South African enterprises seeking expansion beyond the African continent into Europe and the United States often face a labyrinth of complexities.
According to the McKinsey Global Payments report published last year, challenges such as regulatory bottlenecks, extended transaction times, unpredictable exchange rates, and unforeseen costs are formidable hurdles that these businesses encounter within the traditional banking landscape.
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“The instability of currency exchange rates is a significant concern. It can erode the profitability and disrupt strategic planning of businesses engaging in international trade,” states the report. In 2022, trade between South Africa and the European Union was valued at a substantial €26.4 billion, hinting at the impact of such volatility.
It’s not just transactional complications that worry businesses. The time and resources spent navigating these complexities also present a significant opportunity cost.
Delays can stunt growth and profitability, hindering strategic expansion plans. South Africa’s cost of sending payments is among the world’s highest, averaging at 15.05% compared to a global average of 6.24%, as indicated in a World Bank report.
Nonetheless, South African enterprises hold immense potential for expansion, particularly within Africa and Europe. The African Continental Free Trade Area (AfCFTA), one of the world’s largest single markets with a GDP of $3.4 trillion, offers a significant opportunity. Additionally, the continued growth of trade relations between South Africa and Europe – currently the nation’s largest trading partner – paves the way for deeper market penetration.
Amid these hurdles, fintech solutions like Verto emerge as the gateway to overcoming cross-border payment challenges. McKinsey’s report highlights a growth rate of 13% in non-cash retail payment transactions from 2018 to 2021. In emerging markets like Morocco, Nigeria, and South Africa, this figure soars to 25%.
“Through innovative financial technologies, we can overcome barriers, streamline international payouts and currency conversion, and facilitate seamless cross-border payments,” says Ola Oyetayo, chief executive at Verto.
“Our cross-border payment service, for instance, is a revolutionary tool designed to simplify complex payment landscapes. It allows companies to transact swiftly, transparently, and efficiently, boosting their global growth trajectory.”
With the aid of digital wallets and cross-border payments specialists like Verto, African businesses can navigate regulatory compliance with greater ease. Transparent fee structures ensure businesses can predict costs, manage their budgets effectively, and concentrate on growth and job creation instead of administrative complexities.
“In this challenging economic climate, businesses are constantly seeking competitive advantages,” says Oyetayo. “Verto’s real-time conversion solution allows businesses to mitigate exchange rate volatility with competitive rates for almost 50 currencies. This is especially crucial for enterprises solidifying their position in global markets. Trading larger FX volumes unlocks even better rates.”
Oyetayo concludes, “Facilitating smooth transactions within the AfCFTA and EU markets will allow South African companies to capitalise on growth opportunities, drive international expansion, and secure their positions as global players.”
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