I recently had the opportunity to connect with Mario Fernández, CEO at Gosocket about the ‘Kenyan Project’ in Africa. Mario will be giving a session on this topic on May 14th at the Exchange Summit Conference in Miami and I thought this would be a great opportunity for our user community to learn more about the state of eInvoicing, eFactoring, and Blockchain, in Africa.
Bob Cohen: Thank you for taking the time to connect with Ardent Partners. Let’s get started. Can you please describe the current state of eInvoicing in African countries?
Mario Fernández: eInvoicing is still in its infancy in most African countries as there is no push by African tax authorities to implement the technology. The private sector is leading the way as early adopters due to the benefits they see in automating their accounts payable processes. In Kenya specifically, we are seeing businesses that have a digital strategy are especially excited about the opportunity to automate Accounts Payable (“AP”) which usually begins with eInvoicing.
BC: Is it possible to implement eInvoicing and eFactoring in Africa without specific government regulations and standards in place?
MF: Yes, it is. Some tax authorities in Africa recognize electronic documents as legitimate business documents. However, as there is no specific legislation covering electronic invoicing and eFactoring, business should always talk to their tax authorities to inform them of what you are doing and clarify any requirements before beginning.
Factoring in Africa is currently being pushed by Afreximbank which has a model factoring law awaiting legislative approval in a number of African nations. This law has already been passed in Ghana and Senegal. In Kenya, the model factoring law is currently awaiting parliamentary approval. We believe that eFactoring can work in Africa and is covered under common law which recognizes ownership rights of assets that have been assigned or transferred to a third party. However having said that, for eInvoicing and eFactoring to grow and take root, government legislation will need to be enacted to guide and set common standards for all participants.
BC: Does Blockchain have a future in Africa’s and if so, how?
MF: Yes, it does from the government to the private sector. Trust and the ability to audit are in short supply in Africa. We believe the introduction of Blockchain can help rectify the problems that exist in many government and business processes. Gosocket, for instance, has products that enable us to revolutionize the financial supply chain by bringing light into this historically opaque process. Specifically, by digitizing processes through eInvoicing it allows liquidity providers to underwrite these transactions and instill visibility and trust. This is just one application where Blockchain can play a big role in the future of Africa, there are many others where it would be relevant as well.
BC: What most excites you about the eInvoicing opportunity in Africa?
MF: The most exciting thing about eInvoicing in Africa is the size of the market and the sophistication of some countries in the digital journey. Mckinsey reports that there are more than 400 companies in Africa with turnover of over USD 1 billion. Secondly, SME’s contribute most to GDP growth in many countries. We see ourselves as arbiters, ready to create a business network ecosystem to support these enterprises, big and small.
In Kenya, for example, M-pesa has digitized financial services in the B2C segment. This has been very successful and is replicable in the B2B space. There are many companies in Africa that want to digitize their financial supply chain by leveraging eInvoicing which will enable them to create significant efficiencies in their company’s AR and AP processes while also unlocking financial services for the suppliers in the network. The introduction of eInvoicing can help company’s eliminate latent costs in the supply chain and allow them to streamline both purchasing and invoice handling processes, such as reducing manual workflows that are prone to errors and costly stemming from the inefficiencies inherent in the exchange of business documents and lengthy clearance processes. eInvoicing also enables SMEs to unlock working capital that has been historically trapped on their balance sheets by providing them with access to liquidity providers.
We are also excited about the opportunity to partner with African governments to help them with tax collection that will enable them to close the VAT gap that is huge in most African countries.
BC: What lessons can African nations learn from the experiences of eInvoicing in Latin America?
MF: African countries can take away many learnings from the eInvoicing experiences of Latin America. First and foremost, the importance of working with the tax authorities when designing and getting an eInvoicing initiative started in any country. Collaboration is critical for controlling the taxation process and minimizing the possibilities for tax evasion. African countries can also see the positive impact that creating a digital environment, that leverages eInvoicing and eFactoring, can have from a financial democratization perspective which can help level the playing field for small businesses providing them with the possibility of getting access to working capital they need to survive, grow, and contribute to their local economies.
BC: Thank you for your time and insight into eInvoicing in Africa. Best of luck on your presentation at the upcoming Exchange Summit in Miami.
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