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On Friday February 14th, Valentine’s Day, the MSc & MBA of INSEEC Paris decided to highlight the Forex businessin Africa during the first conference-debate of the year organized by Ellen Kountz, Director of the Finance Department. This trade name may, to the uninitiated, seem quite curious and opaque. However, if we have traveled abroad in the past, we have undoubtedly come across a forex trader, a professional currency trader. Back on this conference-debate which allowed our two speakers to enlighten the participants on the underbelly of currency exchange, a fascinating market that deals with nearly 5,000 billion dollars per day.
The conferences organized by Ellen Kountz are real calls to fight against the preconceived ideas on the subjects related to the world of finance for our students. These are opportunities for them to be open-minded and curious about areas that they would not initially think of in terms of the direction they wish to take in their professional careers. By introducing them to niche or little promoted professions, we give them great opportunities for reflection.
Forex jobs in Africa
For this new edition, the name of the conference calls out:” The future of the Forex business in Africa” . What is forex? Why say the Africans? This conference name, according to Ellen Kountz, is a way to ” to challenge the students, to plunge them from the start into an atmosphere of debate and to challenge them on their preconceived ideas about Africa . Giving a conference on the African continent is also a great opportunity to go beyond the European-centrism and to remind, especially for French students, that the world and history are not built only around Europe.
Indeed, Africa is often associated with Europe, especially in the era of colonial France. However, the African continent is not only composed of French-speaking countries. Many other countries are present (Sudan, South Africa, etc.) and have concerns that are quite different from those of the French-speaking African countries. This is why Ellen Kountz prefers to talk about Africans and not just Africa.
But what is the Forex business?
The Forex business (short for Foreign Exchange Dealer ) is simply the business of currency exchange. The forex trader is a professional operator specializing in foreign exchange transactions.
The two speakers of this conference-debate had the opportunity to come back on their favorite subjects:
- Ellen Kountz spoke about the profession of forex trader, the fixed parity of the CFA Franc (avoiding inflation) and challenged the students on the question of the future of new African currencies (especially virtual).
- Rany Patout, bilingual consultant in intercultural management, specialized in Asian markets, and professor at the Pôle Finance, was able to enlighten our students on the presence of the Chinese currency (the yuan) in Africa through the companies that are established there.
Currency exchange, a more complex ecosystem than it seems
197 countries in the world are officially recognized by the UN. However, there are 167 official currencies according to the site of
Travelex
. With so many currencies, foreign exchange is an ever-changing market. Between tourism, business travel and international trade, especially commercial, currency exchange is the most liquid financial market in the world with more than 5,000 billion dollars exchanged per day!
Liquidity is the ability for any asset to be bought or sold quickly without this transaction having too much impact on the prices in its market. This is particularly the case for currency exchange, which benefits from exceptional liquidity in the current economic climate. The simultaneous purchase of many currencies from around the world on a daily basis does not move the exchange rates that much.
Currency exchange is not limited to the exchange offices in the cities. There is a whole ecosystem and businesses that rely on currency exchange strategies. Any company with an import/export component is affected by the need to have a Cash Management Desk that must monitor exchange rates which can have a very significant impact on the cost of raw materials.
Our two speakers addressed the topics of decimalization of prices (the need to increase granularity when the foreign exchange market is very liquid, or to put it simply: this refers to the many digits representing pennies in euros, when in practice there should not be more than two) and thepegging (when fixed exchange rates cannot benefit from an economy-friendly deflation).
What about Africa and the Chinese currency in this ecosystem?
The U.S. dollar accounts for 87% of the world’s daily currency exchanges, the Chinese yuan for 2.5%. However, there is no African currency in the top 10 currencies traded in the world. This is a curious phenomenon at first glance, as Africa is welcoming more and more American and Chinese companies to its continent. Rany Patout informed the students that there are about 30 bilateral trade agreements between China and Africa, which compete with France’s leading position on the African continent.
There is a real question about the future of African currencies within its own continent in the face of the internationalization of financial markets and the success of mobile. Virtual currencies in Africa, such as bitcoin, are abundant because they do not infringe on existing currencies. This has an impact on the currency exchange market, which is why African currencies are not represented in the top 10 most traded currencies in the world.
Indeed, historically, as Ellen Kountz explained during the conference-debate, Africa has evolved very rapidly. Where France still has a landline culture in the corporate world for example, smartphones are the norm on the continent. There are very few landline phones, as they have not had the opportunity to take root and establish themselves on the continent, as the smartphone was marketed there before. The development of cell phones has been very rapid and is one of the major assets of Africa today. This development has enabled the development of electronic banking and mobile payment. And quite naturally, the continent has been bringing its first virtual currency, AFRO, onto the market for the past two years, slowly but surely. Perhaps one of bitcoin’s future serious competitors…
The future of conference-debates: towards more specific but fundamentally transversal themes
We are very pleased to be able to offer our students in the Finance Pole of the INSEEC Paris MSc & MBA programs such ambitious conferences on very specific, little-known, yet fascinating topics. The INSEEC Mindset conference series, which involves all of our students in our 8 areas of expertise, also follows the same dynamic, but with the objective of proposing more cross-disciplinary themes at the heart of public debates.
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