Facilitating trade and investment while mitigating risk in West Africa

AdobeStock 203163862Hosted by BVI Finance and African Review, a panel of financial experts and business leaders joined moderator Anthony Osae-Brown, bureau chief at Bloomberg, to discuss how to minimise risk and maximise economic growth in West Africa

Passionately speaking about the unique opportunities posed by Africa, Akintoye Akindele, chairman & CEO of Atlantic International Refinery and Petrochemicals, said, “Africa is an opportunity in itself. There are 1.4 billion people in Africa in need of accommodation, food, shelter, phones, data, everything. From market point of view the case is strong as well. The market size has been opened up more by the African Continental Free Trade Area (AfCFTA), driven by a young population and it is scaling up globally. We have a lot of challenges but these gaps are also opportunities.”

“Over the last five years more information and data availability has meant that there is more exposure. This drives interest which, in turn, drives investment. We now have teams who are partnered globally, developing skills and have business models which are scalable. I am a big fan of this continent and I have witnessed with pleasure the major growth over the last five years.”

Olufunmi Adepoju, managing partner, PearlMutual Consulting, built on the affect AfCFTA will have. She said, “The whole world believes it will do so many wonderful things for Africa, but you have to bear in mind that there are so many countries on the continent, and they are not all on the same level. The benefits to each country on this programme will be very different. Having said that I believe there is possibility for ample gain for each country participating. 

“Each government needs to ensure that while this is a great opportunity, they need to look out for local business as you don’t want to open the market for everybody and then begin to lose the local market. This can be done by providing adequate infrastructure, reducing multiple or duplicate taxes on local businesses and helping to facilitate business’ access to finance. Finally, aggressive education will help companies understand the opportunities that are available to them.”

Facilitating growth 

Commenting on the role of incubator funds to help develop African businesses, Adenike Sicard, managing partner of Sinclairs BVI, said, “An incubator fund is mainly used for investment managers as a low cost option to set up and also one to develop or ‘incubate’ a track record without having to comply with onerous regulations. Once a track record is developed through the use of an incubator fund they can then develop and transition into a bigger fund, get regulated and attract a higher network of investors.”

“Incubator funds are very easy to access and BVI is one of the best offshore jurisdictions to launch these funds because of the speed, economy and ease of which you can set them up. Whether you are an asset manager or an investor located in Africa, you can utilise BVI fund products to meet your needs and goals. It is a tool to quickly scale up and earn profits in the markets you choose.”

“My advice to businesses is to encourage steps to scale up quickly by looking at what are the products available to meet your needs. BVI has six different types of products for this. It is also important to consider whether the jurisdiction has an established fund regime, what the jurisdiction can do for you in terms of its reputation and the regime that is there. BVI has a long established reputation for providing the most cost effective corporate structures for raising finance and collective investments.”

Touching on crypto intelligence, Sicard added, “The majority of investment banks and hedge funds are already trading through high frequency trading platforms. They are using AI and financial algorithms to perform quick detection and analysis of trends, to help asset managers make the most informed and timely investment decisions. Timing is crucial, so I don’t think AI or the use of crypto can replace people, but it is a tool to facilitate quick trading. It is definitely an area that is growing globally.” 

Jeffrey Kirk, managing partner, Appleby (BVI) Limited, noted that West Africa has now fully subscribed to AfCFTA and this will present a number of opportunities for the people in region and the continent as a whole. The importance of access to finance will be pivotal within this for African businesses and this where international finance centres (IFCs) such as BVI can offer a lot of added value.

Kirk added, “According to a 2019 report published by the Overseas Development Institute, developing nations are being held back by a lack of financing. But IFCs have a crucial role in businesses reaching that financing and can create a unique venue for investors, both private and public. The report stated that IFCs have contributed some US$1.6 trillion in investment between 2007 and 2014 and boosted GDP by US$400bn for developing countries. Many of these projects are geared towards infrastructure, so it is adding value to the jurisdictions as well.”

Commenting on incubator funds and giving advice to upcoming organisations, Austin Okere, founder, CWG PLC, said, “In regards to starting a business it is important to recognise a problem and then provide a solution that can lend itself to commercial success. It is about looking for a problem, solving it and then condensing a business around it. After this, establish a minimal viable product, make it for friends and family, and see whether they will use it. When the minimal value is proven, then you can start up looking at value propositions, partnerships (such as regulators and suppliers) and resources you need. Then you can approach an incubator fund once you have reached the point when you need to scale it.”

Understanding risk

Ayodeji Adelakun, executive director & group chief financial officer, GZ Industries, said that the African business environment is becoming more complex. This has further led to increased risk levels in the operating environment for businesses. This however, creates opportunities for businesses that are able to manage these risks efficiently as with any investment, the higher the risk level, the higher the rewards.

“This is one major reason investments in emerging markets of Africa command higher returns compared to developed markets because of the volatility of the environment which commands higher risk premium. What sets businesses apart is their approach to risk management. If you have two businesses in the same industry and exposed to the same risk complexities, what will set one apart is their attitude and approach to risk management and this could determine the one that will be successful and the one that will fail.

“So how should an organisation approach and mitigate risk? First of all risk awareness and management must be imbibed in the structure and culture of a business: a methodological approach to identifying and monitoring enterprise risk, with a defined enterprise risk management framework that captures an organisation's risk policy, risk appetites and its risk governance must be in place. There must be orientation around this from top to bottom. Risk appetite is determined by the environment, the industry an organization, operates and size. Risk is serious to business and it is advisable to have a dedicated function for risk management. This is also better to reside in house, rather than outsourced, so that it is completely part of the business.”

Kirk added, “In regards to risk mitigation, what we see with our clients is that there is clear focus and gaze at Africa. This is a time for opportunity and a time for investment. It doesn’t make sense to be overly cautious. All international investors see opportunity in Africa, and it makes sense that people within Africa invest also.”

To hear about the challenges and opportunities for East Africa, be sure to attend the East Africa CxO Roundtable at the end of October: https://www.alaincharlestraining.com/webinar/east-africa-bvi-finance

Alain Charles Publishing, University House, 11-13 Lower Grosvenor Place, London, SW1W 0EX, UK
T: +44 20 7834 7676, F: +44 20 7973 0076, W: www.alaincharles.com

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