The Africa Financial Industry Summit-AFIS and Deloitte released their third edition African Financial Industry Barometer.
Based on an in-depth survey to be conducted in the second half of 2023, the barometer offers insight into Africa’s progress towards building a world-class financial industry.
Optimism about the short-term macroeconomic outlook
One overwhelming 95% Financial industry leaders are optimistic about the economic outlook over the next three years despite macroeconomic uncertainties and tensions in financial markets.
However, the industry is strengthening asset-liability management (ALM), risk management (mainly cyber security), and capital management in response to persistent inflation and the potential for tighter interest rates and regulation.
Improved digital maturity
Up 10 points in the latest Barometer, industry leaders perceive their digital maturity to have increased, driven by open banking/insurance, which has been a key driver of digital transformation.
Information technology is meanwhile the investment priority for the majority of respondents (33%) with more than one in three strains saying they have started or are ready to start moving to the cloud.
The industry is also keeping a close eye on artificial intelligence with 8% of business leaders stating that this technology has been effectively integrated into their processes.
Challenges to face in the capital markets
Financial performance indicators remain stable despite falling profitability in several sectors. However, access to capital management instruments remains limited.
The race for liquidity and refinancing through the capital markets continues with 70% of respondents (compared to 56% in the previous Barometer) rated market access and depth as insufficient despite an increase in trading volume. This problem is particularly noticeable in foreign exchange trading and fundraising due to strict regulations.
Green finance and carbon neutrality: Room for improvement
Despite Africa $250 billion in annual climate finance needsinvestment in green finance remains limited with only 10% of respondents is committed to issuing green bonds.
The industry will also need to explore realistic pathways to the net-zero goal, given that only 22% of financial institutions have a clear net-zero trajectory.
The industry’s appeal is waning, but doors are opening for local champions
The perceived attractiveness of the African financial sector has been severely affected by political turmoil in the region and the divestment of major international players over the past five years, such as Standard Chartered, BNP Paribas and Société Générale.
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Only 48% of respondents find the industry more attractive, compared to 61% in the last Barometer.
However, international banks curtailing operations in Africa have benefited some local banks, which have not only grown in size and geographic presence, but have reworked their business models to become true champions of the continent that can compete in international scale.
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Seizing pan-African opportunities
With 72% convinced that PAPSS – the Pan African Payments and Settlement System initiative is an important accelerator of regional integration, leaders should build on this momentum and the rapid implementation of the African Exchanges Linkage Project (AELP) and African Continental Free Trade initiatives ( AfCFTA), whose -The impact of time is still very weak.
Meanwhile, 90% of respondents favor the introduction of a harmonized pan-African prudential framework for solvency and liquidity.
What they say
Ramatoulaye GoudiabyAFIS Director, said: “The third edition of the African Financial Industry Barometer highlights the significant progress and persistent challenges in the African financial industry. As the sector continues to navigate a complex global environment, this study highlights the importance of innovation, digital transformation and regional integration in shaping a resilient and prosperous African financial future. Commitment to green finance and carbon neutrality, although nascent, is a positive step towards sustainable development.”
Aristide OuattaraPartner, Financial Industry Leader, Deloitte Francophone Africa added: “By seizing pan-African opportunities and overcoming structural barriers, the African financial industry is well positioned to play a leading role in the global economy. Deloitte and AFIS remain committed to providing key insights and supporting the development of this vital sector for Africa’s future.”
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