Finance: four essential skills for working in the sector in Africa

Posted by Fed Africa in Career advice
Posted at 13/09/2022
Finance: four essential skills for working in the sector in Africa
Africa's financial sector is in the midst of a major transformation. For example, the continent's banking sector, which was particularly dynamic before the pandemic (with bank revenue growth of 11% per year between 2012 and 2017), has shown unprecedented resilience in the face of the health crisis. According to research by McKinsey, African banks should rebound to near pre-crisis levels by the end of 2024 if they step up their efforts in productivity increases, risk management and technology expansion. 

Mobile money operators and fintechs, meanwhile, have benefited from the explosion in the use of digital tools. From South Africa's Pineapple to Nigeria's Paystack to pan-African InTouch, a number of African fintechs have convinced investors and new customers that their services have a future and have raised impressive amounts of capital. Although the financial sector differs from region to region, it has one thing in common across the continent: it operates in an increasingly international environment with promising prospects.

In this context, key financial players, such as banks, microfinance institutions, and private equity funds, are looking for staff with the knowledge to adapt to the future challenges they will face. Here are four essential, cross-cutting skills for working in the sector in Africa.

Digital skills: increasingly essential

The digital transformation of the financial sector has enormous potential to stimulate development and growth in Africa. In a rapidly evolving and increasingly digitalized market, the need for qualified human resources with a command of new information technologies has increased considerably. In recent years, the rise of blockchain and crypto-asset technologies, the ability to collect and process an almost infinite amount of data (Big Data) and the use of artificial intelligence have also profoundly transformed global finance.

A trend confirmed by a study conducted by Deloitte and the Africa CEO Forum, which revealed that more than 70% of financial institutions on the continent felt that launching or accelerating the digitalization of their business had become their strategic priority since the pandemic. So while a master's degree in IT is not essential, additional training or a solid understanding of the industry's digital architecture can help one stand out and thrive in the position.

Mastering the keys to green finance

Africa and its financial sectors are particularly exposed to climate change risks. As a result, the "greening" of Africa's financial sectors is essential to mobilize additional capital to fight climate change. Although the number and amount of green bond issuances are increasing almost every year in the African market, it remains underdeveloped overalĺ compared to equivalent markets in other regions. Against this backdrop, climate change and the energy transition present both a risk and a development potential for African banks' business.

According to the European Investment Bank (EIB) 2021 survey, African banks are increasingly aware of the need to address the risks posed by global warming and have already started to take advantage of the opportunities offered by green finance. For example, 54 percent of banks surveyed considered climate a strategic issue, and just over 40 percent had hired staff to work on climate-related opportunities. On the African side, while figures are unavailable, one thing is certain: the sector is also likely to attract skills in the coming years.

Microfinance: a sector for the future

Africa has made considerable progress in financial inclusion over the past decade, but significant gaps remain. For example, nearly 57 percent of African adults were still unbanked before the COVID-19 crisis. In addition, inequalities persist: women, poor rural households, and those working outside the formal economy are most likely to be unbanked.

Microfinance is often the only formal source of funding for these groups. Formal microfinance institutions (MFIs) are an important source of funding and served more than 6.3 million people in Africa in 2018, 64 percent of whom were women and 60 percent of whom lived in rural areas. They have also shown great resilience in the face of the crises that have hit them in recent years, and often enjoy the support of policymakers who have clearly understood their usefulness. Acquiring key skills in microfinance and mastering the tools is therefore a significant advantage on the African continent.

Risk management: an international requirement

The political and socio-economic environments in which African banks operate are sometimes unstable and involve many risks. Similarly, trade finance (an activity through which banks support African economic operators in their international trade operations) requires special attention from African banks, which must meet the requirements of their international lenders in terms of transparency and compliance with international regulations. Finally, in a context favorable to regional integration in Africa, several African banks have expanded continent-wide, creating new challenges in managing cross-border risks. This requires African banks to evolve their risk management frameworks in line with international best practices. Strong risk management skills, i.e. the ability to assess, manage and monitor the risks to which a financial organization is or could be exposed, is therefore a key to employability in Africa.