Finance is a crucial change agent in society, government, and technology.



The introduction of artificial intelligence (AI) is fundamentally altering the financial world. AI is a form of technology that confers intelligence on machines. In my 2013 book, Economic Modeling Using Artificial Intelligence Methods, I demonstrated how



AI could forecast economic indicators, predict stock prices in stock exchanges, perform credit scoring in banks, and model complex financial instruments such as options, futures, and derivatives. In our 2017 book, Artificial Intelligence and Economic Theory, Evan Hurwitz and I demonstrate how AI affects how economists think about demand and supply, pricing, and behavioral economics. Utilizing AI’s capabilities, the financial sector is on the verge of massive disruptive changes that present new opportunities and risks. This article examines how AI affects economic systems, specifically the financial sector, markets, and the government.



Using machine learning, predictive analytics, and natural language processing, AI has the potential to revolutionize the way institutions operate. Additionally, AI opens up new avenues for customer service, risk management, and business advice.



For example, AI-powered chatbots and virtual helpers help with customer service around the clock, simplifying user interfaces and making it easier to answer questions quickly.



Consequently, they enhance consumer experience and reduce expenses. For instance, in risk management and credit scoring, AI algorithms can examine enormous amounts of data to identify patterns and assess risk levels. This makes financial services available to a larger population.



In the investment world, robo-advisors have become popular. They use AI’s analytical capabilities to offer cheap, personalized financial advice. Through these changes, AI is making it easier for more people to use financial services and driving the global financial system to be more open to more people.



AI is also changing the way financial markets work. For example, AI has changed how stocks are bought and sold with high-frequency algorithmic trading. AI can analyze vast financial data in milliseconds to identify trends and make trades. This is a substantial improvement over traditional methods making markets move faster, more open and work better. However, increased market speed ushers market stability and systemic risks, requiring protection and strong oversight to avoid these problems.



Regulators worldwide seek to deal with AI’s problems, such as data protection and algorithmic transparency. Accordingly, there should be a balance between encouraging innovation and protecting the financial security and consumer interests in regulations. AI can simplify compliance procedures, monitor



financial transactions in real-time for illicit activities, and predict market glitches, making regulators more proactive.



In the African market, the African Continental Free Trade Area (AfCFTA), a trade deal that aims to increase trade significantly within Africa, offers unique opportunities for AI.



The agreement covers a broad range of aspects of Africa’s economy, such as digital trade and the protection of investments. Moreover, the number of countries in the AfCFTA will make it the largest free trade area globally, linking 1.3 billion people in 54 countries with a combined GDP of $3.4 trillion. AI can make the AfCFTA work better and reach its goals.



For example, AI can help improve trade logistics by making delivery systems, customs processes, and tracking and tracing more efficient. It can find the best ways to move goods, predict delays, and give traders real-time information. In addition, AI can analyze trade data to identify patterns, trends, and connections. This can help policymakers make better choices and predict and respond to future trends better.



AI-powered systems can make cross-border e-commerce more efficient, a sector expected to grow under the AfCFTA. AI can create personalized product recommendations and automate customer service. In education and training, AI can help people acquire the skills they need for an African economy that works better together.



However, for AI to achieve the goals of the AfCFTA, it is essential to have good AI governance and regulation. Furthermore, we need to invest in digital infrastructure and education.



In conclusion, AI is vital to changing how the world’s economic system works. It affects financial services, markets, and regulation. AI is ushering in a new age of innovation and efficiency.



However, as AI continues to change how the financial world works, a cautious and thorough approach is needed to make the most of its prospects and manage its risks well. There needs to be strong regulatory frameworks, investments in AI literacy and skills, and a commitment to ethical AI values. These objectives are essential if we want an AI-driven financial future that is both prosperous and sustainable in Africa.

Manager engineer control Innovation of robotics  automation robot ai Business data analytics process management

How Artificial Intelligence Affects The Financial Sector In Africa

Photo by: Kelechi Amadi-Obi (www.kelechiamadiobi.com)

The Money Men Of Nigeria’s Banking Industry

The year was 1994. South Africa’s political climate was changing; a new president promised democracy and opportunities for all. For Romeo Makhubela life was just beginning. After years of teaching, he decided to register at business school. He put down the chalk and left the classroom, and today he is the CEO of a 100 percent black-owned investment company, a world away from high school teaching.
This epiphany turned him into one of the country’s emerging financial services providers. The reason Makhubela was in the classroom in the first place was no surprise. For most black South Africans at the time, that was the highest you could reach. You could either be a policeman, nurse or teacher.
It wasn’t that he didn’t like teaching. He had studied for a Bachelor of Commerce degree and topped it with a teaching diploma, which led him to become a commerce teacher for final year students, in the North West province of South Africa.
“The most exciting part as a teacher, especially a high school teacher, is when the [matric] results come out, and you realize that the investment that you made [has paid off]. I remember one year ‘I’ had a lot of distinctions and for me that was so fulfilling because you could see people going to university, some are now working and you know that you were part of that product,” says Makhubela.
“I started teaching in 1990… Around 1992 or ’93 I started noticing that a change was coming in South Africa and clearly businesses would start transforming and there would be huge opportunities, especially for people who had a Bachelor of Commerce qualifications,” says Makhubela.
It was never easy, amid the political turmoil of his country. During his university studies, Makhubela was also politically active.
“I matriculated in 1983. Things were quite tough at that stage; I think the upheavals were starting… It was terrible in those days and I had [to take] a break in ’84, then in ’85 I started doing my Bachelor of Commerce degree ’till around ’88. There was one year where we didn’t write exams because of the [political] problems.”
“Politics then was something that you just couldn’t avoid because there were a lot of injustices in this country… Especially at [university] because you started seeing the world and seeing that certain things weren’t correct… The way some lecturers conducted themselves, I can tell you one example; [In our first year] the one [lecturer]… just came and said ‘Look this is such a big class, I’m not used to teaching [so many people] and I can assure you that in third year 80 to 90% [of you] will be gone’. And you sit down and say ‘How could you make such a statement?’.”
Today, he is no longer in politics; he sits at the head of Vunani Limited. The eight-year-old company was launched in 2004 following a management buyout from African Harvest. In 2007, the company listed on the JSE AltX Exchange raising R175 million ($21.4 million). They currently have offices in Johannesburg and Cape Town, in South Africa and Harare, Zimbabwe.
He worked his way to the top, starting out at an insurance company as a graduate trainee, then he became a financial analyst for an asset management company and after around six years in the asset management field, he was recruited as chief investment officer for a life insurance company. And now he is heading Vunani Limited, an emerging company that wants to leave its mark as South Africa’s leading black-owned financial services provider. Vunani Limited is listed on the JSEAltX; it is currently listed 19th in the financial services sector, with R204.5 million ($24.96 million) of market capitalization. The company has a diverse portfolio, which consists of Vunani Fund Managers; Vunani Capital; Vunani Technology Ventures; Vunani Securities; Vunani Capital Markets and Vunani Properties. Now it is going up against the best in the financial services industry and is forging its own way. One challenge they, like many other companies, are facing is growing the industry.
Makhubela’s focus now is on getting his countrymen to start putting away more for a rainy day.
“One of the biggest gripes about South Africa is that if you look at our saving ratio, it’s quite low and clearly that tells to the culture or the environment from which people [come from]. My sense is that, maybe in the white culture it’s much better because at least that kind of information was instilled but in the broader black community… the kind of savings that you generally see within [them] would be pension funds, which is forced, because when you work you get your pension fund automatically.”
Last year, South Africa’s minister of finance, Pravin Gordhan, said that South Africa’s savings rate was low and that it “needed to increase its saving rate if it were to become the ‘China of Africa’”.
Makhubela agrees.
“Savings are critical… look at the Chinese for example. The savings rate there is extremely high—but you could argue that it’s influenced by a number of facts because they don’t have a proper social system… But that helps because if you look at the global crisis we are experiencing now… the Chinese have played an important role in terms of lessening the impact of the global crisis because of their savings.”
According to The South African Savings Institute (SASI), South Africa is the lowest ranking member of BRICS when it comes to saving.
“The International Monetary Fund (IMF) statistics show that since 2001, compared with its BRICS counterparts, SA’s rate of national savings has remained flat… In China, gross savings are over 50% of GDP, in Russia 30% and Brazil over 18%. In South Africa that figure is about 16.5%… It’s 72nd in the world behind Algeria (3rd), Morocco (25th), Nigeria (27th), Zambia (32nd), Namibia (34th), Botswana (42nd) and Lesotho (62nd)”.
The poor argue that saving is the last thing on your mind when you are living from hand-to-mouth, while the middle class chooses to splash out, so where does that leave the future of the fund management industry?
Makhubela says that when the rate of unemployment decreases, and more people start earning and being forced to save, then the tide will change. But while there is no growth in savings right now, Makhubela and his team are looking beyond borders, with Zimbabwe under their belt, they are also currently setting up in Namibia.
From marking exam papers to signing off millions, Makhubela is trying to teach one of the greatest lessons in life—how to save even when it hurts.

Tag: Financial Sector

FORBES AFRICA SOCIAL MEDIA

How Artificial Intelligence Affects The Financial Sector In Africa

The Money Men Of Nigeria’s Banking Industry

Trading The Classroom For The Boardroom