The responsibility of Group Head of Trade is both humbling and exciting, says Vinod Madhavan, whose career has taken him across Africa and Asia (living and working in India, Singapore and South Africa). “It affords an opportunity to work in the intersection of my passion and desire to contribute to achieving Standard Bank’s social, economic and environmental (SEE) outcomes.” Vinod says his experience of engaging customers across 25 countries has afforded him the opportunity to learn from the experiences in offering trade and working capital financing solutions to clients in institutional, corporate, commercial and business banking client segments.
What trends are you seeing in your area of expertise that finance leaders should be aware off?
"Sub-Saharan Africa is, today, the second-fastest-growing region in the world, and home to some of the most exciting emerging markets on the planet. These emerging markets, combined with frontier markets of equally great potential, present a future cross-border trade and economic environment that could, one day, emulate Asia in diversity, opportunity and growth. Efficient, effective and sustainable trade structures and technologies are central to achieving this vision for growth, and for alleviating the poverty that still grips many parts of the continent."
"Key trends in trade and working capital finance for participants in the trade fraternity in Africa include digitisation, regulation, risk management (across the risk categories of credit, compliance, conduct, reputation and operational), and evolving client needs. Among these are two key trends that are of more concern, namely: the increasing trend of de-globalisation, and the increasing gap between the perceived risk and real risk. I'll take each in turn."
"The increasing trend of de-globalisation, fuelled by negative sentiment around cross-border trade, particularly worries me. Maybe it is because I am from Singapore, born in India and have been working, for over two decades, with corporates on managing working capital financing and risk solutions in Africa and Asia. Singapore is a nation that believes in cross-border trade being a win-win situation, and which has benefited from it. I also feel equally passionate about cross-border trade and its beneficial impact on economic growth. Further the growth opportunity is clear and present in Africa, given current levels of intra-Africa trade, the gap in available trade finance, etc."
"As far as the increasing gap between the perceived risk and real risk is concerned, this increase is a key aspect that is holding back the realisation of the growth opportunity in our markets in Africa. It should also be of specific interest to finance leaders."
"There definitely are increasing real risks in Africa - as proven by multiple bank failures in Kenya, Uganda and Mozambique. However, the perceived risks are heightened, resulting in the narrative of 'zombie banks'; further compounded by physical distances and cultural gaps between the decision-makers in an international organisation or bank (seated in financial centres around the world), and the reality on the ground."
"Sadly, the increased perception of risks have real-world outcomes, such as, de-risking, wherein correspondent banks from around the world are exiting certain emerging markets (that are perceived to be risky), sometimes resulting in those markets getting locked out of global trade."
How are you helping your clients and CFOs with these challenges, over the next 12 to 18 months?
"We are helping our corporate and financial institution clients address some of these challenges, and, most importantly, realise revenue from the growth opportunity that is trade in Africa. Over the next three to four years, Africa is expected to grow at around five percent, putting it as the second-fastest-growing emerging region in the world."
"As a member of the ICC Banking Commissions Advisory Board, I have been exposed to the transactional banking industry and do meet and engage with people from around the world (the advisory board has representation from most continents and regions, and works on regulatory advocacy in-addition to rule-making and education). Such engagements have further strengthened my optimism for emerging markets in general and for Africa in particular. Growth (and economic growth) is a proven mechanism to take nations out of poverty. It is personally and professionally exciting to be part of such a journey; a journey that allows me to contribute towards poverty alleviation, in whatever small manner I can."
"Our corporate and financial institutional clients want to access the growth opportunity in Africa. They are looking to work with partners that can help them in risk management and in working capital financing, as well as realising operational efficiencies."
"Standard Bank can help them realise value from their cash conversion cycle through working capital management - for example, by releasing capital stuck in the corporates' working capital cycle. This needs the corporate to work with a bank partner that is willing and able to look at the client's ecosystem. For instance, we have worked with an oil importer in East Africa, meeting their cross-border oil importation needs, distribution/service station collection needs and employee banking needs."
"Another avenue is risk management - corporates and CFOs need partners that can help manage counterparty risk and help manage risky growth (through increased focus in managing risk in the financial supply chain). Standard Bank has helped corporates trade with markets that are facing FX liquidity constraints, supporting critical/strategic product importation - especially by working on risk perceptions."
"Operational efficiencies are another area where we can assist. Corporates and CFOs should continuously ask their banking service providers for ideas/techniques to realise operational efficiency - especially in a largely paper-intensive trade finance business."
"In this space we expect to see increased adoption of digitisation and digitalisation in trade (across the physical supply chain, the financial supply chain and the documents chain). Technologies such as blockchain naturally lend themselves to realising benefits from the digitisation of financial supply chain and documents chain, that secures the documents legal transferability while drastically reducing delays in couriering etc."
"We have successfully conducted proof of concepts, looking at using blockchain in the digitisation of 'documents chain', and are currently working with the various participants focused on achieving commercial viability in South Africa."
"In addition, there is a need to address the gap between the perceived and real risks, through engagement. Conversations are key and something that all participants in the economy should be involved in."
"Not many people outside Africa for example, would know that South Africa has one of the most robust banking systems in the world and ranked second in the 2016-2017 World Economic Forum's Global Competitiveness Index in terms of financial soundness."
"Therefore, corporates (and CFOs), should aim to engage and partner someone whom they trust, who is on the ground (in the market) and has local knowledge, as they continue their search for operational efficiency, working capital financing and risk management for their firms."
