By Liza Eustace, Sector Head of Healthcare, Construction & Hospitality at Absa Corporate and Investment Banking

It will not be an easy way back for the tourism industry in Africa post the COVID-19 pandemic. It is doubtful that, in the short to medium-term, the sector will get back to anywhere close to the levels before the outbreak of the pandemic. However, the industry has always been characterised and defined by its grit and resilience to adversity.

The one golden thread that the entire global tourism industry is clinging to is the practical and widespread roll-out of the COVID-19 vaccine, which will hopefully go a long way in restoring the fortunes of worldwide travel and tourism.

The resuscitation of the travel and tourism sector will reignite growth and sub-Saharan Africa’s economic prospects. As Africa’s overall development continues, the long-term hope is that infrastructure spend and construction related to transport, airports, ICT infrastructure and health facilities will be key spurs for economic growth. Combining competitive pricing with unique historical, cultural, and natural experiences, will serve as catalysts for Africa’s tourism potential to be fully realised.

The Shutdown

The COVID-19 pandemic saw the travel and tourism sector haemorrhage jobs at an alarming rate as international travel ground to a halt, and government and corporate travel was suspended. Domestic travel was also severely curtailed, with hotels and the accommodation sector standing closed and empty, while gaming and wildlife resorts became shells devoid of visitors. In South Africa, as the lockdown levels began to ease, we gradually saw an increase in occupancies but to fractions of normalised trading levels (20-30% and based on less than 100% of the portfolio being open). On the rest of the continent, occupancies levels were slightly higher given less stringent regulations, but overall trading for these companies has put pressure on liquidity and covenant levels for those carrying debt on the balance sheet. Whilst many listed companies in South Africa have avoided the need to raise equity, some have turned to the equity market for additional liquidity or have pursued asset sales. The larger corporates have however been resilient under the extreme trading conditions, and have benefited from strong and decisive management teams.

By the middle of 2020, at the height of the pandemic and country lockdowns, the World Travel and Tourism Council (WTTC) estimated that 100 million tourism-related jobs had already been lost globally due to the COVID-19 outbreak. An estimated 8 million of these were in Africa.

The WTTC subsequently projected that, by the end of 2020, some 174 million jobs would have been lost to the pandemic, this as devastating second waves sweep across many parts of the world, including key tourism markets such as South Africa, the UK and parts of Europe. Whilst many tourism and leisure companies have been forced into drastic cost cutting, it is not certain that when the industry is fully operational again, that all these jobs will be restored.

The Potential

Ahead of the pandemic, while Africa lagged other regions in terms of tourism potential and contribution, the sector was making slow but steady gains. According to the Council, Africa’s tourism sector employed around 24.6 million people and contributed USD169 billion to Africa’s economy, representing just over 7% of gross domestic product (GDP).

In sub-Saharan Africa, in 2018, the travel and tourism sector contributed roughly USD42.1 billion to regional GDP, with 37.4 million tourist arrivals in the prior year. This constituted about 1.6% and 3% of global totals, respectively.

Encouragingly, sub-Saharan Africa continued to show substantial growth from a relatively low base. The region was on track to have the second-highest growth rate globally for travel and tourism GDP in the decade between 2019 and 2029. Recent statistics for international tourist arrivals showed the region growing at around 6% per annum compared to the global average of 4%. Mauritius, South Africa, and Seychelles all shone on global tourism indices.

All that has, however, now ground to a halt. Countries around the world are re-instituting stricter lockdowns in a bid to curb the spread of the virus. Some markets have banned travel from countries such as South Africa and the UK where the mutated variant of the coronavirus SARS-CoV-2, named 501.v2, with a higher transmission rate, has been identified.

The Challenges

At present, and with secondary waves of the pandemic hitting numerous markets globally, travel is very much a lottery. Travellers are not necessarily afraid of the virus, although caution is still crucial. The greatest uncertainty revolves around the impact of the spread of the virus on travel plans. Your departure country is subject to specific regulations, as is your country of arrival, and both could change at short notice, as could be seen when around a dozen countries banned travel from South Africa recently.

South Africa’s International Relations and Cooperation Minister Naledi Pandor spoke for many when she recently cautioned against international travel amid renewed outbreaks worldwide. “Please note that you will be travelling at your own risk to these countries knowing the current circumstances and the uncertainty going forward.”

Travellers are wary of being stranded abroad with the sudden closure of borders or flights being cancelled and the inconvenience of attempting to recover refunds; that is a huge driver of people not wanting to risk travelling at present and will continue to put pressure on this industry until certainty prevails.

There are other factors which mean that, from a structural perspective, the tourism sector in Africa is unlikely to be the same again. One of these is that governments were significant contributors to hotel and conference bookings before the lockdown. Remote working and video conferencing, allied with government coffers’ emptying due to declining revenue and COVID-19 support spending, means that this vital source of business-driven income will likely be considerably less in future. The same can be said about corporate travel and the realisation that much of this travel can now be replaced by a lower cost online alternative.

And as operating income dissipated, so many businesses in the tourism sector were forced to cut back on workforces. It is unlikely that employment figures will hit those same heights any time soon, impacting the many livelihoods reliant on that income.

So where to from here?

Some governments have made meaningful efforts where tourism plays a critical economic role in supporting role players through aid packages and innovative policies. This aimed to shield the country and industry from renewed infections and help prop up businesses facing huge losses.

In Mauritius, for example, the government put in place a strict set of measures to ensure the virus is contained. Simultaneously, the budget has been adjusted to support the tourism sector by establishing a special USD2 billion fund via the Mauritius Investment Cooperation.

Ultimately though, the tourism industry in Africa will have to undergo a remake and a reimaging to adapt to ever changing global circumstances, and cannot ultimately rely on cash-strapped African governments to provide the support that is required to sustain themselves.

Operational costs will have to be carefully measured to ensure greater resilience in an environment marked by tremendous instability and fluidity. The industry has – and will need to continue – to cater to a greater degree to domestic tourists who can help make up the international void.

The COVID-19 vaccine will be an essential building block in the recovery, but there is no magic silver bullet, only a slow and steady build towards global competitiveness and sustainability. Much like was the case pre-COVID-19.

By George Asante, Absa Global Markets

The COVID-19 pandemic has made the underlying structure and resilience of African financial markets a critical matter for consumers of capital as well as domestic and international investors, as the continent copes with the challenges of returning to sustainable growth.

Africa needs critical mass to push it towards a state where growth, prosperity and security are the norms and not the exception. It also needs to get to the point where it can be the master of its destiny to ensure the sustainability of solutions.

The global health and economic crisis triggered by COVID-19 has brought into sharp focus the need for continuous investment into the economies that make up this incredible continent. COVID-19 has also provided us with many learnings and lessons that we cannot discount and must incorporate into the way we invest and do business in the future.

Although we are still at the bottom of this cycle of change and have only just started rebuilding after its tornado-like effects, we can begin applying key learnings. We do not want Africa to be at a point where we lose the value of learning from this pandemic and as result not make the necessary changes that will move this continent forward.

Some of the critical learnings relate to the need to create an enabling environment for financial market participants. This is to make it easier for financial markets to play the role as an efficient platform for mobilising resources to power the continent’s growth and prosperity, as well as facilitating trade within the continent.

It is also important to note that Africa will be on the wrong path if we think we can progress as individual countries without the need to work together. The reality is that the continent can do a lot more from a scalability perspective and through leveraging the different strengths of respective countries through cooperation.

From a capital markets perspective, the starting point for working together will be the harmonisation of market infrastructure, legal frameworks, regulations and market practices, with a purely African lens, to accelerate the road to scale. In the context of recent de-globalization, a call for Africa to work together will be bucking this trend, but this is probably the best way to position the financial markets to drive initiatives like Africa Continental Free Trade Agreement.

Harmonising the financial markets landscape requires a detailed diagnostic tool to understand the underlying factors that have, so far, kept this continent from reaching her potential in terms of attracting its fair share of investments from both local and foreign investors alike by answering the critical question of ‘What is it that is holding us back’? Armed with this data, the continent can move faster to reform in a way that helps us shape our future.

That’s where the Absa Africa Financial Markets Index comes in. Now in its fourth year, the Index, produced by the Official Monetary and Financial Institutions Forum, has become a benchmark for policymakers to gauge countries’ performance across a range of indicators important for financial market development, focusing on six fundamental pillars:

• Market depth
• Access to foreign exchange
• Market transparency, tax and regulatory environment
• Capacity of local investors
• Macroeconomic opportunity
• Legality and enforceability of standard financial markets master agreements

The research is a development index focused on the financial markets and works as a benchmarking tool that tracks the maturity of respective financial markets, as well as the openness and ease of accessibility of financial market products to suppliers of capital or investors, as well as people who consume capital.

This year, the impact of COVID-19 had a dire impact on markets, the economy, as well as the health of citizenry, and that can be seen in the declining liquidity that we’ve seen across financial markets.

At the start as well as during the height of the pandemic, global investors pulled back from the continent, which reduced the amount of liquidity available in different securities. At the same time, we saw local investors move out of certain type of products into more cash, as they looked to preserve liquidity and cash in the short term, given the volatilities and vulnerabilities that the pandemic was drawing.

The Index has proved its worth, because its key take-outs allow for better planning from a regulatory and policy making point of view, as well as crucial insights that will aid countries to rebuild economies faster.

Key benefits

Primary findings from the 2020 Index show that the average overall country score dipped to 51 in 2020 from 53 in 2019. This score, which is measured out of 100, declined partially due to slower market activity in the first half of 2020 and stricter scoring in some indicators.

The good news is that countries performed best in the market transparency and tax, and regulatory environment pillars, scoring 67 on average across these two metrics.

Also, worth highlighting is the fact that green finance is gaining momentum, with Nigeria, Kenya and Egypt issuing sovereign green bonds in the past year. This is not surprising, given the emphasis being placed on environmental, social and governance (ESG) issues now. Together with Rwanda establishing a green investment bank and Uganda punting a post-disaster environmental restoration fund, this all translates into a growing maturity among African financial markets.

The Index pulls together all the sub-markets into one benchmark, allowing governments to see a holistic view of where they are in terms of being able to attract domestic and international investments.

This pinpoints areas that policymakers need to focus on to reform markets at a faster pace than has been done historically. Instead of having to do all the groundwork and develop an understanding of the issues so they can determine how to fix them, this is now readily available to them.

Perhaps one of the biggest advantage countries are seeing as an output of the Index is that individual regulators can now track the knock-on effects of regulations on the financial market’s ecosystem, beyond the subsector they directly regulate. Before, the impact of regulatory actions in one submarket on another was not independently and transparently tracked. For example, the Egypt and Nigeria equity markets have benefited greatly from recent reforms in the foreign exchange markets which subsequently spurred economic recovery and development.

There is no doubt that we will see more financial volatility as the result of the pandemic, and this is unlikely to be the last of such global shockwaves. However, Africa’s rapidly maturing and strengthened financial markets bode well for our ability to withstand such stress tests, as we can pull together to attract our fair share of both domestic and international capital, for the greater good of all Africans.

Although the past year has been difficult for many of us, things are starting to look up, writes Fehmida Motara, Head of Retail Products, Absa Regional Operations.

There can be no doubt that many of us have been negatively affected by the coronavirus pandemic. Although it is difficult to say just how deep this impact has been, what is certain and is borne out by key data numerics, is that consumers are tightening belts – whether forced or by design – and also opting for consumer channels that are safer, easier and cheaper.

The pandemic certainly accelerated evolving trends in the market, such as a growing shift to online shopping and facilitated by digital channels, with many of these changes in consumer behaviour look like being cast in concrete for the foreseeable future.

The spending slowdown

Despite this acceleration of trends, the current economic uncertainty has led to consumers being unwilling to splurge on non-essentials, and to save money wherever possible.

This has had a material impact on spending and spending patterns and notable events on the retail calendar such as Black Friday, and Christmas shopping saw a noticeable downturn in sales volumes last year compared to past periods.

Although there have been many negatives, COVID-19 has forced many individuals to adopt a fiscally prudent attitude to saving and their medium-term finances.

At some banks, there has been reduced card revenues for Point-of-sale transactions, indicating that people are swiping cards much less often and are, instead, saving. Additionally, the shift to using online channels to approach banking should result in cost-savings at a branch level over time.

The roll-out of vaccination programmes across the continent will help revive economic activity as sectors, particularly travel, leisure and tourism, a key revenue generator in Africa, begin to rebound.

Yet it is fair to say there is still a great deal of economic uncertainty linked to the COVID-19 pandemic, and it will take some time before we can say that the situation is back to anywhere near what it was before.

To entice consumers, retailers are looking at deeper discounts to ensure increased customer traffic and ultimately transactions. Yet despite many retailers sacrificing margin to boost volume, consumers will generally be reticent to spend at levels exhibited in previous years, which has the unintended consequence of slowing down economic activity at a time when economies are desperate for a pick-up.

There remains the risk, however, that the extent and lure of the discounts in discretionary categories may convince some consumers to engage in potentially reckless spending behaviour, which they may come to regret in time.

What to spend on

Although every consumer has a different profile, most would do well to increase saving efforts and hold off on additional spending, particularly on expensive discretionary items.

If you do spend money, go with purchasing the essentials and always keep in mind a “worst-case scenario”.

For those who are financially secure, there are likely opportunities for relatively good deals.

But often, paying down debt in a low interest rate environment, as is now the case in many African states, is the best way to spend money. It makes sense to take advantage of low interest rates to reduce debt levels and future interest costs as much as possible. If your home loan or vehicle payment was a certain amount before rate cuts, keep paying that amount so that you trim your debt faster.

Done in a methodical and disciplined manner, this will help create the financial freedom down the line to be able to spend on wishlist items.

Changed behaviour

We have seen a marked increase in the use of digital channels as people increasingly consume services and products this way and this is an uptake we expect will remain in a post-COVID world.

There is also a clear reduction in trading on discretionary goods and cutting back on holiday spend – not least because of the large-scale shutdown of air travel as well as resorts and hotels – and many consumers have structurally adapted to spending more time in the home. This has, unsurprisingly, led to a rise in home entertainment expenditure, along with an increase in the sales of electronic products which support a work-from-home orientation.

Grocery purchases are also being delivered more often now, as people generally seek to avoid malls and large crowds, and traditional retailers are increasingly adapting to this trend to meet the evolving needs of consumers.

The pandemic has undoubtedly fast-tracked changes that may otherwise have taken years to manifest.

The eCommerce segment has seen a marked increase in some markets, despite the devastating economic impact of the pandemic which cost a significant number of jobs and hit consumers hard, and the growth in online shopping is a trend we are likely to see replicated across the continent.

The big picture

Companies and financial institutions have generally responded to the shifting sands by tightening lending criteria as gross domestic product forecasts across Africa have declined substantially over the past year.

While the extreme effects of COVID-19 are largely starting to dissipate as the phased roll-out of vaccines take place and economies are slowly recovering, the uncertainty for corporate and small and medium enterprises’ financial outlooks remains material, which has ramifications for consumer spending patterns.

Barring a major unforeseen global event, the situation will be better over the coming year. Retailers and financial institutions should use this time to fully understand the changed landscape and how best to meet the needs of customers in this new normal.

Consumers should similarly use this time to entrench financial discipline, build up healthy credit scores, as well as financial buffers, and to save towards next the next major shopping days at the end of 2021.

By Heidi Barends, Co-Head of Sustainable Finance, Absa Corporate and Investment Banking (CIB)

The world is clearly seeing how quickly a disaster can escalate when not globally coordinated and when no decisive action is taken to fight a crisis, as happened with the Covid pandemic.

The battle to combat climate change also demands global cooperation so that no country is left behind, since we all share the same skies. And although Africa generates less than 4% of the world’s carbon footprint and bears very little blame for climate change, it already suffers the brunt of the damage with floods, famine, droughts and plagues.

“No region in the world has done less to cause climate change, and no area is more affected by it than Africa,” said Mark Carney, the United Nations Special Envoy on Climate Action and Finance. Carney was speaking at a high-level panel discussion hosted by Absa, one of Africa’s largest diversified financial services groups, to ensure that African voices are heard ahead of COP26, the UN Climate Change Conference to be held in Scotland in November.

The event, titled Road to COP26: Opportunities, Challenges and the African Transition to Net-Zero, was held in partnership with the Group of Thirty (G30), a global body of economic leaders from the public and private sectors.

The world generally sees Africa as needing solutions to be imposed from outside, when many of its problems can be solved from within. Carbon offsets, for example, could generate enormous income, with the Congo Basin rainforests alone sitting with three years of sequestered carbon emissions it could sell to companies striving to reach Net-Zero carbon emissions.

Yet, the carbon emission market is still not operational, and needs pushing forward at COP26. “This is a service to humanity, and we must find some way of remunerating that,” said Dr Vera Songwe, Executive Secretary of the Economic Commission for Africa. That would give African countries an incentive to preserve their forests to protect the planet.

The carbon offset market could become one of the most important new financial models that are needed to fund greening initiatives in emerging markets. “Ninety percent of the demand for those offsets will come from advances economies and 90% of the supply will come from developing economies, including in Africa. This is a market that could scale quickly to $100 billion per annum,” Carney said.

More than 125 countries have committed to Net Zero carbon emissions by 2050 as governments increasingly respond to the demands of their citizens. But Africa undeniably lacks the finance to fund a transition to greener infrastructure and power, so developed nations must share the financial burden of transitioning to Net-Zero.

Songwe pointed out that Africa still needed to put 70% of its infrastructure in place, creating an opportunity to leapfrog to new, renewable and sustainable technologies. But many countries – South Africa included – still depend on fossil fuels for economic growth, employment and government revenues – and having fuel to power their development takes priority over how clean it is.

Yet governments could be convinced to invest in greener fuels by tying it in with job creation, Songwe believes. She quoted compelling research by Oxford University conducted in South Africa that found renewable energy and sustainable transport infrastructure could create 420% more jobs than fossil fuel solutions.

During previous COP gatherings, the developed nations have committed to transfer $100 billion a year to emerging nations, while other sources of income such as the Green Development Fund also drive their transformation. However, the problems are too numerous and expensive for public sector funding to support alone. Much of the burden will fall on private financial institutions, and organisations like Absa have a large role to play by developing innovative funding solutions to support this journey.

“The simple truth is that the transition we wish for will not happen without a massive infusion of cash and additional resources,” said Tidjane Thiam, Chairman of Rwanda Finance Limited. Each country must develop its own predictable and credible strategy for achieving Net-Zero emissions and must involve the private sector in a very significant way, he said.

Thiam said a strong political will was needed to implement more public-private partnerships and to establish regulatory reforms so foreign investors could be sure their investments wouldn’t be expropriated, or contracts reneged on.

Another key goal should be supporting small local businesses in Africa, so they become successful. The first thing foreign investors look for is a solid base of strong local enterprises, and if they don’t exist, it implies that the regulatory environment is not conducive to doing business, Thiam said. If foreign investors cannot find local partners to work with, they will stay away.

The panelists agreed it was important to encourage home-grown African investors to support green initiatives in Africa, because they would not flee with their money in times of crisis like first-world investors tend to do. Again, that’s an example of the need for African solutions to mitigate a global crisis.

Absa has a target of financing or arranging R100 billion for environmental, social and corporate governance (ESG) projects by 2025 and has arranged financing for 46% of projects under South Africa’s Renewable Energy Independent Power Producer Procurement (REIPPP) programme. The bank invests in these projects because they make good business sense and deliver appropriate returns, and Absa’s aim is to help its clients achieve sustainable growth aligned to the climate change goals.

The requirement for all companies to step up their green initiatives will inevitably increase in the months and years ahead. Carney, of the United Nations, believes that companies should be obliged to address sustainability and climate change issues in their financial reporting. So far, 34 large African companies already do that voluntarily, proving that while Africans bear little blame for climate change, some of us are determined to reverse it.

By David Renwick, Head of Investment Banking Division. Absa Corporate and Investment Banking (CIB)

As we head towards COP26 in Scotland, the world is reeling from the impacts of COVID-19 and its resultant human and economic costs. The pandemic has reminded us that global challenges require global coordination and bold action. At the upcoming 26th UN Climate Change conference scheduled to take place in Glasgow, Scotland, governments, businesses and broader society will, once again, have to confront the challenges posed by climate change. As with COVID-19, climate crises do not discriminate, and we have seen how any vulnerability that arises elsewhere in the system can cause significant devastation in other parts.

Given the urgency that the global climate challenges have caused, we can reasonably expect that global action on climate-related issues will be accelerated. On the one hand, rapid, collective action and change are required to reduce emissions to levels that will prevent an ecosystem collapse and widespread human suffering. On the other, we live in complex, multi-layered societies, in which stability is maintained through the predictability of long-standing, slow-changing norms and standards.

A careful and difficult balance must be struck on the global transition journey between moving fast enough to avoid climate-tipping points, but slow enough to maintain global societal stability. For fossil-fuel dependent countries, significant resources will be required to avert a series of humanitarian and economic crises. If not managed properly, the transition could result in greater socio-economic instability and fragility, as well as increased migration and security risks across the globe.

An equitable and just transition to net-zero emissions will require concerted efforts of all societal layers, that is, individuals, civil society, the private and public sectors. On an individual level, it is important that, where we can, we implement energy efficiency plans within own households and environments. At Absa, we continue to work to not only reduce our carbon footprint as a business, but also develop innovative climate finance products to support our clients on their transition journey. As individuals, we must also not forget the power we hold in our purchasing and investment decisions.

At a business level, companies have an important role to play in mitigating global warming and in ensuring a just global transition to net-zero emissions. They can do this by investing in research, new energy technologies, energy efficiency measures, and smarter business practices. For our part at Absa, we have shown our commitment to this transition by being the first South African company to voluntarily include a climate change resolution on our AGM agenda last year, and secure support from shareholders for that; being a founding signatory to the UN Principles for Responsible Banking, and being one of the leading financiers for the country’s extensive Renewable Energy Independent Power Producer Procurement (REIPPP) programme.

It is encouraging to note that Absa Group is not alone in these efforts. There is a growing number of businesses that are similarly committing to the global transition, as illustrated by the growing support for initiatives such as the Task Force on Climate-Related Financial Disclosure; WeMeanBusiness; Science-Based Targets and the Global Compact. However, like other businesses, Absa is constrained by resources, local and global regulations and policies, as well as unique country contexts. For the business sector to have a significant impact in stemming the tide of global warming, more companies need to be involved.

Widespread resource mobilisation is required in order to achieve just transition. In line with the Paris Agreement, advanced economies must reconfirm the $100-billion annual transfers to lower-income countries and raise that figure to ensure that countries across Africa and other emerging markets can leapfrog old technologies and move directly to using green technologies. Furthermore, concessional funding to support the transition to a green economy is required across the continent.

International frameworks and guidelines to manage and mitigate against climate risks need to be enhanced. As part of the financial sector, we are accustomed to the use of regulatory instruments to improve financial stability. At an international level, Basel Accords have contributed to banking sector resilience. It would be useful if international standards bodies, including the Financial Stability Board (FSB) and the Basel Committee, and multilateral organisations such as the OECD and IMF, collaborated with national regulators to enhance existing frameworks that can support the financial sector’s response to the climate crisis. At Absa, we also believe that there is scope for work to be done by the G20/IMF to model the economic and social consequences of the climate transition.

Lastly, regulatory and policy decisions that address climate change and financial stability risks require multilateral rules-based regimes. Thus far, the work of the UN Framework Convention on Climate Change (UNFCCC) has provided broad governance and understanding of climate issues. The next phase will require a cross-sectoral responses and leadership to bring together the multiplicity of issues that are interconnected and interrelated when solving social inequality and climate change: from women, water, health and hygiene, to pollution, emissions, trade and, economics.

By David Wingfield, Absa Group Marketing Managing Executive

It’s become hard to ignore the siren call to protect our planet. As a result, many consumers are trying to be responsible citizens of the world, and they expect the same from corporations.

At a business level, companies have an important role to play in mitigating global warming and in ensuring a just global transition to net-zero emissions. Real economic players and governments are working with a common purpose in the pursuit of a global sustainable market, and this trend is being reinforced by investors.

One notable recent example is Larry Fink, Chief Executive of the world’s largest asset manager, Black Rock, who has appealed to his counterparts in the business world: “Society increasingly is turning to the private sector and asking that companies respond to broader societal challenges,” he wrote. “Indeed, the public expectations of your company have never been greater. Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Already in 2015, polling group, Nielsen, surveyed 30 000 people in 60 countries around the world, wanting to know what influences the way consumers feel about brands – and how those feelings impact buying behaviour.

The survey found that two-thirds of respondents would happily pay more for sustainable goods. Interestingly, however, the results showed that in developed markets where consumers face an abundance of choice, the percentage of people willing to pay more, was lower.

It follows then that there is much more scope, and demand, for stimulating public debate and promoting sustainable principles to consumers in emerging and developing economies such as Africa, the continent that we call home.

Africa: A continent of opportunities

Africa is a big continent of stark contrasts. Despite this, the continent’s economic potential remains full of possibility – thanks to a significant youth population, fast-growing cities and flourishing domestic markets.

In addition, the Fourth Industrial Revolution (4IR) and the outbreak of the COVID-19 pandemic presented unique opportunities to speed up change on the continent. It signals a new era for regional partnerships, requiring agile leadership with an entrepreneurial mindset to create pathways for shared prosperity and a sustainable future.

Our ambition is to become a leading, purpose-led African bank, and we are acutely aware that climate change presents a material and urgent global challenge with significant socio-economic consequences.

We have shown our commitment to a just global transition to net-zero emissions, and a number of milestones in our sustainability journey reflects our ongoing commitment.

• We were the first South African company to voluntarily include a climate change resolution on our AGM agenda last year, and secure support from shareholders for that.
• We were a founding signatory to the UN Principles for Responsible Banking.
• We signed an agreement with the Multilateral Investment Guarantee Agency (MIGA) covering seven of our subsidiaries outside South Africa, which includes setting up environment and social management systems, caps on specific loans and green loan commitments.
• We established the dedicated Sustainable Finance team in our Corporate and Investment Banking business.
• We elevated Sustainability Risk to Principal Risk in our Risk Management Framework.
• We published our first Task Force on Climate-related Financial Disclosures report in March.
• We were the first South African bank to announce sustainable finance targets.
• We have financed 33 deals, or 46% of South Africa’s renewables projects to date, making us one of the leading financiers for the country’s extensive renewable energy programme.
• We are one of the lead arrangers and a senior lender in South Africa’s largest concentrated solar power tower plant, with an estimated cost of R12 billion.
• We announced Africa’s first certified green loan from the IFC, of $150 million.
• We completed a pilot with the Council for Scientific and Industrial Research (CSIR) on climate change scenarios that we will extend to cover our real estate and agriculture book, which jointly comprise 40% of our South African loans.
• Finally, we have committed to publish standards for the oil and gas and mining sectors this year.

With our pledge to implement the United Nations Principles for Responsible Banking, we affirm and express our willingness to assume an active leadership role to encourage sustainable practices and enable economic activities that create shared prosperity for current and future generations.

Playing a shaping role in the societies where we operate

Our Group strategy identifies playing a shaping role in Africa’s growth and sustainability as a key strategic enabler, and the growth we want to achieve is inextricably linked to our firm commitment to be an active force for good in the communities where we serve.

We currently impact the lives of tens of thousands of people on the continent who live and work in the diverse communities where we operate, and akin to Fink’s appeal, we acknowledge that we have to show how we make a positive contribution to society.

One of our top priorities is to put the basic building blocks in place to ensure that young Africans can reimagine their futures and bring their possibility to life. Our young generation face a rapidly changing world and it’s with this in mind that we have made a very clear strategic commitment to bolstering the education, skills development and employability of our young people.

We also believe in possibility and in the actions of Africans who always find a way to get things done. This positions us as a bank that is truly African in understanding and responding with creativity, ingenuity and tenacity to the development imperatives of our continent.

Collaborating for change

As our new post-COVID-19 world order grows more inter-connected and even more complex, we will now, more so than ever before, play a key role in unlocking Africanacity – bringing our shared futures and Africa’s possibility to life.

The pandemic has reminded us that global challenges require brave action, and for this reason, we have joined forces with like-minded partners such as Daily Maverick to help South Africans make the risks of the global climate crisis a bigger focus of everyday life.

The response to the climate crisis is everyone’s responsibility and with our support, Daily Maverick will be stepping up its response with impactful, investigative journalism.

We are really proud to be a media sponsor of Daily Maverick’s Our Burning Planet project, to bring readers the hard-hitting journalism for which Daily Maverick is known.

Together, we hope to stimulate public debate, shift policy and contribute to creating sustainable and value-creating solutions to some of Africa’s greatest environmental challenges.

As we head towards the 26th UN Climate Change Conference (COP26) that will be held in Glasgow in November this year, we are heeding the call to protect our planet.

By John Annadale –  Absa Group Financial Controller, and Ebrahim Samodien, Chief Information Officer in the Absa Group technology office

Absa has taken the next step in its digital transformation journey, ensuring that technology becomes an enabler of effective change and unprecedented possibilities. Through our Owari Programme, we combined two different and complex software platforms and consolidated financial data and reporting on the cloud – a feat many organisations are still only attempting.

What we did

Starting in Kenya, Absa migrated from legacy infrastructure to SAP’s latest Enterprise Resource Planning (ERP) software (known as SAP S/4HANA), allowing for comprehensive, centralised financial data integration. This was set-up in conjunction with Coupa, a spend management solution that effectively streamlines procurement processes. All of this was then taken to the cloud through Amazon Web Services (AWS), allowing for rapid and flexible scalability. The successful implementation in Kenya opens the way for us to roll out the solution to our operations across Africa.

A number of businesses have faced challenges in implementing SAP/4HANA and have been curious to know how we approached the project, from design through to production.

How we pulled it off

Being decisive and finding ‘the silver lining’ in crises

While the previous ERP system was adequate and ready to be rolled-out across operations, we knew that the next version was on the horizon, stable and fully functional. A strategic decision was made to ditch the old infrastructure and implement a state-of-the-art solution that would enable big data, thorough analytics, efficient third-party management, and world class financial reporting. COVID-19 extended the project timelines, but also provided us with an opportunity to meticulously assess our unique needs, scrutinise the options available and map out appropriate next steps.

Embracing the new normal

We, as an Absa team, did not let new protocols and ways of working deter our progress. Normally, a number of specialists and technicians would be required on the ground, in-market, to facilitate and monitor implementation. Due to social distancing, this simply wasn’t an option. Instead of giving up, cross-border teams came up with creative ways to perform required tasks – remotely. We established virtual rooms with MS Teams where support staff were online to troubleshoot potential issues and address new user queries.

Ensuring for clean, accurate data from the onset

The quality of your master data determines validity going forward. Here, a combination of extensive employee training and leveraging of software capabilities, was essential. Once information is inputted into the system, it maps itself to predefined fields and prompts you to discard irrelevant information. Not only does this provide a higher level of certainty, additional assurances and enhanced processes and controls, it also enables users to access subsets or sub-categories of data. Any errors during this phase would be detrimental to data quality going forward.

Why we did it

The benefits are far reaching. Now, all financial ledgers used across all Absa entities are housed on a single platform with a single, consistent data set, establishing ‘one source of truth’, eliminating the need for constant cross-referencing and reconciliation. In addition, the new platform provides a detailed portal for systematic vendor engagement from onboarding, to invoicing and payments. What’s more, the new infrastructure lends itself to a significant amount of automation and standardisation, enhancing the group’s financial reporting and governance as well as its supply chain management, through safe, secure, and efficient cloud solutions and software.

It’s not over yet. We look forward to using the best practice methodology we have developed to deploy the solution across the rest of our markets of operation, starting with South Africa.

Owari Programme benefits

• One source of truth for financial management and reporting
• Data harmonisation, quality and consistency
• Standardisation and alignment of back office business processes to best practice
•  Automation of manual processes and a shift towards value analysis
• More cost-effective management of  third-party spend

By Andrew Baker, Absa Chief Technology Officer

As the COVID-19 pandemic prompts a leap forward in digital and technology adoption, ‘cloud’ stands out increasingly as a competitive business advantage and it will soon be a strategic imperative, writes Andrew Baker, Absa’s Chief Technology Officer.

There has been a substantial acceleration in digital and technology adoption over the past year, spurred by the need for digital alternatives to the ways in which we worked, shopped, learnt and even socialised before the pandemic. The 23% jump in the number of digitally-active Absa customers in South Africa in 2020 vs 2019 serves as one of many proof-points. In this context, the way in which large volumes of data are stored and managed has also come under scrutiny more than before.

Traditionally, most companies stored data on servers on their own premises. However, as data volumes grew, owning and managing on-premises data centres has become costly, cumbersome and inefficient. Storing data online, or ‘in the cloud’, is an alternative solution provided by companies such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud.

Companies that store their data in the cloud also have access to powerful ‘cloud computing’ capabilities. It means they can analyse, interpret, process and manage data faster and at bigger scale. Cloud security services have also made it easier for companies to manage IT infrastructure as more staff work from home. It is for these reasons, and more, that Absa has become one of the biggest cloud adopters in Africa. We have accelerated cloud adoption, and we’re not alone in doing so.

According to the International Data Corporation (IDC), cloud adoption has surged in the past year and will continue to do so. Global spending on cloud services across the board will accelerate to $1 trillion in three years, growing at a compound annual rate of 15.7%, according to IDC. Gartner’s prediction is for end-user spending on public cloud services to increase by more than 18% to $305 billion this year compared with 2020.

The move to cloud in Africa is further promoted by the establishment of local data centres by the world’s largest cloud service providers. For example, last year, AWS announced the opening of a data centre in Cape Town to service clients in Africa.

Until now, businesses in Africa were mostly connected to AWS data centres in Ireland, and while these were only about 160-170 milliseconds away, the geographical spread carried the risk of interruption, such as breakages in the West African Cable System. The opening of the AWS data centre in Cape Town means this risk is now significantly reduced. As the data centre footprint develops in Africa, it presents significant opportunities for businesses, from small businesses to large corporates, to move to virtual systems.

Cost benefit

Well-architected cloud offers significant cost benefits, both from the perspective of capital outlay and ongoing operational costs.

In a fixed-capacity operating model, determining the size of a company’s data storage needs – despite the best modelling algorithms – is never a perfect science. Being left short of, or with excess capacity due to a cumbersome operating model can have costly consequences. Cloud, on the other hand, allows a business to scale up or down elastically, according to its particular and immediate operational requirements.

At Absa, we conduct numerous mobile disbursements across our Africa operations, processing large files of cellphone numbers for payment. Before, this process cost us millions of rands with minimal returns on investment. After migrating to a cloud-native platform, however, the equivalent cost declined to a mere $19 a month.

The journey to cloud

The journey to cloud is not an easy one, particularly in the heavily-regulated financial services sector. It is a detailed, methodical and complex process undertaken with oversight by regulators in the multiple jurisdictions in which we operate.

In order to maximise the potential benefit of cloud computing, it is critical to get staff on board, particularly in large multinational organisations.

Our efforts to train staff in cloud computing was accelerated recently with the launch of a Cloud Incubator – an internal initiative launched jointly with AWS – to train 1,500 Absa staff members across Africa this year alone. A key outcome for us is that cloud incubator participants will be able to identify cloud opportunities within their businesses, and create more efficient, scalable services and solutions. Employees will have the confidence to innovate faster and experiment more to drive broadscale digital transformation across the business.

At Absa, we are accelerating cloud adoption as we firmly believe it will have a significant impact on our ability to innovate, offer new value propositions, and play a meaningful role in our customers’ and clients’ experiences. Cloud is already improving our ability to manage and access big data sets and to bring products to market faster.

Cloud is currently a competitive business advantage but will soon become a strategic imperative.