Adam Smith Awards 2017

OVERALL WINNER

Best in Class Treasury

Solution in Africa

ABB South Africa (Pty) Ltd

Modderfontein, South Africa

Andreas Krause, CFO

ABB implements solution in 13 countries across Africa

Company profile

ABB is a pioneering technology leader that works closely with utility, industry, transport and infrastructure customers

in roughly 100 countries. With more than four decades at the forefront of digital technologies, it is a leader in digitally

connected and enabled industrial equipment and systems with an installed base of more than 70,000 control systems

connecting 70m devices.

The challenge

ABB had four key challenges:

•

Enhancing regional liquidity management, optimising working

capital, consolidating risk exposure across banks and markets as

well as achieving operational efficiency and control through a

centralised treasury structure. Fundamental to the first objective

of ensuring optimal treasury management for ABB was improved

liquidity management and cash visibility over 13 African markets

where it had multiple banking relationships, numerous local and

foreign currency accounts and minimal governance over local

cash flows.

•

Improving working capital through unique and cost-effective

financing solutions.

•

Consolidating risk and exposure management through a holistic

treasury solution in Africa. A recurring theme for many multi-

national corporations over the past 12 months is reviewing

counterparty risk amongst banking partners in the region.

•

Achieving operational efficiency and control in its treasury

management across the region.

The solution

ABB adopted Citi’s domestic cash management solution to effectively

aggregate single-entity cash balances for ABB South Africa (Pty) Ltd

accounts in South Africa – these consolidated funds are pooled to a

central header account via an automated, end-of-day target

balancing mechanism. To ensure end-to-end visibility, ABB is fully

integrated with CitiDirect BE to allow for real-time oversight.

Andreas Krause, CFO explains, “We replicated the supply chain finance

solution that was rolled out in Brazil, China and Thailand for South

Africa which was sourced at a market-leading rate to support financing

for 56 key suppliers that are currently on the local programme.”

Citi was a natural fit for ABB as a core relationship bank globally

through over US$1.6bn of committed credit facilities and maintaining

a stable investment-grade credit rating in Africa. Through Citi’s

pan-African footprint, globally-standardised banking platform and

superior balance sheet capacity, it was able to serve as ABB’s core

banking partner in the region. This resulted in a significant reduction

of bank accounts and relationships as well as optimising transactional

pricing and connectivity for ABB which translated into US$48,000 in

estimated cost savings.

ABB integrated its transactional banking across 13 markets into one

centralised payment factory via a secure host-to-host channel that

accommodates multiple payment types in a standardised file format,

XML v3.

Best practice and innovation

Best practice is showcased in this deal by leveraging years of

knowledge and acquired expertise through ABB’s global relationship

with Citi. This has resulted in an extensive understanding of how both

parties operate when it comes to product fit, implementation and

service delivery on a local, regional and global level. ABB was one of

Citi’s first clients to leverage innovative technology such as the SAP

ERP integrator when setting up their host-to-host channel which built

off existing SAP capabilities and reduced the implementation

timeframe, thereby eliminating unnecessary technical costs, time and

allocation of resources.

Krause concludes, “Taking into account the variety of corporate

regulatory hurdles, the nascent development of payment infrastructure

and currency controls embedded in many African markets – for ABB

to have developed a regional treasury solution that is both compliant

with local regulations and efficient in servicing day-to-day business

requirements highlights the true value of this infrastructure.”

Key benefits

•

Centralised visibility of funds.

•

Automation gains.

•

Modular and scalable ERP infrastructure.

•

Risk exposure reduced.

•

Bank relationships consolidated from over ten to a single

core bank.

•

Market leading rate in SCF programme backed by a

US$15m facility which supports 56 key local suppliers.

•

Technical implementation time reduced by around 60%.

Geoff Gursel, Citi, Hadi El-Amaary and Tenzing Bomratsang, ABB