Key takeaways
- Motus Holdings Limited (Motus), despite using a domestic treasury management company (DTMC), faced working capital inefficiencies, time zone discrepancies and the need to maintain a domestic South African rand (ZAR) account.
- J.P. Morgan Payments introduced a groundbreaking notional pooling structure based in London, which uniquely incorporated the South African DTMC funding account.
- This multi-entity, multicurrency model enabled immediate fund availability, reduced borrowings and centralized visibility for treasury operations.
About
Motus is a powerhouse in the automotive industry, with a presence not only in South Africa but also on the international stage, including the UK and Australia. With a workforce of more than 17,250 employees worldwide, Motus is the largest diversified non-manufacturing automotive group in sub-Saharan Africa. Its unwavering commitment to innovation and growth has driven its need for a dynamic account structure.
The challenge
Motus faced working capital inefficiencies and time zone issues with the company’s main funding account held in South Africa.
- Exchange control regulations: Like many jurisdictions, South African entities have unique regulations that they need to comply with. This led to working capital inefficiencies due to time zone differences, fund-clearing constraints and the need for pre-funding obligations.
- Inefficient use of cash: Motus had global entities with excess cash that couldn't be aligned with group requirements, resulting in inefficient cash and facility utilization.
- Lack of notional pooling: South African corporations have unique operational structures that provided a hurtle for Motus.
"There’s no doubt that unleashing funds has increased our ability as a group. It was critical for us to work with a credible partner. We needed J.P. Morgan to really ensure that the global knowledge and expertise within each country was available to us."
Kobus Volschenk
Group Treasurer at Motus Holdings Limited
The solution
J.P. Morgan Payments proposed a multicurrency, multi-entity notional pooling structure with London as the central location, which allowed Motus to concentrate available liquidity, provide funding access to the Motus group’s international entities and integrate a South African DTMC into the pooling structure. The DTMC's classification as a nonresident entity was crucial in achieving this.
With this solution, Motus entities could participate in a pool, draw funds in their required functional currency, eliminate the need for additional borrowings, and link domestic and international operations to a single location.
- Strategized sustainability: Integrating environmental, social and governance (ESG) principles was top-of-mind. By performing a full-scale refinance of its South African debt in 2022, Motus closed the first ZAR-based, sustainability-linked funding in the South African automotive sector.
- Paving the way: While notional pooling structures are not groundbreaking globally, they represent a significant innovation for the sub-Saharan region. Motus Group Treasurer Kobus Volschenk elaborated, "It's well recognized throughout the world, but it was great to be able to say, well, this award is the crescendo of the efforts of putting such a multicurrency notional pool, a first for South Africa, in place."
- Enhanced cash control: By leveraging the cross-currency expertise of J.P. Morgan Payments, Motus deployed a structure to manage foreign and domestic currency in one place in real-time—offering complete control over liquidity through a single setup.
- Regulatory adaptability: Motus and J.P. Morgan Payments attorneys navigated international legal parameters with a positive outcome.
The results
- Cost savings: The J.P. Morgan Payments cross-currency solution improved visibility and helped Motus avoid high interest rates, optimize cash flow and create better-informed strategies based on daily funding needs. This meant less borrowing and reduced costs—something all shareholders love.
- Sustainability success: In 2022, Motus collaborated with Standard Bank to close the first ZAR-based, sustainability-forward funding in the South African automotive sector. "We are determined to keep breaking new ground, getting better results from both a financial and ESG perspective, and asking questions about the future," Volschenk shared.
- Industry advancements: The combined industrial, financial and legal expertise of Motus and J.P. Morgan Payments helped develop a solution that shows how the industry engages with the SARB, opening cash flows that were previously inaccessible.
- Setting the pace: The SARB-approved inclusion of ZAR accounts into a global notional pool when using a DTMC-facilitated offshore investment for a South African-based domiciled entity for the first time. "This was a legal first in South Africa, setting a precedent for other South African treasuries to follow," shared Volschenk.
To learn more about cross currency solutions from J.P. Morgan Payments, click here.
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