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Treasury VerdictWest AfricaThe viewpoint of corporate treasurers on up-to-the-minute issues

of 5Treasury Verdict West Africa www.eurofinance.com

INTRODUCTIONTreasury Verdict is the electronic voting and panel discussion held at EuroFinance events worldwide. This report is based on the votes of corporate treasury professionals, bankers and other vendors and advisers who attended EuroFinance’s 4th conference on Treasury, Risk and Cash Management in West Africa, held in Lagos, Nigeria on 21 to 22 February 2013.

Commentary was provided by these panellists: • Peter Green, Senior EuroFinance Tutor; and Director, Transactionbanking.com, UK (conference chair)• SeyeSandey,Director,FinanceOperationsAfrica,Coca-ColaAfrica(Pty),SouthAfrica

Key fINDINgs• TreasuryandfinanceprofessionalsinWestAfricaareextremelyconfidentabouttheprospectsfortheirbusinessoverthecomingyear.Anoverwhelming90%ofthedelegatespolledsaytheyfeelmoreconfidentcomparedtothepreviousyear.ThismeansthatWestAfricaisclearatthetopoftheTreasuryVerdictbusinessconfidencetable,aheadofBrazil(78%),SouthernAfrica(56%),India(50%),China(47%)andEurope(31%).[Question1,seeGlobalContextbelow] • ManyWestAfricantreasurers(47%)arelookingtoincreasetheirnumberofbankrelationships.ThisisjustaheadoftheirpeersinBrazil(46%),andsignificantlymorethanfinanceprofessionalsinIndia(39%),China(31%),SouthernAfrica(26%)andEurope(24%).[Question3] • TaxisaseriousproblemforcorporatesinWestAfrica,withoverthree-quarters(76%)statingthatthelocaltaxenvironmentisgettingharderfortheirbusiness.Just3%thinkitisgettingeasier.[Question7]

• ThevalueofsupplychainfinancetotreasurersinWestAfricawashighlightedbythefactthat90%ofthosetowhomitisrelevantsaythatsupplychainfinanceisimportanttotheirtreasuryfunction.[Question8]

Date: 21 February 2013

Topic: CURReNT IssUes fACINg TReAsURy AND fINANCe PROfessIONAls IN WesT AfRICA

Where: EuroFinance’s 4th conference on Treasury, Risk and Cash Management in West Africa, held in Lagos, Nigeria

Respondents: Seniortreasuryandfinanceprofessionalsofdomesticandforeign-ownedmultinationalcompaniesoperatinginWestAfrica


30% 33%

37%

Compared to last year, do you feel more confident about the global economic prospects in the next year?

Yes No Same

Source: EuroFinance Treasury Verdict Survey, 21 February 2013

44%

90%

4%6%

Compared to last year, do you feel more confident about your business’ prospects in the next year?

Yes No Same


Analysis & Commentary• “Thisresultreflectsouroutlookintermsofbusinessconfidence.Projectionsfor2013showthatthingsaregoingtobegin to settle down. Commodity prices will be on the decline, aswillinflationrates.”• “Nigeriahasprojectedgrowthratesfor2013ofover6%.Thatisanindicationofverygoodthingstocomeforbusinesses.”

Analysis & Commentary• “Thisresultsuggeststhat,asasub-regionhereinWestAfrica,wearemuchmoreconfidentaboutourprospectsthanthoseweseeinotherregions.”• “Perhapsthephraseis‘cautiousoptimism’.Thismaybeasa result of some of the global economic volatility and unrest, especiallyintheMiddleEast.”

01 CONfIDeNCe

ResUlTs

02 NAIRA

0 10 20 30 40 50 60 70 80

9%

73%

14%

3%

1%

Over the next 12 months, how will the NAIRA perform against the UsD?


Appreciate > 15%

Appreciate 5% - 15%

Remain about the same (±5%)

Depreciate 5% - 15%

Depreciate > 15%

Analysis & Commentary• “Mysensetodayisthatwearereasonablyconfidentasagroupthatitwillremainthesame.Butitisimportanttoremembernottoforgoriskmitigationjustbecausewebelieveitisgoingtostaythesame.”• “WehavementionedtheprojectedgrowthratesintheNigerianeconomyandalsoaboutinflationbeingonadownward trend. These are factors that may come to play in the appreciationofthecurrency.”

Analysis & Commentary• “Thisisdifferentfromwhatweareseeinginotherregions,where there has been a trend towards consolidation on the transactionalsideofthebusiness.”• “Wearelookingatrationalisingbankingrelationshipsinordertodriveefficiencies.Ithinkthatyouwouldprobablysee the number of banking relationships for multinational companies decreasing over time as there is a lot of emphasis on productivity.”• “Iworkinaretailenvironmentandamtryingtospreadandreduce my transaction costs for depositing cash by having more bankingrelationships.”

03 BANK RelATIONsHIPs

47%

25% 28%

The number of bank relationships my treasury has will:

Increase Decrease Stay the same



Analysis & Commentary• “Itseemsthatcreditandlongertermfundingisnotbeinginhibitedhere,fortwothirdsofyou.”• “Ifyouarealargemultinationalandyouwantfunding,youwilltendtogetit.”

04 fUNDINg

0 10 20 30 40 50 60 70 80

3%

16%

15%

66%

I’m going to have problems accessing term funding in the next: (Pick one)

3 – 6 months

12 months

24 months

Not in the foreseeable future


Analysis & Commentary• “Ithinkthatifwehadasked‘yesI’mhappybutwewouldstill like to do it better’ that probably would have swept up a numberofthe‘no’answers.”• “Thereiscertainly,evenforourcompany,opportunitiestodothis better, even though we do have very good clarity regarding wherethecashis.”

05 CAsH VIsIBIlITy

0 10 20 30 40 50 60 70 80

30%

70%

I’m happy with the level of cash visibility in my organisation

Yes

No


Analysis & Commentary• OfthoseWestAfricantreasurerstowhomtheRMBisrelevant(54%),24%ofthesealreadyuseRMBfortradesettlement.• “ThisisoneofthehigherpercentagesI’veseenoutsideofAsia.Iamseeingmuchmore‘SouthSouthflows’-AsiadealingwithAfricaandSouthAmericadirectly,ratherthanflowsthroughtheUSorEurope.”• “Thisisnotrelevanttous,butIthinkthefactthatChinaisbeginning to open up, albeit in a very limited way, is a step in therightdirection.Inashort-termofaround10yearsthiswillhaveamajorimpactontheglobaleconomy.Soitwillbecomerelevantinthattime.”

06 ReNMINBI

I will be using offshore Renminbi for trade settlement

35%46%

6%13%

I already do so Yes, I will within the next five years Maybe some time in the future No, not relevant to me


Analysis & Commentary• “Forusitisgettingharder,notjustinNigeriabutacrossthecontinentofAfrica.”• “Manycurrencieshavebeendevalued,sogovernmentsarebeginning to look inwards in terms of generating revenue. A lot of multinationals have been impacted by this because it is easytopickonamultinational.Butifyouareamultinationalcompanyandnotfilingyourtaxreturnsthenitsuggeststhatperhapsyoudohavesomethingstohide.”

07 TAx

0 10 20 30 40 50 60 70 80

21%

3%

76%

Is the tax environment for your business:


I will be using offshore Renminbi for trade settlement

Getting easier

Getting harder

Staying the same


Analysis & Commentary• Avastmajority(90%)ofthosethatitisapplicabletosaythatsupplychainfinanceisimportanttotheirtreasuryfunction.• “Supplychainfinancehasmovedfrombeingperceivedasimportandexportaroundtrade.Today,treasurersarelookingat how they can use the trading relationships that they have to getbetteraccesstocreditwhenitisascarceresource.”• “Thisisimportantwhetheryouareasupplierorabuyer.Ifyou are a buyer, it helps you delay paying for the goods you are buyingforaslongaspossible.Ifyouareasupplier,ithelpsyoutogetaccesstocashintheshortestpossibletime.”

08 sUPPly CHAIN fINANCe

69%

8%23%

supply chain finance (sCf) is important to my treasury function

Yes No Not applicable to me


Analysis & Commentary• CorporatesthatuseOTCderivatives(46%ofoveralldelegates) are split over whether they are in the clear (52%) withtheregulationsinthisarea,oriftheyarenot(48%).• “Myguessisthatsomeofthemoreheavyendusersare theonesthataregoingtobeatthe‘Yes’end.”• “PersonallyIhavealwaysfoundderivativestobeverycomplicated,beitoverthecounterderivatives,exoticderivatives...Icertainlydothinkthatthereshouldbe regulationinplacetocontrolthis.”• “Onereasonthatthefinancialmarketscontagiondidn’t hit Africa as strongly as other places was because the sorts ofinstrumentsinuseherewerenotasexoticassomeoftheothermarkets.”

09 OTC DeRIVATIVes

54%

22%

24%

Corporates are in the clear with OTC derivatives regulation

Yes No Not applicable to me

Analysis & Commentary• “Therulesaroundthisaretightandifyoudon’tactyoucouldfindyourselfintrouble.”• “Treasurershaveaperspectiveonrisk,weareprobablytherightpeopletoaskthequestions,andwhenwegettheanswersbackwedoneedtorespondtothat.”• “Theonlysurpriseformeisthosewhosaythattheywouldkeepquiet,becauseI’mreallynotsurethatthereisanyoptionhere but to blow the whistle. Financial irregularity creates a verydifficultoperatingenvironmentforeveryone.”

10 WHIsTleBlOWINg

0 10 20 30 40 50 60 70 80

77%

15%

8%

If I witness financial irregularity in my company, I would:

Blow the whistle

Keep quiet

Leave the company




Analysis & Commentary• “WhileAfricaasaregionislikelytobefollowingBaselIIIprogressively, over a period of time, it will still have a fairly big impact on things that can be economically offered by the banks aroundcertainservices.”• “Ithinkthatmightbeintheshortterm.Inthelongerterm,however,Ithinkitwouldcertainlybeagoodthingforthebankingcommunityintermsofmakingthefinancialenvironmentonethatismoresecureandsaferforallofus.”“Itisthecostyouhavetopay.”

12 BAsel III

0 10 20 30 40 50 60 70 80

34%

66%

Basel III regulations are, or will be, harming my access to funds


Yes

No

0 10 20 30 40 50 60

51%

49%

By the next time we meet there will be as many countries in the euro as there are today

Yes

No

Analysis & Commentary• While‘Yes’ismarginallyaheadwith51%ofthevote,compared to their peers around the world, West African treasurersarelessconfidentoftheeuroremainingintact.AtrecentTreasuryVerdictsessions,74%offinanceprofessionalsinIndiabelievethattheeurowillstaytogether,aheadofEurope(66%)andBrazil(64%).OnlySouthAfrica(53%)isclosetotheWest African result.

11 eURO


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