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Sponsored Q&A: Barclays Africa

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Relatively long periods of stability in many African countries have facilitated growth and attracted an increasing number of investors to the region. Chris Paizis, head of corporate and Africa (excluding SA) distribution at Barclays Africa, offers advice to investors looking to enter African markets on the challenges and opportunities the continent presents.

What does Barclays Africa offer to clients?
The Barclays Africa Group enjoys a strong footprint in 14 African markets, including South Africa. In most of these countries, we are seen as a local bank with a highly visible branch network. This is a powerful value proposition.

We are rolling out state-of-the-art systems designed for clients in Africa, such as our award-winning Barx Africa online trading platform, which assists corporate clients to hedge foreign exchange and money market risks. Thanks to our association with Barclays, we are able to offer world-class products and intellectual property to our clients.

We work with African regional corporates to help them expand and understand their growth needs in order to develop an optimal funding structure, including raising debt offshore. At the same time, we ensure international investors have a good understanding of the macro environment in a particular country, as well as the client’s own strategy and growth. The easiest way for us to do that is to mediate and ensure the two sets of clients come together. That’s not simple if you don’t have both the international network and the local strength.


Africa continues to be the flavour of the month for many investors. What is the attraction for these investors?
Africa – excluding South Africa – offers fantastic growth potential for international investors. Many countries have enjoyed lengthy periods of political stability and are increasingly receiving international credit ratings. That has helped to facilitate their growth, as access to international markets is otherwise difficult.

To some extent, Africa is also a beneficiary of the global financial crisis. In the wake of the crisis, investors are looking at peripheral markets in a different way. Provided the risks are well understood and the debt is priced correctly, they are very eager to enter these markets. It is a win-win solution for both international investors and local African clients. 

Recent bond issues bear this out. In June 2014, for instance, Kenya issued the largest sub-Saharan sovereign debt bond to date, worth $2 billion in five-year and 10-year bonds. The transaction has established liquid pricing benchmarks for the country and allowed the government to access cost-effective financing. Barclays acted as joint bookrunner for this deal.

In the same capacity, in April, we assisted the Zambian government to raise $1 billion through 10-year bonds, which marked the country’s return to international capital markets after its debut deal in 2012. Zambia’s final order book was oversubscribed by 4.35, with 279 orders.

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What trends have you noticed over the past year?
We have seen much more interest in the African growth story, and an enhanced focus on trade corridors. Trade flows between Africa, China and India remain strong, but the UK and the US have also exhibited increased levels of interest. While European countries have always maintained some interest in Africa, we are now seeing more interest in taking Africa into the global financial community. Many countries in Africa have enjoyed relatively long periods of political stability, with rising stars such as Nigeria and Kenya increasingly becoming regional hubs. Egypt, despite recent political volatility, still exhibits great potential as a developing market.

Although Africa has traditionally been viewed as a resource-heavy destination, intellectual property and innovation is on the increase. We see many great ideas coming from these markets and, as a bank, it is our job to facilitate and support innovation. The more we strengthen African companies and grow their infrastructure, the more we can boost these markets and grow financial capabilities. Continuing prosperity and stability will support this trend.

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Working in Africa presents many challenges compared to mature markets. Can you take us through some of the issues?

African jurisdictions present country-specific challenges, as well as regional issues. Internet bandwidth and availability can often be sketchy, so rolling out new platforms can be more difficult. We do extensive bespoke work for our clients in each market.

It is important to note that Africa is also a centre of innovation, and this is part of a growing trend where ideas increasingly come out of emerging markets. For instance, M-Pesa is a Kenyan solution that allows consumers to easily transfer money using their mobile phones. Part of our job is to help clients benefit from those innovations in other markets while also supporting our local clients – not just in the traditional banking sense, but also through our own intellectual property. There are both challenges and opportunities, and we would say there are more opportunities than challenges.

Globally, regulation is increasing in the banking sector. This is in response to mistakes made in developed markets, such as mismanagement around derivatives as hedging tools. These have not become an issue in many African countries and, as a bank, our international experience should add to local market stability. In Africa, the focus is on getting the basics right and building a solid foundation for banking services. African markets have the opportunity to learn from these regulations and avoid repeating the mistakes made in more mature markets. That is another responsibility we have as a global bank in these markets.

Many financial markets on the continent are still nascent, so the ability to hedge long-term currency and interest rate risk is limited. If you are on the ground helping your clients, you have to present bespoke solutions and bring counterparties together. That’s the role of a strong local banking partner.


What is your advice to investors looking to enter African markets?
For international investors, there is a lot of detail to keep in mind. They need to be cognizant of country-specific regulations, particularly around local exchange controls and documentation requirements. Because local financial markets are not as well developed, there needs to be a different approach to managing risk.

International investors tend to look at their African businesses in hard currency terms. One should really look at raising local currency debt and doing as much business as possible in local currency, which will also help develop the markets over time. International investors often try to get dividends out quickly, which adds to the problems of currency mismatches and illiquidity. There has to be a strategy to grow the local currency balance sheet first. If you really want to be successful in Africa, you should to see yourself as a local African company.

Many African markets offer growth rates of between 7% and 10%, which you won’t find in too many other places. This, of course, comes with its own risks and challenges, and it has to be seen as a package.

Our challenge is to help grow these markets and help our clients to grow with them while, at the same time, making local markets much better known to international investors. It is a key focus for us, although I think there’s a long way to go.

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