By Abdul Yassim and Mosa Tshabalala

If one were to speak to African suppliers who trade across borders, many would say that doing business within the continent can feel riskier than exporting beyond it. Especially for small and medium-sized enterprises (SMEs), information on counterparties is not always easy to obtain, regional currencies can be volatile and difficult to hedge, forward markets offer little depth, and access to affordable finance is often limited at precisely the moment it is needed most. Financial institutions also sometimes price regional trade more cautiously than comparable transactions further afield, even though the markets sit closer together, and despite the clear opportunity to finance these supply chains, only a portion of the demand for capital is met.

In practical terms, this puts pressure on the supply chain. Take an everyday transaction: an order comes in, and raw materials, labour, production, and transport all have to be funded before a single payment is received. By the time goods cross a border, weeks may already have passed, and settlement can take longer still where processes are uneven or payment terms extend across jurisdictions. If trade credit, supplier finance, or receivables discounting are not readily available, even modest delays begin to strain the balance sheet.

This is why easier access to supply chain finance (SCF) is so important to expanding Africa’s regional trade agenda.

However, despite an estimated SCF market on the continent exceeding $60 billion (merely 2% of global volume), UNCTAD suggests that only between 7 and 25% of demand is currently met, and Afreximbank reports that just 18% of African banks’ SCF portfolios are directed toward intra-African trade.

When working capital is scarce and currency risk sits with the supplier, cross-border trade becomes a balance-sheet decision rather than a market opportunity. Smaller businesses begin to limit their exposure, prioritising domestic transactions where settlement is more predictable and informal credit can bridge short-term gaps, and pricing defensively where exchange-rate volatility threatens already thin margins. Over time, the result is a narrowing of participation, with only the most capitalised firms able to operate comfortably across borders.

There are practical solutions that can be implemented in the near term to make SCF more bankable. Regional trade becomes expensive to finance when too much of the transaction sits in separate systems that do not talk to each other. A buyer may know a supplier well, and a supplier may trust a buyer, but once a bank or insurer steps in, it often has to piece together the transaction from scattered documents and inconsistent settlement records, and the cost of that reconstruction shows up in pricing.

This is why it is important to develop stronger regional digital supply chain platforms. These are shared tools that bring buyers, suppliers, logistics providers, and financiers onto the same transactional record, linking confirmed orders, shipment updates and payment data in a way that can be accessed across borders. They reduce the need for each institution to independently reconstruct a deal from fragments and instead allow financing decisions to rest on a verified record of what has actually been traded and settled.

But the effectiveness of regional platforms ultimately depends on the quality of the data flowing into them. UNCTAD research finds that businesses that use digital technologies such as enterprise resource planning (ERP) systems, electronic invoicing and integrated data platforms are better positioned to access SCF because they generate more consistent and transparent transaction records.

African banks have also developed in-house digital SCF portals that allow their corporate clients to onboard suppliers and manage invoice finance programmes online. By automating processes that were previously manual and paper-heavy, these platforms have reduced administrative costs and made it commercially viable to include smaller suppliers who would once have been too expensive to serve.

The way risk is measured also needs to change. Much of trade-linked lending on the continent still leans heavily on fixed security, property and guarantees, assets that smaller firms either do not have or cannot pledge without choking their own operations. Transaction data provides a different basis for judgement: repeated orders, buyer payment behaviour, settlement timing, dispute frequency, the ordinary signals of whether a business performs. When lenders can rely on that record, funding can be structured around what the firm does rather than what it owns, and that is how SCF moves from being an instrument used by a few large anchor programmes to something that changes who can participate in regional trade.

When suppliers can access working capital against confirmed trade flows, entire value chains become more bankable, payment cycles become more predictable, and cross-border relationships become more durable because financing is tied directly to commercial activity rather than to fixed assets.

If the African Continental Free Trade Area is to translate into real commercial activity, this financial architecture has to grow with it. Trade agreements can open corridors, but it is the movement of working capital within value chains that determines whether those corridors carry consistent trade or sit largely idle.

Abdul Yassim, Head: Trade and Working Capital South Africa and Mosa Tshabalala, Head: Institutional Trade and DSI Sales, Absa CIB

By James Noble

Ahead of the Franchise Association of South Africa’s 2026 National Conference and Expo, James Noble, Sector Executive: Wholesale, Retail and Franchising at Absa Business Banking, underlines the importance of growing this sector to the economy of South Africa and the wider continent.

If franchise business owners want to scale up and stay ahead of the pack in their retail areas, they must embrace new technology and innovation, or risk being overtaken as the modes of doing business change globally and AI emerges as a critical tool to succeed.

While the franchise business sector already contributes R1 trillion to the South African economy, there’s optimism for even further growth. Those who succeed will be adaptable, open to data-driven decisions and willing to tailor their business towards a better user experience in an ever-changing trading environment. Being able to contribute towards reconfiguring established best practice when needed – often at a dizzying speed – will be a key driver of maintaining competitiveness, helping brands illustrate their resourcefulness and demonstrating they will not be left behind. A good example of this was during the Covid-19 pandemic when South Africa saw which retailers were quick off the mark to mobilise their same day grocery and retail home deliveries. It was abundantly clear which retailers dithered and were left behind. The early adapters improved their models and are still ahead of the pack. Those who came late to the party may have difficulty catching up.

It’s inevitable that AI capability will play a far more significant role in driving successful business going forward. Smart business owners know that loyalty programmes steer customer behaviour. To this end, AI is already starting to identify specific customer needs and spending patterns, and tailoring discount vouchers and loyalty points based on what these customers normally purchase. Using predictive demand capabilities, AI will streamline business by analysing past data to predict future orders, for example. Another way AI will contribute will be in solving the often-lengthy times taken for fast food deliveries, a big crunch point for many businesses.

Again, the innovators will be the ones that corner the market in their fields. For instance, we are already seeing the rise of dark kitchens here, where many fast-food outlets are clustered together in an unbranded location under an umbrella shell, so that home deliveries can reach customers faster and smarter. It’s a brilliant solution concept which works well. No one wants a cold takeout, delivered late because the outlet is all the way across town.

Self-service and high-tech cashier-less checkouts also have the potential to fly, but this will be limited to those who can afford this expensive technology.

While the notion exists that AI will deprive people of jobs, this could be balanced by more franchises being established. The FASA 2023 Franchise Survey, sponsored by Absa, indicates that within the sector, each new franchise business brings the potential of eight to 10 new jobs. Crucially, for every 14 direct jobs, seven indirect jobs are created in supply chains and support services. Many of these represent material prospects for economic empowerment for women, youth, black owned business and emerging markets in townships and rural communities.

Having supported South Africa’s franchise industry for more than three decades, Absa has developed a deep understanding of the evolving needs of both franchisors and franchisees. Its sector expertise connects with franchise businesses throughout their lifecycle – from new entrants to established brands looking to scale. Insights suggest as the mobile economy and models of financial inclusion expand in Africa, there’s greater scope for those who have been previously sidelined to participate in the market. For instance, there are more women as primary owners of the business as franchising creates new opportunities for them. In addition, women are coming forward to head up the franchisee councils within brands, so they’re at the forefront of representing the interests and concerns of franchisees.

The FASA data reflects growing confidence for penetration into underserved markets. Predictably, Gauteng still has the largest amount of franchise outlets at 41%, with 16% in the Western Cape, 12% in KwaZulu-Natal, and the other provinces with a combined 31%.

The data FASA has mined reveals that as of 2023 there were 68,463 franchisees operating across 727 franchise systems. There was a healthy 43% increase in franchisees operating franchise systems since 2019. Approximately half a million direct jobs were created, representing 4.7% of national employment.

It’s encouraging that according to FASA, 89% of franchisees achieve break even within the first year, up from 69% in 2019. That’s firm testimony to the positive business prospects franchising offers right now.

Franchise ownership by the previously disadvantaged increased from 20% in 2019 to 48% in 2023. South Africa can boast that some 88% of franchise systems are locally owned brands. Almost 40% of South African franchise brands have demonstrated their global competitiveness by operating outside South Africa. Their growth into Africa to markets like Botswana, Lesotho, eSwatini, Namibia, Mauritius has helped create employment opportunities outside our borders, with 13% expanding their reaches into the Middle East, United States, and United Kingdom.

The franchise sector has demonstrated a dogged resilience, weathering some tough economic challenges while maintaining its 15% contribution to GDP over the last couple of years.  Encouragingly, that 15% is growing, reflecting the power of collaboration between franchisors and franchisees, the strength of proven business models, and the effectiveness of knowledge transfer.

The longevity and sustainability of businesses in the franchise sector are also far greater than that of independent businesses. A solid illustration of that is that 80% of franchise businesses are successful beyond three years, whereas 80% of independent SMEs have failed in this period.

As at the start of 2026, the environment for South African SMEs has improved, driven by the lowest fuel costs in several years, more than 270 days without load shedding, the Rand trading at much stronger levels to the dollar, and interest rates dropping to their lowest since 2024. If these trends continue, and franchise owners harness the best new technology they can afford, the broad success of franchises in this decade – and their contribution to the national economy – should be assured.

James Noble, Sector Executive: Wholesale, Retail and Franchising at Absa Business Banking

By Chris Edwards

Many argue that the global financial crisis permanently changed the relationship between hedge funds and their prime brokers. Prior to 2008, South African equity managers were typically running relatively niche, domestically focused equity long-short or market-neutral strategies, whilst fixed income managers focused local exposure, largely centred on sovereign debt, often managed and financed in relative isolation. But the aftermath of 2008 forced managers to confront how closely counterparty strength and balance sheet resilience were tied to their ability to run those strategies.

The buy side diversified counterparty risk by moving to a multi-prime broker model, something that is all too familiar today, while advances in electronic trading and cross-asset modelling expanded the range of instruments that could be traded within a single portfolio, setting the stage for multi-asset strategies that now differentiate prime brokers in the market.

Managers are now able to invest more broadly within defined mandates that permit international exposure, with access to instruments across markets and asset classes that allow for far more diversified, globally integrated portfolios. For prime brokers, that has meant meeting those requirements in practice, from providing access to global markets and traded instruments to understanding the risk embedded in more complex underlying portfolios and structuring solutions that allow managers to implement these strategies effectively.

A significant amount of time and effort goes into developing multi-asset class margin models that assess portfolio risk across instruments, geographies, and asset classes. The objective is to provide fund managers with margin requirements that are both optimised and competitively priced, ensuring they are not unduly penalised through excessive collateral posting relative to the risk embedded in their portfolios. That requires looking at portfolio-level risk and the correlations that exist across asset classes, rather than treating exposures in isolation. By doing so, prime brokers ensure managers achieve the most efficient use of collateral possible, effectively maximising the value of what they post against the risks they are running.

That focus on portfolio-level risk and collateral efficiency has become even more important as regulatory requirements evolve in specific markets, South Africa being a clear example.

Local regulators are implementing reforms aligned with global initiatives to strengthen the regulation of Over-The-Counter (OTC) derivatives, most notably through the introduction of initial margin requirements for non-centrally cleared derivatives. This staged approach has had a penal effect on hedge funds that make active use of derivatives within their portfolios, materially increasing collateral requirements for instruments such as interest rate swaps and related derivatives. For funds with limited balance sheet capacity, those requirements can quickly become prohibitive relative to the capital they manage.

From a prime brokerage perspective, this is where platform capability and model sophistication matter, and some banks have moved quickly to adapt. Absa, for example, has invested heavily in developing solutions that offer managers alternative ways to meet these regulatory requirements, allowing them to collateralise exposures more efficiently. In some cases, that has been critical in enabling funds to remain viable.

This is not about circumventing regulation, but about interpreting it properly and adapting to it, finding workable solutions that sit within the rules while allowing managers to continue operating strategies that would otherwise struggle to be sustained. Recognising offsets and correlations across asset classes becomes a practical requirement for supporting multi-asset portfolios efficiently under modern regulatory regimes.

As portfolios become more complex, the way strategies are packaged and delivered has changed too.

The traditional fund structure is transforming with the growth of actively managed certificates, actively managed ETFs, and other delivery or access channels. Managers are therefore exploring alternative ways of deploying their strategies, and their choice of platform provider is being influenced by the ability to support multiple structures at once. That includes supporting traditional fund infrastructure alongside AMCs, segregated or separately managed accounts, and other tailored vehicles.

With strategies expressed through a broader set of channels, managers are looking for prime brokers that can meet those requirements in parallel rather than forcing trade-offs between them. What this means is that prime brokers will need to evolve to support and deliver services beyond liquidity and execution if they are to support the growing call for diversified, multi-asset investment strategies.

Chris Edwards, Managing Director and Head of the Prime Services, and the Index & Structured Solutions businesses at Absa Bank

By Vignesh Subramani

South Africa heads into 2026 on firmer economic footing than in recent years, with a steadier macro backdrop and modest growth prospects beginning to take shape. That should be positive for the country’s small business sector, which picked up some momentum in the second half of last year off a low base, even as sentiment improves and confidence returns in a measured, cautiously optimistic way rather than with outright bullishness.

It comes as a welcome breather for a sector that accounts for the bulk of formalised businesses and employment in the country, and which has spent the years since the pandemic contending with persistent headwinds and rising cost pressures that have steadily squeezed its room to grow. January arrives with fuel costs at their lowest in almost four years, more than 200 days without load shedding, a rand trading below 17 to the dollar for the first time since 2023, and interest rates at their lowest since 2024. If those conditions hold, or even stabilise around current levels, they will ease operating pressure materially and make it more attractive for businesses to consider funding and expansion again, two areas that have been among the most persistent constraints for small businesses.

According to the Small Business Growth Index (SBGI), South Africa’s first real-time barometer tracking the conditions shaping small business performance, only 38% of businesses surveyed in 2025 believed they could survive for more than a year under cost pressures without external support. Those pressures were concentrated around input costs, energy reliability, and the broader economic environment, with many respondents pointing to the need for government action that reduces administrative friction and provides relief from energy-related costs. Additionally, more than two thirds (70.5%) expected to require additional financing within six months, largely to fund working capital, capital equipment, marketing, or refinance existing debt. In practice, at least 40% were relying primarily on self-funding, with others turning to family and friends or informal and private lending.

Taken together, this resolves into a composite SBGI reading that points to fragile stability as the sector enters 2026. The Index shows that around 59% of small businesses anticipate moderate to strong growth over the next 12 months. Growth intentions are largely domestic, with 92% planning to expand locally and 72% nationally, while a smaller but notable share is looking outward, with 45% intending to export and 67% aiming to grow their online presence.

The extent to which those intentions translate into action will be determined by how conducive the operating environment proves to be, and by how quickly small businesses are able to adapt to it. There is no one-size-fits-all approach, but some common principles are starting to take shape.

Market access will be vital, with greater emphasis on the channels through which customers are reached. Many businesses are meeting customers where they already transact, whether by extending physical operations online or by using digital marketplaces to sell products and services. Part of this is the way businesses make and receive payments, with instant payment platforms and digital wallets gaining traction, especially among underbanked businesses, helping to stabilise cash flow and reduce delays. This area is likely to see further innovation as the year unfolds, and owners, especially those with smaller operations, will need to take a deliberate digital- and mobile-first approach to stay relevant.

Technology is also becoming more consequential inside the business, with efficiency becoming a defining factor in competitiveness. Tasks that were previously manual are now being digitised through AI-powered chat assistants, cloud-based financial reporting, diary management, and employee management tools. These tools are more accessible than ever and are worth serious consideration. For larger businesses within the SME segment, this brings a parallel requirement: more deliberate investment in cybersecurity, particularly as digital tools are adopted more broadly across operations.

Meanwhile, through conversations with business owners, it is clear that concerns around infrastructure have not eased, despite the extended period without load shedding. Water security, in particular, has become the dominant worry. Many businesses are already investing in backup and storage solutions in anticipation of future constraints, and this is becoming an important consideration for operations that depend on reliable water supply.

The SBGI suggests that most businesses are unlikely to move forward aggressively this year.

Improving indicators have not translated into a rush to commit capital, and caution still shapes much of the decision-making process. Speed of access to funding still matters, particularly when opportunities emerge, but there is growing awareness of the risks that come with accepting finance on unfavourable terms. In some cases, that trade-off may be justified. In others, it can place unnecessary strain on the business at precisely the wrong moment.

This is why stronger relationships with financial institutions are arguably among the most decisive factors this year.

The SBGI found that while most SMEs surveyed sought some form of advice, engagement with formal advisory networks is very limited, with a meaningful share still operating without any external input at all. When financial institutions are treated only as transactional intermediaries, opportunities to test assumptions or structure funding more deliberately are often missed. More open engagement allows businesses to think through questions of timing, funding mix, and risk exposure before those decisions become urgent. It also brings sector-specific insight into the conversation, which can be particularly valuable in an environment where conditions differ sharply across industries.

For many small businesses, 2026 is less about acceleration and more about judgement. Building a working relationship with a financial partner, one that supports informed decision-making, may prove to be one of the most practical advantages available in the year ahead.

Vignesh Subramani, Interim Managing Executive of SME Business at Absa Business Banking