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.

By Werner Venter, Senior Manager, Group Financial Crime

Can curbing the illegal wildlife trade prevent another COVID-19?

The Illegal Wildlife Trade (IWT) has long been viewed as just another conservation issue, however, the onset of a global pandemic has shifted expert focus from just preserving species for future generations, to assessing the impact of IWT on human health. According to a recent report by the Financial Action Task Force (an inter-governmental body that develops policies to combat money laundering), annual proceeds from the IWT range between $7 and 23 billion. This figure is compounded by the economic and social devastation brought on by animal to human viral transmissions, such as the coronavirus.

While many associate IWT with rhinos, elephants and pangolins, activity is certainly not limited to these animals. Exotic bird trafficking in South America is prevalent, owls are extremely popular in India and there is a growing demand for endangered glass eels from Europe. Essentially, an opportunistic crime, markets or ‘little economies’ tend to develop around specific and emerging products.

Key operating tactics have been noted by investigators and the sad reality is that poachers are usually from vulnerable communities, living below the poverty line. Local syndicates are then ideally positioned to exploit these individuals to obtain what they need. Following this, illicit goods are moved to a transit or destination country, often stored alongside legitimate products. Criminals have been known to hollow out timber and place ivory inside, disguising cargo as perfectly ‘normal’ shipments. In most instances, corruption features prominently throughout the IWT value chain. For example, officials altering origin countries in transportation documentation; lowering suspicions and ensuring that end products enter relevant markets as quickly as possible.

The Abalone (perlemoen) trade, in and of itself, involves layers of complex syndicates, all contained within a larger structure. South Africa loses billions of rands per year as a result of illegal harvesting and related activities, one of which is the manufacturing of drugs as this highly desired invertebrate is utilised as a barter for precursors to methaqualone and methamphetamine.

Interestingly, the industry is gaining more insight into the IWT and the individuals behind it. Traffic, a leading NGO, recently interviewed over 100 criminals convicted of wildlife crimes, hoping to learn more about motives and common modi operandi. Those brought to book are usually those who ‘pull the trigger’ so to speak, and catching the kingpins of operations is a far more difficult challenge. Those higher up are usually reluctant to speak out, for fear of the negative repercussions.

Following the trail

While protecting natural resources and environmental governance is central to any organisation’s sustainability strategy, financial institutions are especially equipped to take it one step further, by playing a significant role in pinpointing suspicious transactions. Financial investigators can also assist in gathering the evidence required for successful prosecution.

There are various obstacles to cracking down on wildlife criminals, namely a  lack of resourcing and the fact that priority is given to other transnational crimes. It is important to note that all of these crimes do converge to an extent, and that targeting wildlife crimes frequently exposes other illicit activities.

We are not out of the woods

The question remains, how can financial institutions (particularly those operating across Africa) effectively take action against the IWT? What is the best approach to helping to protect biodiversity, economies, and livelihoods, and prevent the spread of disease and subsequent collapse of health systems and other government structures? First and foremost, banks etc. must fully understand their risks and potential exposure to the IWT. The United for Wildlife, a forum with over 170 members comprising of financial institutions, transport companies and Non-Governmental Organisations, led by the Duke of Cambridge and The Royal Foundation, has developed a bespoke ‘tool’ which member banks etc. can utilise to assess their IWT risk. Once this is established, risk mitigation must be prioritised – assessing, identifying, and addressing exposures.

Lastly, actively participating in public-private partnerships and forums – like the South African Anti-Money Laundering Integrated Taskforce (SAMLIT), United for Wildlife, Focused Conservation, and the Basel Institute on Governance – ensures that intelligence, typologies, and trends can be shared and used as crucial indicators when evaluating suspicious financial flows and enhancing existing controls. The keyword here is ‘shared’; innovative measures and a willingness to cooperate with other organisations in the financial sector is one of the best ways that IWT can be successfully controlled. Now is the time to stop beating around the bush and combine all available resources, technology and otherwise, for the sake of both humans and animals.

By Sandro Bucchianeri, Chief Security Officer

In December 2013, Manchester United goalkeeper, David De Gea, famously equalled the Premier League record for saves in a single match (14). He helped Manchester United beat Arsenal 3-1 at the Emirates Stadium in London.

It was an astonishing performance from the Spaniard as he almost single-handedly kept Arsenal at bay, and the score line could have been very different but for his man-of-the-match display.

This brings to mind the significant challenges that Chief Security Officers (CSOs) worldwide face daily in constant attacks against the foundation stones – the goalposts in an organisation’s football terminology.

As our world has become more digitalised, so too has the frequency and intensity of cyber-attacks and security breaches, with CSOs directly in the firing line and doing all they can to prevent such, ala De Gea.

The hard truth of the matter, though, is that data breaches and leaks are no longer the exception to the rule but an almost everyday occurrence.

The stats support this growing trend and make for difficult reading for anyone in the cybersecurity sector. Research published by AtlasVPN revealed that as many as 45% of businesses globally had a data breach in the 12 months, between September 2019 and September 2020.

The published figures are based on a survey conducted by Kaspersky and B2B International that involved interviewing 4,179 global businesses with between 50 and 4,999 employees. Companies that took part in the survey came from the financial services, government, manufacturing, IT and telecommunications, and retail and wholesale sectors.

The analysis revealed that, out of the 4,179 businesses, 45% had lost data to hackers over the year. IT and telecommunication companies saw breaches most often, with 53% of companies losing data to security breaches. This is of particular concern because IT and telecommunication businesses often hold sensitive customer information.

The retail and wholesale sectors also didn’t fare very well, with 52% of businesses having experienced a data breach during the period under review. The consequences of a breach can frequently lead to brand damage and a breakdown in trust across the customer base.

Financial services were third on the list, with exactly half of the respondents reporting that their business lost sensitive data to cybercriminals. This is of particular concern given that customer accounts, monies are at stake, and breaches are likely to draw regulators’ attention.

Those in the government sector are not immune as 46% had a data leak in the 12 months. According to AtlasVPN, “attacks aimed at the government are more often than not supported by foreign authorities, whose aim is to obtain political and military information”.

Although manufacturing and industrial companies experienced data breaches least often, they still saw a significant amount, at 43%. These breaches are generally because a competitor hires a hacker to steal inside data to destroy competitive advantage.

Among the notable and high-profile breaches recorded during 2020, Microsoft reported that several servers used to store user analytics had been exposed on the internet without proper protection. It was further revealed this month that the software giant had also been targeted by hackers who homed in on Microsoft’s business email software and reportedly compromised the integrity of tens of thousands of accounts.

In early 2020, the Defence Information Systems Agency (DISA), which handles IT for the White House, admitted to a data breach possibly affecting employee records; global hotel chain Marriott suffered a cyberattack which affected over five million hotel guests; and Whisper, the anonymous secret-sharing app saw millions of user-profiles and data exposed. Other corporates which saw data breaches of one form or another during 2020 included Nintendo, EasyJet, and South Africa’s Postbank. In November last year, Manchester United said it was investigating a security incident affecting its internal systems.

External threats come in many forms and are directed at both organisations and clients or customers. I’ve written about this before, and there is no reason for any of us to let our guard down when it comes to external attacks.

But what about internal threats?

Far more discreet but also destructive is the threat that comes from within. According to ObserveIT’s 2020 Cost of Insider Threats study, the latest research available, insider threat incidents increased by a massive 47% globally since 2018. The average annual cost to companies of insider threats has also rocketed, rising 31% to $11.45 million in only two years.

Closer to home, local companies, including Absa, have experienced insider threat incidents. Last year, we dealt decisively with an employee who shared data unlawfully. The employee was dismissed and faces criminal charges, as has been reported in the media.

Internal monitoring and control systems need to be continuously reviewed and revised, particularly as remote working becomes more mainstream and brings challenges in ensuring adequate security protocols are place across the business’s entire operation.

Vigilance remains everyone’s responsibility – from businesses which keep data, to customers who must monitor their transactions and bank statements closely, and who should never share their pins and passwords.

The role of CSOs – and indeed, the broader leadership of organisations – is continually expanding to incorporate a deeper understanding of the human psyche and human element. The COVID-19 pandemic has placed intolerable stresses on individuals and households, and this can easily default into erratic, negligent, and even criminally deviant behaviour.

Part of businesses’ growing responsibilities from a security perspective will be to understand and assess employees and the benefits and risks they pose to the organisation. This is our new normal, and CSOs can begin the step-up security by implementing the following basic rules:

• Constantly educate and update your teams about what constitutes potential threats
• How to recognise, report and address suspicious behaviour
• Purge dormant accounts
• Implement robust authentication protocols
• Strictly monitor third-party access
• Sentiment analysis such as log-in times and lengths can help early detection of a threat

Our job is to make it harder for cybercriminals and those with malicious intent to compromise our defences and score goals. We have to be like David De Gea was on that December day in 2017 and stand tall and firm in the face of the barrage of attacks.

By Bohani Hlungwane, Managing Director, Trade and Working Capital Sales Absa

The African Continental Free Trade Area (AfCFTA) has been touted as the supercharger of Africa’s long-term economic success. Here, Bohani Hlungwane, Managing Director, Trade and Working Capital Sales at Absa, looks at how far we have come and what needs to be done.

There is little doubt that the African Continental Free Trade Area (AfCFTA) is one of the golden keys to unlocking the continent’s long-term economic prosperity.

The free trade area has been a long time in the making, and there are still considerable hurdles to overcome, not least of which is the requirement for each member state to deposit their full schedule of zero-tariff goods and services. Some states also have valid concerns about whether infant industries should be protected from stronger country or industry players, while financing and political risks remain. Then there are the non-tariff barriers in restrictive regulations affecting the ease of border crossings and product safety requirements, and requisite approval processes.

But as the milestones are ticked one by one, we should not lose sight of how far the continent has come in creating a single and unified African market to deepen trade and economic integration. From the 1980 Lagos Plan of Action of the then Organisation of African Unity, the forerunner to the African Union, to the 1991 Abuja Treaty, which created the platform for free trade areas, Africa’s path to economic freedom and prosperity is marked by steady and measured steps of progress.

We should not be under any illusions as to the size of the undertaking in putting a continental free trade area into place. Europe created a single market for the movement of goods, services, people, and money in 1993, and the ensuing years have seen the European Union bloc grow to include more countries, the healing of the deep historical divides of the past, and the adoption of a single currency. So even though Brexit caused a rupture in the EU family of nations, it bears remembering that Croatia became the 28th member state in 2013.

In Africa, we seek to create a single market comprising almost double the number of EU states. Furthermore, the EU has its genesis as far back as 1950 when six founding countries – Belgium, France, Germany, Italy, Luxembourg, and the Netherlands – formed the European Coal and Steel Community in a bid to unite European nations economically and politically in the wake of the end of World War II.

It can be daunting when one looks through the lens of needing to bring together 54 individual and diverse countries into a single market. But already, we have eight regional economic communities with varying levels of liberalisation, so while we still have a long way to go, it is not as far as 54 completely disparate entities.

So, where does Africa find itself today in terms of AfCFTA?

The 1st of January 2021 was the go-live date of the Free Trade Area. This meant that those countries whose Parliaments had ratified the agreement and deposited a schedule of tariffs under which 90% of the goods will be zero tariffed goods and services were permitted to trade under the area.

Countries that have still not deposited their schedule of tariff-exempt goods and services have been given until the end of June 2021 to complete this, which is very transformational in and of itself because, instead of having sets of levies for various imports and exports, the majority of those defined goods and services will be subjected to zero tariffs.

There are still important issues to clarify, including broad agreement and acceptance around the question of rules of origin and intellectual property and how this impacts the value of components added as part of the value chain.

Can Africa pull this off?

The other big and seemingly eternal question revolves around infrastructure, or the lack thereof across the continent.

There is a ready acceptance that Africa has an enormous infrastructure deficit, and by all accounts, the annual required spend is well upwards of $100 million over at least the next decade, amounting to around $1 trillion.

And while that is a daunting figure, the reality is that Africa will bridge the infrastructure gap because of the enormous potential and gains inherent in seeing the creation of a single inter-connected market. Moreover, global corporates, asset and fund managers see the opportunity presented by a single market in Africa and the potential evident in factors such as labour competitiveness that make the continent supremely primed for manufacturing and large-scale industrial development.

We already see essential infrastructure projects across the continent underway that will add to the growing network of roads, rail, port, and other notable infrastructure development nodes. This is critical because, as more infrastructure projects are completed, these will generate increased confidence among global investors and finance institutions demonstrating that Africa is on the right track. It also counters the narrative of Africa’s dismal record in moving projects to successful closure.

Added to this is a solid political will to make AfCFTA succeed. The issues around non-tariff barriers such as delays with customs as one example can sink the very best initiatives. However, the AfCFTA Commission has established a digital platform whereby countries and any person involved in the trade of goods and services can flag issues that hamper the effective and efficient trade movement. This points to a commitment to engage with key stakeholders to ensure that critical issues are addressed.

Digital infrastructure will play a critical role in facilitating the workings of the free trade area. For example, the registration of businesses and the movement of goods across borders and general business administration requirements are completed quickly and seamlessly.

As we have seen with Absa Regional Operations (ARO), the COVID-19 pandemic and large-scale drive towards digital transacting speaks to the very future of the free trade area and how business will increasingly be conducted. By its very nature, digitisation drives integration much faster than regulatory reform as entrepreneurs and SMEs seek innovative solutions.

The current reality and the challenges are stark. According to the World Bank, Africa has a population of 1.3 billion people with a combined gross domestic product estimated at $3.4 trillion. Yet, despite its abundant resources and riches, the continent only contributes around 3% to total world trade, while intra-Africa trade sits below 20% of total trade on the continent.

For the first time, Africa is gearing up to ensure that the value found on the continent is to the ultimate benefit of African economies and her citizens.

By Nic Swingler, Head of Financial Crime

The state of a country’s financial sector is a key factor in determining its stability and sustainability. During the height of the pandemic, financial institutions had no choice but to remain resilient, whilst contributing to national relief efforts and accommodating customer payment holidays. An additional element to maintaining and protecting this vital system is accurately identifying and mitigating risks; including money laundering, which can be detrimental to both society and economies.

The Financial Intelligence Centre (FIC) defines money laundering as “the processing of criminal proceeds to disguise their illegal origin.” This can range from drug trafficking and smuggling to illegal arms sales and prostitution rings. In fact, according to the FIC’s latest annual report, the number of suspicious transaction reports increased from 288 000 in 2018, to 300 000 in 2019. Artificial Intelligence (AI), in the form of algorithms and models, has made great strides in flagging suspicious activities, however, expert skills and human discernment cannot be discounted when it comes to effectively addressing ongoing and constantly evolving threats.

Combining intelligence

There are a number of aspects to money laundering. Criminals need to place illicit money in the system through property or other assets, distance themselves from it (often through what’s known as “fronting”) and then integrate the funds back into the formal economy, usually through banking channels. Not surprisingly, this modus operandi is deployed across the spectrum of illicit activity – from sanctioned countries such as North Korea to illegal wildlife traffickers to recipients looking to conceal the proceeds from corrupt activities.

All banks are required to detect and report unusual or suspicious transactions and activities to the FIC who then collates a financial intelligence report and if necessary, consults with relevant authorities for further investigation. Financial crime cannot be addressed if all touchpoints of the value chain don’t cooperate – this comprises the private sector such as banks and other accountable institutions, FIC, law enforcement, prosecuting authorities and government bodies. All of these need to be fully capacitated and have an aligned view of priorities in order to become truly effective. South Africa took a very positive step in this regard by creating SAMLIT (South African Anti-Money Laundering Integrated Task Force) in 2020. This is a public-private partnership across the banks, industry representatives, FIC and the Prudential Authority to share resources and information to drive early detection of criminality and to ensure that the banking system is not abused for financial crime.

Regulatory frameworks dictate that banks need to know exactly who their customers are, how they are behaving and the extent of their financial transactions and activities. All relevant SA institutions are now required to utilise a risk-based approach, which requires institutions to also know the financial crime threats and risks being faced and to develop appropriate responses to manage and mitigate those threats. While AI is useful in identifying ongoing patterns, solutions need to be tailored to incorporate all business units and enhance accuracy, so that resources are prioritised based on risk and do not spend disproportionate time on insignificant items and ‘false alarms’. Interestingly, deployment of AI techniques can also be very effective at reducing the level of ‘false alarms’. Systems that integrate sophisticated data analysis, automation, and behavioural risk models are also essential to a robust risk management strategy. Technology assists with the high volumes of activity that need to be assessed every day, however, there remains a decree of subjectivity and decision making for which human intelligence and expertise are still required to evaluate the nature of the transactions and determine if they are associated with illicit activity.

Catch and release

Of course, employee screening comes with the territory, including background checks and regular account and activity monitoring. However, establishing a risk and compliance culture within, and across the organisation can go a long way in shifting behaviours and attitudes, as can continuous training and capacity building. Embedding core governance principles at the centre of all functions also enables comprehensive surveillance of all transactions, connections, and networks, from the moment the client opens the account through to ongoing monitoring. It goes without saying that organisations must continuously review threats, risks, protocols, policies, systems etc. to ensure that they are always up to date and relevant. Sourcing the appropriate talent, equipped to keep abreast of changing threats and risks, legislation, international standards, and best practice, is non-negotiable.

The reality is, closing a client account or exiting a customer relationship is not taken lightly. Due process needs to be followed and it’s no good catching a ‘fish’ and throwing it straight back into other parts of the system. Appropriate, collaborative, and swift action across the private and public sector (by both technology and humans) needs to be taken, with follow through from the legal system and other sector players. Guess we’ll have to wait for the robot takeover – for now.