invest in order to compete with the bigger pan-African and global players who have traditionally been the only providers to these markets.”

He adds that the majority of product demand still focuses on spot, forwards and swaps. “Sourcing of prices is determined by in country traders as opposed to having multiple sources being aggregated in your more liquid markets. The fragmented and illiquid nature of these markets, coupled with central banks having significant influence in how these markets operate, holds back a lot of innovation into more diverse products such as options etc. Where electronic channels are being delivered in risk management style products is internally within banks for internal sales people to offer quicker and more diverse product sets to clients.”

Paul Fenwick

Paul Fenwick

“Increased competition is to the benefit of the consumer and will offer greater breadth in the distribution of FX and a greater variety for all segments of clients.”


Although there are dominant market players in FX today, Africa is known for new ‘leapfrog’ solutions to big challenges, and forex is no different. Democratization, de-centralization, more players, newer technologies are all rapidly changing the FX landscape. 

According to Ian Bessarabia, FX and FI Market Development Lead for Thomson Reuters Africa, in rapidly developing markets, with rapid growth comes the responsibility to ensure the market is growing transparently and sustainably. 

“It is more important now than ever, for all market participants to work together to create the right frameworks for these new tools and technologies to enable our markets. For example, the introduction of the FX Global Code of Conduct, of which Thomson Reuters is a signatory, has helped to increase the execution of due diligence, transparency and in general “common sense” and proper conduct. Becoming a signatory is voluntary, and as Thomson Reuters, we would like to see more African countries sign this code of conduct.”

Ian Bessarabia

Ian Bessarabia

“FinTech is filling the gap for bureaucratic red tape and contributing to economic growth in the region,”

Everyone we spoke to agreed that best execution through true price discovery was important among the offerings that e-FX providers must now be able to provide.

“In the local market the one of the really big needs is price discovery as, other than South Africa, there is no primary market for that currency,” explains Standard’s Tim Hutchinson. “This makes it incredibly tough for a buy-side client to operate and so price discovery is a key element of the services. Obviously in a market like South Africa, where there is a primary market, the need is for quicker and more real-time markets that can be accessed electronically. As we have seen with the growth in the APIs, this seems to naturally evolve and if we look at the primary market rules of engagement we can already see this as a sign of faster markets being called for.”

He goes on to add that pre & post trade services are also a vital offering as that almost all of the Sub-Saharan markets operate under some form of currency control regime. “Most participants want to work with providers who are able to navigate the complexities of this for them and ensure that they are not in breach of any of these. In terms of post-trade, more are looking for straight through processing (STP) solutions and reconciliation capability. And whilst our markets don’t require any form of data disclosure [as with MiFID II in Europe for example] we do see this as a value added service that we are able to provide to clients in different forms and most seem to find that very useful in their operations.” He concludes that currency research is also something that Standard’s clients frequently seek.

SARB FinTECH programme

The South African Reserve Bank (SARB) recently established the Financial Technology (FinTech) Programme to strategically assess the emergence of FinTech in a structured and organised manner, and to consider its regulatory implications.The main goal of the programme is to track and analyse FinTech developments and to assist policymakers in formulating frameworks in response to these emerging innovations. The FinTech Programme will focus on three primary objectives: 

The first objective is to review the SARB’s position on private cryptocurrencies to inform an appropriate policy framework and regulatory regime. This review will address regulatory issues such as clearing and settlement risks, exchange control impacts, monetary policy and financial stability, and other matters such as cybersecurity considerations. Through collaboration with the other regulatory bodies, matters such as tax implications, consumer and investor protection, and money laundering activities will also be addressed. The SARB expects to complete the review in the second half of 2018. 
The second objective is to investigate and decide on the applicability of innovation facilitators for the SARB. ‘Innovation facilitators’ is a collective term for innovation hubs, regulatory sandboxes and accelerators. The SARB hopes to have concluded its assessment of the appropriateness of innovation facilitators by the third quarter of 2018. Clear and transparent eligibility and participation criteria will be developed to assist in the consideration of applicants into a regulatory sandbox. 

The third objective is to launch Project Khokha which will experiment with distributed ledger technologies (DLTs).  The aim of this project is to gain a practical understanding of DLTs through the development of a proof of concept (POC) in collaboration with the banking industry. The objective of the POC is to replicate interbank clearing and settlement on a DLT which will allow the SARB and industry to jointly assess the potential benefits and risks of DLTs. The POC involves the processing of wholesale payments using Quorum, an Ethereum enterprise DLT.

The young populations across Sub Saharan Africa have grown up in a wired world.
The young populations across Sub Saharan Africa have grown up in a wired world.


Helping clients cope with regulation is key support that clients seek. Absa’s Paul Fenwick points out that this is nothing new but it is essential. “Africa is used to challenging regulatory environments and in some markets there are often new regulatory developments happening on a monthly basis which impact the price and way FX is delivered to clients.” 

“Delivering e-channels that cater for these developments is of the utmost importance for users to have confidence in the systems / apps they use. “ says Fenwick.  “For regulations such as MiFID II, Africa tends to be fast followers and there has been some movement with some of the multi-bank platforms to provide a solution in this space but in general it is a wait to see how the MiFID implementation settles down.”

Part of Sale Capital’s success in a variety of markets across Africa has much to do with compliance. “We have a fair amount of exchange control and it’s something that I think Europeans can’t really relate to. What that drives is the need for supporting documentation for every transaction. What is the money for? Where is it getting paid to? Because it impacts scarce foreign exchanges reserves, they have to justify that to the central bank. Our systems give them that transparency all the way from client, straight the way through to bank, even through to the central bank, so they’re able to report transactions on a transparent basis from client to end source.

Solving Africa’s challenges digitally would allow Africa to leap ahead of the rest of the world
Solving Africa’s challenges digitally would allow Africa to leap ahead of the rest of the world


In essence, compliance with the web of rules and regulations across the continent boils down to developing the technology to cut through and execute transactions. For this reason, as well as due to the logistical headaches of trading and transferring money in Sub-Saharan Africa, developments in fin-tech can play a transformative role, and this is where the marketplace is rapidly being democratised. There is always demand for more convenient ways to do FX and with API integration becoming main stream, technology is finally at a point where it is possible for small fintech firms and local banks to offer the same electronic experience previously only provided by the bigger players.

“A lot of fintech work in the FX space is focusing on the remittances space and mobile wallet disbursement,” according Absa’s Fenwick. “They are starting to take a fair chunk of the market that was previously dominated by banks, mobile operators and money transfer providers. Their entrance into the market alongside the bigger tech companies such as Apple and Google is forcing the participants to adapt quicker and offer newer solutions at greater speed than ever before.”

Most Kenya FX now traded on-line

Most Kenya FX now traded on-line

A recent poll shows how fast e-FX trading is spreading throughout Sub-Saharan Africa.

Delegates at the Bloomberg FXGO sponsored FX18 conference in Nairobi on 21st February 2018, were asked how much of their FX trading is carried out electronically.  One in four respondents said that all of their trades were carried out by electronic means. Half said that “most” of their trades were now conducted in this way. 

The more than 100 attendees were drawn from domestic Kenyan banks and Kenya-based international banks. Their roles included FX traders, asset managers and local corporate treasurers.

Bloomberg commented that banks have been aggressively deploying new technology to reduce operational costs. This is against a background of renewed foreign investor appetite for opportunities in the Sub-Saharan Africa region.

“Simply put, this increased competition is to the benefit of the consumer and will offer greater breadth in the distribution of FX and a greater variety for all segments of clients,” he says.  “There are also a number of blockchain / distributed ledger collaborations between banks & fintechs that are also looking to provide value in the FX value chain in Africa.”

Just how important fintech and mobile capabilities can be, is well demonstrated by personal money transfer apps. The diaspora of African workers both throughout the continent but also overseas has created a need that fintech can fulfil.  Annette Smyth says that, “If you look at the African market and you just look at how remote we are, we’ve always had to be fairly innovative. That’s why things like M-Pesa and EcoCash, which are run on mobile platforms, have been incredibly successful.” 

The vast numbers of people for whom these services are relevant lends scale to them and enables ordinary people to by-pass cumbersome bank queues and high costs. “FinTech is filling the gap for bureaucratic red tape and contributing to economic growth in the region,” says Thomson Reuters Bessarabia. “The next area of consideration is whether cryptocurrencies end up impacting the distribution and availability of FX services especially if regulators, Governments and decision-makers do not start opening up the market.”

He goes on to point out that across Africa in general there are little-to-no legacy systems, meaning that technology has a vital role to play in filling the gap. 

This is a huge overall region with massive foreign exchange needs
This is a huge overall region with massive foreign exchange needs

The road ahead

In the vast Sub-Saharan market, the fundamentals are always inescapable. Distance, diversity, a billion people in need of services, poor levels of infrastructure development and wide-spread poverty; all of these point to the increasing role of technology in meeting the burgeoning needs of businesses of all shapes and sizes as well as those of private individuals. Which is why Africa could become a leading region for digital innovation in FX.

“We believe it is already happening with mobile money and banking,” says Paul Fenwick. “Now with more and more people being brought into the financial system, the future solutions have to cater for this very broad set of participants and their requirements. Africa could also provide a step change in digital innovation given its unique circumstances that are not prevalent in the rest of the world. Solving Africa’s challenges digitally would allow Africa to leap ahead of the rest of the world.”

Standard Bank’s Hutchinson says, “We can think about the problems to be solved of illiquidity, along with the natural distrust that have long plagued banks in Africa. If you marry that with the new technologies, such as blockchain and its numerous use cases, and the young and technology savvy populations, it stands to reason that Africa is primed to lead.”

The last word goes to Sale Capital’s Annette Smyth, who is typically upbeat about the future of e-transacting in Africa. “Look at the technology that’s available in Europe and America, and then at what’s available in Africa,” she says. “From an innovative perspective, such as what we’ve had to do to make payments work across rural areas and divides, prize number one would be a combination of the two for the African market. I honestly think in five years’ time if you and I have this chat again, we’ll be there.”