201508 tar finance

AFRICAN TOP 200 BANKS EXCLUSIVE RANKING

JOBS, JOBS, JOBS Fix unemployment or face the consequences

NIGERIA Next generation banking: more women, more tech

SPECIAL EDITION • O C T O B E R - D E C E M B E R 2 015

w w w.t hea f r ic a r ep or t .c om

STOCK EXCHANGES • REGiONAl ANAlySiS • KEy DE AlS • pRivATE EquiT y • STAR pERfORmERS • iNNOvATiON the africa report

Leslie Maasdorp (South Africa)

Chinelo Anohu-Amazu (Nigeria)

Wale Shonibare (Nigeria)

finance edition • october-december 2015

Faces Dealmakers and fortune builders of the new Africa

of finance GROUPE JEUNE AFRIQUE

INTERNATIONAL EDITION

Algeria 550 DA • Angola 600 Kwanza • Austria 4.90 € • Belgium 4.90 € • Canada 6.95 CAN$ • Denmark 60 DK • Ethiopia 75 Birr • France 4.90 € Germany 4.90 € • Ghana 7 GH¢ • Italy 4.90 € • Kenya 410 shillings • Liberia $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

AFRICAN TOP 200 BANKS EXCLUSIVE RANKING

JOBS, JOBS, JOBS

NIGERIA

Fix unemployment or face the consequences

Next generation banking: more women, more tech

CONTENTS

SPECIAL EDITION • O C T O B E R - D E C E M B E R 2 0 15

w w w.t heafr icar epor t .com

STOCK EXCHANGES • REGiONAl ANAlySiS • KE y DE Al S • pRi vATE Equi T y • STAR pER fORmERS • iNNOvATiON Leslie Maasdorp (South Africa)

Chinelo Anohu-Amazu (Nigeria)

Wale Shonibare (Nigeria)

THE AFRICA REPORT | FINANCE SPECIAL OCTOBER-DECEMBER 2015

Faces Dealmakers and fortune builders of the new Africa

of finance GROUPE JEUNE AFRIQUE

INTERNATIONAL EDITION

Algeria 550 DA • Angola 600 Kwanza • Austria 4.90 € • Belgium 4.90 € • Canada 6.95 CAN$ • Denmark 60 DK • Ethiopia 75 Birr • France 4.90 € Germany 4.90 € • Ghana 7 GH¢ • Italy 4.90 € • Kenya 410 shillings • Liberia $LD 300 • Morocco 50 DH • Netherlands 4.90 € • Nigeria 600 naira Norway 60 NK • Portugal 4.90 € • Sierra Leone LE 12,000 • South Africa 35 rand (tax incl.) • Spain 4.90 € • Switzerland 9.90 FS • Tanzania 9,000 shillings Tunisia 8 DT • Uganda 9,000 shillings • UK £ 4.50 • United States US$ 6.95 • Zambia 30 ZMW • Zimbabwe US$ 4 • CFA Countries 3,500 FCFA

STEP UP, NEW GUYS

JOBS, JOBS AND MORE JOBS

53

The new generation of bankers in Nigeria are a more eclectic and broader bunch – preaching good governance and new technology. Now, they are leading the charge to draw the unbanked into the financial mainstream and harness the power of their deposits

As the largest cohort of youth in history head towards the job market, African governments are waking up to the challenge ahead

16

FINANCE SPECIAL EDITION

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FACES OF FINANCE The African alumni of international banks begin to take up high-ranking positions in Africa’s top financial organisations, as a fresh infusion of local talent links global markets to African opportunities.

These are some of the figures shaping a new future for African finance

25

04 EDITORIAL Models and mysteries

Africa’s banks have reported a collective asset base of more than $1.5trn for the first time, but headwinds are fast approaching

28 NIGERIA’S Chinelo Anohu-Amazu The quiet revolutionary putting the nation’s pension funds to work 30 BENIN’S Reckya Madougou Human-focused Finance

TRENDING

COVER CREDITS: MARC SHOUL FOR TAR; GBEMIGA OLAMIKAN FOR TAR; ANDREW ESIEBO FOR TAR

TOP 200 BANKS

06 Briefing 10 Dealbook 12 Opinion Nkosana Moyo, executive chair, Mandela Institute for Development Studies

MARKETS & MONEY

FRONTLINE 16 Jobs, jobs and more jobs 22 Interview Makhtar Diop, vice-president for Africa, World Bank PEOPLE 26 SOUTH AFRICA’S Leslie Maasdorp A new bank for a new era

32 Austerity Keeping growth on track 36 Opinion Jude Fejokwu, CEO Thaddeus Investment 38 Private equity Let’s sleep on it 42 Islamic Finance Sukuk for Senegal COUNTRY FOCUS - NIGERIA 53 Overview Step up, new guys 58 Banks Oil clouds the waters 62 Interview Wale Shonibare, Managing Director, United Capital

66 Opinion Morten Jerven, associate professor, Simon Fraser University BANKING 70 Morocco A battle royale 74 Ethiopia Splendid isolation 78 SMEs Small struggles, big rewards TOP 200 BANKS 82 87 94 96 100 102 104 106

Overview A record year Rankings Top 200 Banks Ghana Waiting for skies to clear Cameroon Uneven development Kenya Bankers without borders Egypt Challenge of the unbanked South Africa Small appetites Last Word Bailout and begging in Harare and Athens

ADVERTISERS’ INDEX CRATOS GROUP p 2; STANDARD BANK p 5; ACCOR p 9; RDB p 11; BEAC p 14-15; MCB GROUP p 21; SAHAM FINANCE p 24; DANGOTE GROUP p 29; LIQUID TELECOM p 31; COMMERZBANK p 35; ACF 2016 p 39; RAWBANK p 41; AFRASIA p 43; GENERAL ELECTRIC p 45-52; ECOBANK NIGERIA p 56-57; KAPPAFRIK p 59; MIX TELEMATICS INT. p 61; ADEXEN p 61; BUKHAM GROUP p 65; REP. OF COTE D’IVOIRE p 68-69; FITCH RATING p 73; ICB 2015 p 75; EKO HOTELS p 77; AFRICA INV. FORUM p 80; ECONOMIST - ETHIOPIA SUMMIT p 81; AHIF p 81; STANDARD BANK RDC p 85; ASCOMA CÔTE D’IVOIRE p 89; PROCREDIT BANK CONGO p 91; CALDAS p 91; TOTAL p 97; TAR SUBSCRIPTION p 99; DSTV MEDIA SALES p 107; ALLIANZ GLOBAL p 108

To order more copies of TAR Finance Special Edition: sales@theafricareport.com THE AFRIC A REPORT

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EDITORIAL

THE AFRICA REPORT A Groupe Jeune Afrique publication

BY NICHOLAS NORBROOK

57-BIS, RUE D’AUTEUIL – 75016 PARIS – FRANCE TEL: (33) 1 44 30 19 60 – FAX: (33) 1 44 30 19 30 www.theafricareport.com

Models and mysteries

A

CH AIR M AN AN D FOU N D E R BÉCHIR BEN YAHMED P U BL IS H E R DANIELLE BEN YAHMED publisher@theafricareport.com E XE CU T IVE P U BL IS H E R JÉRÔME MILLAN

Beijing-based finance analyst, appraising the recent Chinese stock market meltdown, told his audience about a guitar-playing friend. During a gig late last year, the young man discussed how much he had borrowed to buy shares in an electronics company. “When musicians are buying paper,” he groused, “then perhaps you have a problem.”

China’s economic downturn is Africa’s problem too. After a decade and a half where China’s trade with Africa rose twentyfold to hit more than $200bn, economic woes in Asia have a very real impact on the continent. The International Monetary Fund warns that for every dollar decline in Chinese domestic investment, sub-Saharan African countries lose $0.6 in export revenue.

And the effect is even more pronounced for oil exporters – the China crash has hit commodities, and resource-backed currencies. Oil will remain depressed as Iran enters the market. Goldman Sachs is slashing its copper outlook through 2018 by 44%.

Beijing’s ‘correction’ will have other impacts too. It may allow space for much-needed diversification away from commodities, a near-impossible task when prices for raw materials are high. With 350 million young Africans set to enter the job market over the next three decades, Africa is on the precipice of its own demographic dividend. Diversification is required because oil rigs are not big employers. African countries now need to ramp up labour-intensive sectors (see page 16).

China’s travails will also have an impact on the debate about how to boost job-creating industries, for example on how active or absent the state should be. In Addis Ababa, a city fast-resembling a Chinese metropolis,

there is no debate: creating jobs requires the state to play an active role.

The keenest students of China’s economic model are tracking what Beijing does closely. Undoubtedly, Ethiopia’s capable ambassador in Beijing, Seyoum Mesfin, is sending back dispatches about the consequences of an early-stage opening up of capital markets after several decades of tight state control.

Those watching Beijing could also look further across the East China Sea for more bad ideas. In the 1990s, Japan was seized by the epic collapse of an asset bubble. A culture of crony capitalism between banks and companies had replaced the discipline of previous decades as policy-makers let go of the reins. The flood of liquidity into stock markets ended up with some very bad bets.

And when the bubble was pricked, Japan’s lost decades began.

Today, state-run Ethiopian Airlines makes $175m net profit, while most other African airlines book hundreds of millions in losses. Tomorrow, will these companies be the ball-andchain on their national treasuries, the new ‘zombie’ companies permanently requiring bail-out? If African countries are going to start down the road of state-backed capitalism – and some have taken great strides – they must study how Asian countries are coping with the bend in the river towards more open and dynamic economies.

How to navigate these rapids is still shrouded in mystery. ●

State-run Ethiopian Airlines makes $175m net profit.

Most African airlines book hundreds of millions in losses

editorial@theafricareport.com

THE AFRIC A REPORT

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M AR KE T IN G & D E VE LO P M E NT ALISON KINGSLEY-HALL E D ITO R IN CH IE F PATRICK SMITH M AN AG IN G E D ITO R NICHOLAS NORBROOK editorial@theafricareport.com AS S IS TANT E D ITO R CHARLIE HAMILTON AS S O CIATE E D ITO R MARSHALL VAN VALEN E D ITO R IAL AS S IS TANT OHENEBA AMA NTI OSEI RE G IO N AL E D ITO RS PARSELELO KANTAI (EAST AFRICA) CRYSTAL ORDERSON (SOUTHERN AFRICA) TOLU OGUNLESI (NIGERIA) BILLIE ADWOA MCTERNAN (GHANA) S U B- E D ITO RS ALISON CULLIFORD ERIN CONROY P RO O F RE AD IN G KATHLEEN GRAY ART D IRE CTO R MARC TRENSON D E S IG N VALÉRIE OLIVIER (LEAD DESIGNER) SAMA DANAN SYDONIE GHAYEB CAMILLE CHAUVIN (INFOGRAPHICS) P RO D U CT IO N PHILIPPE MARTIN CHRISTIAN KASONGO RES E ARCH SYLVIE FOURNIER P H OTO G R AP H Y CLAIRE VATTEBLED PIERANGÉLIQUE SCHOULER LORENA MARTINI O N L IN E PRINCE OFORI-ATTA SALES SANDRA DROUET Tel: (33) 1 44 30 18 07 – Fax: (33) 1 45 20 09 67 sales@theafricareport.com CONTACT FOR SUBSCRIPTION: Webscribe Ltd Unit 8 The Old Silk Mill Brook Street, Tring Hertfordshire HP23 5EF United Kingdom Tel: + 44 (0) 1442 820580 Fax: + 44 (0) 1442 827912 Email: subs@webscribe.co.uk 1 year subscription (10 issues): All destinations: €39 - $60 - £35 TO ORDER ONLINE: www.theafricareportstore.com D IF CO M INTERNATIONAL ADVERTISING AND COMMUNICATION AGENCY 57-BIS, RUE D’AUTEUIL 75016 PARIS - FRANCE Tel: (33) 1 44 30 19-60 – Fax: (33) 1 44 30 18 34 advertising@theafricareport.com ADVERT IS IN G D IRE CTO R NATHALIE GUILLERY WITH JEANNY CHABON RE G IO N AL M AN AG E RS ÉLODIE BOUSSONNIERE IBIJOKE FABORODE PASCALE LALLEMAND PRINTER: SIEP 77 - FRANCE N° DE COMMISSION PARITAIRE : 0715 I 86885 Dépôt légal à parution / ISSN 1950-4810 THE AFRICA REPORT is published by GROUPE JEUNE AFRIQUE

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5

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TRENDING

DEVELOPMENT TALKS Global leaders met in Addis Ababa on 27 July to hammer out a framework for financing the sustainable development goals

defied sceptics who saw the presidency rotating back to a francophone country

MINERS STRIKE Platinum miners forced a pay rise out of owners in June, in the first significant victory for non-ANC forces, a harbinger of significant change

OPPORTUNITY BLOOMS

Breakdown of Foreign Currency International Credit Ratings (FCICR) of Africa’s financial institutions 11/08/15

1

W

2

7 4 2 2

FCICR assess the capacity to meet foreign currency commitments with a globally applicable scale from AAA to D

SOUTH AFRICA LOAN SHARKS HAMSTRUNG In late June, South Africa’s Department of Trade and Industry published a new set of proposals to combat loan sharks by limiting fees and interest rates on short-term and unsecured loans in addition to credit cards.

Credit firms complained the plans would limit access to finance, but many commentators praised the ideas as a way of combating high levels of debt among South Africans.

estern investors with an eye to Africa would be wise to take heed of a Chinese proverb – “Pluck flowers as they bloom.

Wait, and you will have only twigs” – as Beijing battles to keep its economy on track. China enjoys its role as Africa’s primary trading partner, with exchanges between the two having reached more than $200bn in 2013, twice the level of Africa’s trade with the United States (US) and around two thirds of the value of trade with Europe.

But China’s July stock market crash and sudden dramatic devaluation of its currency in August sparked fears that its woes could spill over into its

investment and trade with Africa, leading some to speculate that this is the moment for the West to live up to its repeated pledges to boost its economic engagement.

Certainly, news in July that the European Union joined the US-backed Power Africa initiative to boost electricity provision came as a positive sign, as did the announcement in May that the New York State Common Retirement Fund, one of the largest in the US, plans to invest up to 5% of its $180bn in funds in Africa. Talk, however, is cheap, and it is still not clear whether the West intends to match its rhetoric with action. ●

HU QINGMING/IMAGINECHINA/AFP

AAA 1 ABBB BBB1O BB+ BB BB5 B+ B B- 2

AFDB Nigeria’s Akinwumi Adesina

INVESTMENT

CREDIT RATINGS AFRICA’S BANKS

SOURCE: FITCH RATINGS

6

THE AFRIC A REPORT

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TRENDING

SUEZ CANAL The ambitions of the

Egyptian president El-Sisi have crystalised around a grandiose Suez Canal expansion

BRICS BANK Now known as the ‘New Development Bank’, the institution opened for business in Shanghai in July

OBAMA IMPACT Dubbed as the Obama-comes-home

tour, the visit of the US president quickly turned into the home-truths tour, with speeches castigating corruption

BENOIT DOPPAGNE/BELGA PHOTO/AFP; VINCENT FOURNIER FOR TAR; KEVIN SUTHERLAND/EPA/MAXPPP; AP/SIPA; CHINAFOTOPRESS/MAXPPP; EVAN VUCCI/AP/SIPA

MORTGAGES ON THE PROPERTY LADDER Mortgages as a % of GDP

?

In conjunction with Geopoll, The Africa Report asked 300 Ghanaians, Nigerians and South Africans the question:

Tunisia

Burkina Faso

0.29

9.25

Morocco

13.85

0.07

Algeria

Zero Uganda

1.15

$1 to $50 $51 to $100 More than $100

0.90

Senegal Nigeria

Kenya

0.58

3.46

0.34 Ghana

Togo

0.45

0.49

1.16

3.64 0.36 Tanzania Malawi

1.29 Botswana

18.21

Namibia

6.59

GeoPoll is the world’s largest mobile surveying platform and sample provider in emerging markets, enabling companies and organisations to gather quick, accurate and in-depth insights. To learn more or to sign up to receive surveys visit Research.GeoPoll.com

Seychelles

3.19

Zambia

Mozambique

Mauritius

0.50

12.99

0.14

PRIVATE EQUITY BOUNCES BACK

Zimbabwe

2.83

22.04

PE funds are piling back into Africa with finance hitting pre-credit crunch levels. The total value of PE transactions between 2007 and 2014 hit $34bn, according to the African Private Equity and Venture Capital association.

SOURCE: CENTRE FOR AFFORDABLE HOUSING FINANCE IN AFRICA

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$bn

7 5 ALL RIGHTS RESERVED

“Rich countries refused to give way on steps that would democratise the global governance of tax” Winnie Byanyima, executive director of Oxfam International, after the failure to upgrade a UN body to monitor tax cooperation

Nigeria South Africa

Burundi

Rwanda

Cameroon 0.50

Ghana

3 1 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14

SOURCE: THE AFRICAN PRIVATE EQUITY AND VENTURE CAPITAL ASSOCIATION

0.07 Liberia

South Africa

“How much money do you save each month ?”

Central African Republic

7

TRENDING

POLITICAL ECONOMY

MONEY, GREENS AND POLITICS GWENN DUBOURTHOUMIEU FOR TAR

O

COMMODITIES

THAT SINKING FEELING

Plunging commodity prices are piling pressure on many African governments that are now scrambling to adjust budgets and find new sources of revenue.

The economic slowdown in China, which uses around 40% of the world’s copper and 50% of its aluminium, forced down prices as demand dried up.

Africa’s principal oil producers have been badly hit as the Organisation of Petroleum Exporting Countries kept production high to defend its market share against the fledgling shale industry in the United States (US). Hopes of a price rebound were dealt a further blow in August when Iran, which has the world’s fourth-largest proven oil reserves, announced it planned to double its oil exports after signing a deal to lift international sanctions in exchange for Tehran curbing its nuclear research programme.

Gold prices tumbled to a five-year low in August on the back of the strong US dollar and the prospect of interest-rate hikes from the US Federal Reserve.

For South Africa, the world’s sixth-largest producer, the price drop pushes it ever closer to recession. Companies are cutting back on their investment budgets and South Africa’s AngloGold Ashanti announced in August that it will shift its strategy on projects in Mali if prices drop below $1,000 per ounce. ●

RCE: L

A VIE

€3,5 87

The level of average household debt in Morocco doubled during the past decade to 2014, according to a report produced by the country’s central bank, the Bank Al Maghrib, in July. Much of this was due to a surge in the uptake of housing loans, which totalled almost two-thirds of debt held by households.

ECO

DEBT HUNGER FOR HOME OWNERSHIP

SOU

ver the next three months, Africa’s economic battles – over currencies, commodities, debt and climate-change finance – will shake up politics. The first fight to concentrate politicians’ minds will be the looming currency wars. Speculators are touring the world’s markets and targeting the weakest currencies. Of all of Africa’s currencies at risk – including those of Angola, Egypt, Ghana, Kenya, South Africa and Uganda – Nigeria’s naira is coming under the most pressure.

Traders confidently predict that it will end this year down 10%. Next in line is Angola, where the kwanza lost almost 25% of its value during the past year.

Shoring up Africa’s currencies with diminishing foreign reserves is a political project. The old imperative of a strong national currency survives, despite Asia’s success with flexible exchange rates. For governments facing elections, devaluations are unpopular because they drive up prices, especially in import-dependent economies.

Similarly, the struggle to wring more revenue out of mineral exports amid falling commodity prices has turned into a political fight between governments and mining companies over jobs, taxes and royalties.

Even Africa’s enthusiastic spree of bond selling – floating some $40bn in international sovereign bonds over the past decade – is getting political.

Oppositionists accuse governments of racking up heavy debts while staving off tough spending cuts to help win elections.

And the final money-politics conundrum of the year is the most important: how much cash can Africa raise at the United Nations Climate Change Conference in Paris in December? Africa got just a fraction of the $100bn in adaptation funds agreed at the Copenhagen summit in 2010. This year, Africa’s negotiators want more access to climate change funding for the thousands of solar, wind and hydropower schemes being planned on the continent. ●

“We will not be guided by mindless austerity” ENVER ANWA ESSOP FOR TAR

8

SA trade minister Rob Davies, on the sidelines of the launch of the new BRICS development bank. He added that cutting spending is not the only way to deal with downturns.

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TRENDING

DEALBOOK BOND ISSUANCES TOP 10 AFRICAN BONDS H1 2015

SSA Inbound M&A $4bn Most targeted nations by value of activity 36%

NIGERIA

27%

SOUTH AFRICA

14%

BENIN

SSA Outbound M&A $3.3bn Most acquisitive nations by value of activity 65%

SOUTH AFRICA MAURITIUS NIGERIA

13% 11%

M&A deals with sub-Saharan African involvement saw a 12% increase in the first half of 2015 compared to the same period last year, according to Reuters. Brait Mauritius scooped the prize for largest single purchase, with its acquisition of a 90% stake in UK clothes retailer New Look for $1.2bn.

FUNDRAISING AFRICA GOES TO MARKET In July Nigerian oil producer Shoreline Energy announced plans to buy oil and gas projects in Africa funded by the sale of $2bn worth of bonds. Shoreline expects to sell its first tranche of bonds worth $500m before the end of the year.

The Africa50 project, an infrastructure development organisation linked to the African Development Bank, raised some $830m in its first closing in July, which will be used to fund construction of projects in 20 countries. A second closing, which will be open to investors outside Africa, will take place before the end of 2015.

AMOUNT (US$ M)

COUPON

MATURITY COUNTRY

S&P RATING

KENYA GOVERNMENT INTERNATIONAL BOND

24/6/14

2 000

6.875

24/6/24 Kenya

B+

EGYPT GOVERNMENT INTERNATIONAL BOND

11/6/15

1 500

5.875

11/6/25 Egypt

B-

ESKOM HOLDINGS SOC LTD

11/2/15

1 250

7.125

11/2/25

South Africa

BB+

3/3/15

1 000

6.375

3/3/28

Côte d’Ivoire

B

11/12/14

1 000

6.625 11/12/24 Ethiopia

B

REPUBLIC OF GHANA

18/9/14

1 000

8.125

B-

OCP SA

22/4/15

1 000

BANQUE CENTRALE DE TUNISIE SA

30/1/15

1 000

MTN MAURITIUS INVESTMENTS LTD

10/11/14

750

16/6/15

500

CÔTE D’IVOIRE GOVERNMENT INTERNATIONAL BOND FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

GABONESE REPUBLIC

18/1/26 Ghana

4.5 22/10/25 Morocco 5.75

30/1/25 Tunisia

4.755 11/11/24 Mauritius 6.95

16/6/25 Gabon

BBBBBBBB B+

LOANS TOP 10 AFRICAN LOANS H1 2015 COMPANY

DATE PRICED

SASOL LTD

22/12/14

EGYPT

Ghana’s Agricultural Development Bank (ADB) got the green light in August to launch the country’s largest initial public offering (IPO), seeking to raise around $100m through the sale of new securities and existing shares.

The IPO by the ADB, which is 52% owned by the state, was twice delayed by legal challenges by unions representing staff.

DATE PRICED

ISSUER

SOURCE: BLOOMBERG

MERGERS AND ACQUISITIONS

16/4/15

AMOUNT (US$M)

COUNTRY MATURITY OF RISK

4 040 22/12/21 2 261

South Africa

USE OF FUNDS

Project financing

N/A Egypt

ECA financing

SONANGOL FINANCE LTD

28/7/14

2 000

28/7/21 Angola

Capital expenditures; General corporate purposes

GHANA COCOA BOARD COCOBOD

11/9/14

1 700

11/8/15 Ghana

Structured commodity finance

SONANGOL FINANCE LTD SASOL LTD

27/10/14

Receivable backed financing; trade financing

1 500 27/10/21 Angola South Africa

Working capital; capital expenditures

5/1/15

1 500

ACWA POWER OUARZAZATE II

19/5/15

1 375

BRAIT MAURITIUS LTD

22/6/15

1 356

30/9/16 Mauritius

Working capital; investments

23/12/14

1 323

23/6/18 Egypt

General corporate purposes; trade financing

18/9/14

1 115

EGPC SAFI ENERGY

THE AFRIC A REPORT

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1/10/19

N/A Morocco

1/9/32 Morocco

FINANCE SPECIAL

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Project financing

Project and ECA financing

OC TOBER-DECEMBER 2015

SOURCE: DEBTWIRE

10

12

TRENDING

OPINION

Nkosana Moyo Founder and executive chair, Mandela Institute for Development Studies

AFRICA NEEDS ITS OWN VERSION OF THE AIRBUS PROJECT

I

n private equity, as is indeed true in virtually all other areas of human endeavour, if you want to optimise cooperation between individual entities you have to create a maximal alignment between the intended participants’ interests.

The contributions to the collective have to cater simultaneously to the individuals’ goals.

It is my belief that if African countries used this approach, as it was applied to the European Airbus project, African economic integration would get a substantial fillip. Airbus, a consortium of European aerospace companies that produces aeroplanes, was so cleverly engineered that it was easy for the politicians from all the participating countries to explain to their constituencies why they should be part of this manufacturing club. The benefits of job creation and contributions to gross domestic product are very easy to explain in this model.

The rationale for creating a virtuous circle through purchasing the finished product for a national carrier’s fleet is also very easy to see. This last part is what made it possible for Airbus to take on Boeing in a market that the latter had dominated for decades.

Economies of scale are another very compelling reason for African countries to realise that this is the only model that will save them as producers of anything beyond unprocessed commodities. Assuming quality and productivity issues are taken care of, the only way to reduce unit costs and hence become globally competitive is production in significant volumes.

Although not an absolute requirement, a significant home market is a very good stepping stone towards volume production and competitive unit costs for the global market. African national markets are way too small to provide an intermediate stage towards becoming global suppliers.

Given the closed and very fragmented nature of African markets, attracting the investment required to start on this journey is practically impossible.

A more unified African market on the other hand would, literally at the stroke of a pen, create the scale for which investment for significant production levels would become much easier to attract.

In the Southern African Development Community, there has been a lot of talk about industrialisation of late. This is not an unreasonable aspiration. If the approach, however, is that each country seeks to achieve the desired industrialisation on a selfsufficiency basis, then clearly this will remain nothing but a pipe dream. If countries in a sub-region, say platinum producers, take a joined-up approach to the building of a sub-regional value chain for platinum, I think this would be entirely feasible.

Zimbabwe and South Africa are both well-endowed with mineral wealth. The building of beneficiation or downstream industries deliberately structured to strengthen regional economic integration is not only feasible but actually the only sensible way forward. The construction of the Mozal aluminium smelter in Mozambique rather than at Saldanha Bay in South Africa is a very good example of this managed economic integration. In the late 1990s, South Africa facilitated the project to enable the necessary foreign direct investment flows for the financing of the smelter.

A more unified African market would make it easier to attract investment for production Just as in the case of the Airbus project, larger regional economies have to see the bigger picture rather than taking a narrow nationalistic perspective. Between them, just Germany, France and the United Kingdom could probably have done the Airbus project. This approach would, however, have failed to create the cohesion that led to an almost captive market for the Airbus. Each country that participates in the Airbus project in supplying components and sub-assemblies has a self-interest in purchasing the aircraft to keep the virtuous circle going.

African countries continue to discover natural resource deposits of global significance. Along the east coast of Africa, Mozambique, Tanzania, Kenya and Uganda all have significant hydrocarbon reserves.

The exploitation of these resources could benefit from a cooperative approach at a number of levels, THE AFRIC A REPORT

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including the setting up of centres of excellence for technical training and the constructing of refineries. It could be that these consultations are taking place and I am just not privy to them, but President Yoweri Museveni seems to want to build a refinery in Uganda on a stand-alone basis. I am sure I do not have to elaborate on what the likely reaction of the countries in Uganda’s neighbourhood will be.

The bottom line in the framework I am proposing is that African countries do a few things to support the development of intra-Africa trade. If neighbouring countries all have agriculture as a priority sector, then agricultural mechanisation and manufacture of pesticides and fertilisers should be opportunities they can explore together. They could, for instance, produce tractors using their combined market to attract the investment required. The options to explore would include the manufacture of different tractor sizes in different countries and the assembly of components in facilities that are deliberately distributed amongst the countries involved. This manufacturing architecture would create quantifiable benefits and at the same time deliver a more economic ‘domestic’ market.

A lot of products for the bottom-of-the-pyramid market also create an opportunity for newly industrialising countries to hone their skills for the more discerning and more demanding global markets.

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The creation of a truly African market requires the removal of nation-state-level hindrances to trade.

No matter how advanced an economy gets, citizens will demand and, more often than not, get protection against foreign competition. This is very clearly evidenced by the tensions on the intra-European Union (EU) movement of people.

A framework that can easily show and quantify the benefits that would accrue to governments contemplating opening up their markets to each other will be easier to implement than one that is simply based on economic theory. The majority of any country’s citizens do not hold economic degrees. I dare say, most politicians do not hold economic degrees either.

The size of virtually all African countries is sub-scale for purposes of large-scale production underpinned by a domestic market. Size is a contributory factor to the global competitiveness of the United States.

That is also why European politicians will leave no stone unturned to try and keep the EU bloc intact in the face of a lot of challenges. This is not to be confused with why the EU came into being in the first place. Where we are today, the EU has become an economic rather than a security necessity. Scale matters and scale underpinned by reciprocity is both politically defensible and easier to sustain. ●

Banque des États de l’Afrique Centrale

BEAC

Banque des États de l’Afrique Centrale

THE PILLAR OF MONETARY COOPERATION AND THE FOUNDATION OF ECONOMIC INTEGRATION IN CENTRAL AFRICA

T

he central bank of the six-nation Economic and Monetary Community of Central Africa, known by its French acronym,

CEMAC: Cameroon, the Central African Republic, Congo, Gabon, Equatorial Guinea and Chad.

The Bank of Central African States, known by its French acronym BEAC, is an international public institution set up within the framework of the monetary cooperation accords signed in Brazzaville, Congo, on 22 and 23 No-

● monitored payment and settlement

systems; ● fostered financial stability within the

Union.

vember 1972.

Since then, on behalf of the CEMAC countries the BEAC has:

The guarantor of monetary policy The BEAC issues the CFA franc (CFA is

● defined and implemented the monetary policy of the

the French acronym for Financial Coopera-

Monetary Union of Central Africa (UMAC or Union);

tion in Central Africa), which is legal tender

● issued the fiduciary currency; ● implemented the Union’s exchange policy; ● managed the Member States’ official exchange reserves;

ADVERTORIAL

in all six UMAC countries and ensures its stability.

Moreover, the BEAC defines and carries out

UMAC monetary policy, implements its ex-

tems and means of payment for greater

change policy, promotes financial stability,

financial inclusiveness;

holds and manages the Member States’ official exchange reserves and promotes and ensures the proper functioning of payment and settlement systems.

II- monitor the stability of the sub-region’s financial system; III- pursue the reform of its monetary policy to improve financial intermediation and deepen capital markets, which encourage investment financing.

After raising its stake in the BDEAC’s capital from 6% to 32%, in November

Lucas Abaga Nchama

The BEAC is a reliable, committed

2011 the BEAC launched the market of

partner at the service of the CEMAC’s

Governor of the BEAC

government securities issued by auction

Member States, economic players and

and in October 2012 had the UMAC Min-

peoples. It is committed to economic

isterial Committee adopt two CEMAC

development and integration in Cen-

regulations on the overall effective in-

tral Africa. Without prejudice to its goal

terest rate and usury. In March 2013,

down and prices for raw

of financial stability, the bank provides

it raised the BEAC’s overall regulatory

materials exported by the

support for the Member States’ general

debt ceiling for each of the CEMAC’s

economic policies. It also takes an ac-

countries in the Economic

Member States. In October 2013, it wid-

tive part in promoting and strengthening

ened the range of assets acceptable as

and Monetary Community

Central Africa’s capital markets to sup-

collateral in monetary policy operations.

port economic development and integration in the CEMAC better. To that end, it supervises and encourages the issue of government securities by the Member States and works towards building a sound, healthy banking system.

The BEAC maintains close bilateral ties with several of its African counterparts and actively participates in spreading the influence of the Association of African Central Banks (AACB), the 38th meeting of which it will host in August.

Based on the CEMAC Member States’

Lastly, in December 2014 the BEAC approved two CEMAC draft regulations

the trends in the CEMAC economies in 2014 (see the Governor’s message opposite), the BEAC will take the following measures this year in order to achieve three goals: I- continuously promote modern sys-

of Central Africa (CEMAC), especially oil, decreased.

Despite

those

trends,

a

public investment allowed

and the creation of a negotiable debt se-

the CEMAC’s economic ex-

curities market.

These measures aim to boost the common monetary policy’s effectiveness and, consequently, to ensure the

pansion to continue. Estimated real GDP in 2014 is put at 4.4% compared to

non-inflationary financing of the CEMAC

1.6% in 2013.

economies.

In this perspective, and

In 2015 they will be strengthened by:

financial database (BDEMF);

Within this framework, and in light of

slowed

through supervision of the repo market

BEAC is firmly committed to contribut-

The 2015 action plan

recovery

buoyant non-oil sector and

I- launching an economic, monetary and

benefit of their peoples.

nomic

to re-energise the inter-banking market

spirit of solidarity and discipline, the ing to their economic emergence for the

In 2014, the global eco-

II- creating a balance sheet centre in or-

without prejudice to its statutory missions, the BEAC will

continue

supporting

the growth of the CEMAC

der to improve information about com-

economies in general and

panies and, therefore, encourage their

the emergence policies un-

financing;

derway in the Community’s

III- implementing a modern bank liquid-

various States.

ity management methodology on the monetary market for optimal regulation of the central bank’s refinancing of the banking system as a means of ensuring a non-inflationary environment, which is indispensable for the CEMAC countries’ steady, sustainable growth.

Banque des États de l’Afrique Centrale BP 1917, Yaoundé, Cameroun Tel.: (+237) 222 23 40 30/222 23 40 60 Fax: (+237) 222 23 34 68

www.beac.int

Réalisation DIFCOM - Photos : D.R.

An economic development and integration player in Central Africa

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GWENN DUBOURTHOUMIEU FOR JA

FRONTLINE

AFRICA’S DECADE OF GROWTH FAILED TO CREATE ENOUGH JOBS AND END RELIANCE ON COMMODITY EXPORTS

GROWTH

JOBS, JOBS AND MORE JOBS Within 35 years Africa will have the world’s biggest workforce – finding jobs for them is the top priority for governments throughout the continent as economic conditions get tougher

By Nicholas Norbrook and Patrick Smith

W

hen the presidents of Ghana, South Africa and the United States (US) ring alarm bells on the pressing need for more jobs in Africa, it should be a jolt to the system. With more than 350 million young Africans due to join the labour market in the next three decades, almost everyone admits the urgency but there is a startling lack of consensus about what policies create jobs and how to finance them.

Although Africa has seen strong and sustained growth during the past decade, this has neither generated the required tens of millions of jobs nor changed the continent’s dependence on the production of primary commodities. As commodity prices sink due to oversupply and China’s slowdown, the big re-

source companies are cutting jobs and government revenue is falling, raising new questions about what policies can produce growth and jobs. And the importance of jobs in Africa goes beyond the continent’s borders.

A recent World Bank report on youth employment explains: “Africa’s rapidly growing population will constitute the world’s largest reservoir of working-age individuals for generations to come, and the majority of this population will be young.” As millions of Africans leave the countryside and head for cities, both output and employment are shifting from agriculture to services but with little growth in industry and manufacturing.

US President Barack Obama told a special session of the African Union on 27 July: “The most urgent task ● ● ●

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GROWTH: JOBS, JOBS AND MORE JOBS

facing Africa today and for decades ahead is to create opportunity for this next generation. And this will be an enormous undertaking. Africa will need to generate millions more jobs than it’s doing right now. And time is of the essence. The choices made today will shape the trajectory of Africa, and therefore, the world.”

And to spell out the stakes with Africa’s population due to rise to two billion by 2050, Obama added: “This could bring tremendous opportunities as these young Africans harness new technologies and ignite new growth and reforms […] It’s a demographic edge and advantage – but only if these young people are being trained. We need only to look to the Middle East and North Africa to see that large numbers of young people with no jobs and stifled voices can fuel instability and disorder.” ●●●

MINING STANDOFF As Obama was speaking, yet another job crisis was brewing in South Africa. With an officialunemploymentrate of25% and an unofficial rate almost double that, jobs have become the priority of priorities for the governing African National Congress (ANC) party. What started as a spat between mines minister Ngoako Ramatlhodi and London-listed miner Glencore, which wanted to cut 380 jobs in response to lower coal prices, quickly grew into a wider confrontation.Ramatlhodiordered Glencore to shut its coal mine because its cuts broke employment law before he reversed his decision in August.

Other companies such as Anglo American and Lonmin have made common cause with Glencore but trade unionists warn that there are plans to fire as many as 10,000 of the 440,000 workers in the mining industry. On 9 August, President

Jacob Zuma said that mining companies should avoid retrenching “at the first possible opportunity”. Before last year’s elections, Zuma had promised to create 6 million jobs in his second term.

Academics Alan Hirsch, Brian Levy and Ingrid Woolard recently compared South Africa’s performance to that of its emerging-market peers. They found that South Africa compared well in terms of most measures except for inequality.

Explaining their findings, Hirsch and Levy argued: “The sustainability of the democratic miracle of 1994 becomes worryingly uncertain if South Africa does not rectify this unbalanced combination of high earnings for highly skilled workers and owners of wealth, and high unemployment plus the very poor quality of jobs in the middle range of incomes.”

They say that the way to address that would be through a social compact to build a more inclusive economy, but they lament that the political will is lacking.

Ghana is also haunted by rising joblessness. In mid-August, President John Dramani Mahama told the local radio station Joy FM that the country has to double its economic growth rate: “We want to accelerate the economy so that more people can find jobs in the formal and informal sectors. The private sector has to begin to grow to be able to take up the extra jobs that are needed.”

With a nod to the country’s frustrated youth, Mahama said a mismatch between the skills that companies require and the qualifications of those emerging from the country’s schools has worsened unemployment trends.

The education ministry is still reeling from the findings of a survey by the Organisation of Economic Cooperation and Development that ranked Ghana’s schools at the bottom of a league ● ● ●

FARMING REMAINS A CRUCIAL BACKBONE OF THE ECONOMIES OF MANY AFRICAN COUNTRIES, PROVIDING UP TO 70% OF EMPLOYMENT IN SOME POOR NATIONS. AGRICULTURAL INDUSTRIALISATION PLUS MANUFACTURING MAY BE THE KEY TO THE CONTINENT’S FUTURE ECONOMIC DEVELOPMENT, BUT WILL THIS PROVIDE SUFFICIENT JOBS TO EMPLOY THE HUNDREDS OF MILLIONS OF YOUNG PEOPLE ENTERING THE LABOUR MARKET IN THE COMING DECADES?

WORK AND WAGES IN SOUTH AFRICA CONSTRUCTING JOB GROWTH IN ETHIOPIA

POLICY-MAKERS IN THE GOVERNING African National Congress see three core problems – unemployment (officially estimated at 25%), the working poor (about 20% of workers are unable to meet their basic needs) and gross wealth inequality – as interlinked. Government figures show that social grants to both the unemployed and the working poor cut poverty rates sharply up until 2006. Since then, their impact on fighting poverty has been weaker. Most recipients used social grants to start small businesses and create jobs. This year, the government is introducing a national minimum wage.

It faces the challenge of managing the consequences of this minimum wage so that it drives up living standards but does not push smaller businesses to lay off workers.

INFRASTRUCTURE IS THE BEDROCK of industrialisation, a first stage to creating manufacturing jobs. For the past decade, a vast construction programme has gripped the country.

Secondary roads – a boon to farmers – now snake across areas formerly abandoned by the government. In May, Dire Dawa, a dusty provincial capital, saw the laying of rail tracks connecting Djibouti to the capital Addis Ababa. In July, the Gibe III Dam started generating power, a 1,800MW precursor to the 6,000MW Grand Ethiopian Renaissance Dam being built in the Benishangul-Gumuz Region. Beyond these construction jobs, the government also favours small and labour-intensive companies in its social-housing construction contracts.

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A. BORGEAUD FOR JA; H. OUAZZANI FOR JA; V. FOUNIER/JA; OLIVIER FOR JA; G. DUBOURTHOUMIEU FOR JA; J. TORREGANO FOR JA

GROWTH: JOBS, JOBS AND MORE JOBS

NIGERIA WILL REAP WHAT IT SOWS “THE DEVIL MAKES WORK FOR IDLE HANDS,” former agriculture minister Akinwumi Adesina, now African Development Bank president, told The Africa Report. Perhaps it was a message to Nigeria’s political class and certainly an incentive for Boko Haram-afflicted northern Nigeria to roll out a fertiliser subsidy via a mobile-phone voucher system, bypassing the previous corrupt system. Success has been reported in rice production. An additional government initiative provides insurance for lenders to industrial agriculture to encourage food processing companies to set up shop in Nigeria. The country does not have the capacity to process all that it produces, and a basket of 1,000 tomatoes can fetch just N50 ($0.25) in the high season.

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MOROCCO’S MANUFACTURING HUBS GROW FRENCH AUTOMOBILE MANUFACTURER RENAULT opened a plant in Morocco in 2012, and Peugeot followed in June this year with the announcement of a planned €557m ($644m) investment. The tens of thousands of people employed are the reward for a patient strategy of building up an auto cluster to attract car makers. Since 2005, the government has tried to put the needs of the private sector first. It created a world-class port and logistics hub in Tangier, a $1bn auto skills institute designed by Renault, purpose-built industrial parks for secondary and tertiary part manufacturers – the source of the bulk of employment – and an agency that headhunts companies interested in setting up new operations.

FRONTLINE

GROWTH: JOBS, JOBS AND MORE JOBS

GWENN DUBOURTHOUMIEU FOR TAR

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PLUNGING COMMODITY PRICES HAVE PUT PRESSURE ON THE MINING SECTOR LEADING TO THREATS OF JOB CUTS

table – just behind South Africa and Morocco – of 76 countries.

For finance minister Seth Terkper, the main question is structural. “If you don’t add value, you don’t create jobs,” he told The Africa Report in London during a trip to raise funds for a $7bn gas production project that received a $700m guarantee from the World Bank in July.

Most of the gas, Terkper explains, will be used to generate power for processing and manufacturing operations: “There are petrochemical plants planned using by-products from the process and also fertiliser plants […] These will create jobs directly and [also] in the companies using their products.”

Beyond adopting new technologies, countries have to make strategic changes to tackle jobs, according to Makhtar Diop, vice-president for the Africa region at the World Bank. “There is kind of an aversion to investing in something that gives you a longer-term rate of return,” he says. But to raise the finance for long-term job-creating projects – such as agro-processing and light manufacturing – there has to be more effort to mitigate risk and guarantee investments, ●●●

says Diop. Uncertainty needs to be reduced in sectors that create jobs. In agriculture, this could mean promoting a move to irrigation away from a reliance on rainfall, through private-public partnerships where the state provides the land and the private sector provides the necessary investment (see interview).

agriculture minister in Nigeria and now president of the African Development Bank, explains: “We are moving agriculture from a development project to a profitable business.” Ethiopia has its new model army of farm extension workers, and Rwanda is increasing its agricultural budget by 10% each year.

Rwanda tripled its yields of maize, wheat and cassava between 2007 and 2011, according to professor Graham Harrison of the University of Sheffield.

Thelatestdata from the UnitedNations International Labour Organisation and the World Bank estimate that just 16%

FARMING FIRST Those sorts of partnerships, pioneered in Ethiopia and Nigeria, are commercialising farming across the board, not just for the production of export crops.

“The vegetable market in Lagos State alone is worth $20m a day,” adds Kayode Fayemi, head of Currently, the average share policy for Nigeria’s governing of manufacturing in Africa’s AllProgressivesCongressparty.

Farming will be the main economies is only 12% source of jobs in Africa for decof African workers are in wage labour. ades to come. Currently 70% of jobs in Their forecast is that the share of people the poorest African countries and just more than half in middle-income states in wage labour could increase to 25% are in farming. However, agricultural over the next 10 years but with a minority working for big companies. After years productivity is lower in Africa than in any other region of the world, according of chasing away street traders and hosto the World Bank. This translates into tility to most other informal businesses, high local food prices, which make cheap governments now see these sectors as a imports, such as rice from Thailand and source of tax revenue and employment. palm oil from Malaysia, attractive.

In some cases, the jobs crisis has Somecountriesaremaking substantial sparked an entrepreneurial response progress. Akinwumi Adesina, a former from local businesspeople. ● ● ● THE AFRIC A REPORT

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GROWTH: JOBS, JOBS AND MORE JOBS

In Nigeria, Odunayo Eweniyi co-founded PushCV to help young people find work. “Employers didn’t trust fresh graduates […] so we started our own thing where we helped youth build employability,” she says. Eweniyi specialises in building information technology skills: “Employers need students with at least intermediate professional skills. The educational system is not givingthemthat.We have adivide thatmany companies are trying to fix with little support, and unemployment is rising.” ●●●

MANUFACTURING MYTH Making those links between the skills that companies are demanding and schools are providing is also critical to the prospects for manufacturing jobs in Africa.

Currently, the average share of manufacturing in Africa’s economies, at around 12% according to the World Bank, is less than it was in 1980. Experts differ sharply on how quickly that could be changed.

Some development economists such as Dani Rodrik of Harvard University, an early advocate of African governments adopting industrial policies, are raising doubts about the ease with which African countries can move into light manufacturing as a first stage to industrialisation as wage costs rise in China and India.

Most of the new jobs will come from modernising the service sector, argues Rodrik, in one form or another. He warns that “premature de-industrialisation” is already happening in Latin America and parts of Asia as part of structural changes in the international division of labour.

Even hardened sceptics about Africa’s capacity to create big industries and the jobs to go with them concede that there is a blurring of the edges between manufacturing and services. More nationalistic proponents of African industries have a far more upbeat assessment of developments in the short term, citing a new generation of projects in at least a dozen countries to use the continent’s massive gas resources for electric power and other industries.

Those vast new power projects will shape the range and number of jobs in Africa, along with the massive investments that governments have to make in education and training programmes to capitalise on new economic opportunities. How far and fast these initiatives go will depend critically on the determination of African governments to meet the jobs challenge. They cannot say they have not been warned. ●

INTERVIEW

Makhtar Diop Vice-president for Africa, World Bank

LOW PRICES CAN BE AN OPPORTUNITY Falling commodity revenue is pushing governments to get more serious about job-creating investment in agriculture and light manufacturing, says the World Bank’s Africa chief

I

n the run-up to the UN summit on sustainable development goals on 25-27 September, the World Bank’s Makhtar Diop argued that tougher global economic conditions were fostering innovationasAfricangovernments soughttomaintainthemomentum of investment and growth. The international conference on development financing in Addis Ababa in mid-July was also an important preparationfortheUNsummitand a reflection of changing priorities and strategies, said Diop.

There would be no repeat of the grand promises made 10 years ago at the G7 meeting in Gleneagles, Scotland, for a massive boost to development aid. Most of those promises have not been kept. Instead, he says, there is a greater emphasis on generating revenue nationally: through more efficient tax collection and staunching illicit outflows due to trade mispricing and other forms of corruption.

Development institutions and governments are also looking more closely at how aid flows can work alongside private finance as a form of guarantee for projects, at least in middle-income countries. Those funds can also do more to mitigate unwarranted perceptions of political risk, says Diop. And there is still a key THE AFRIC A REPORT

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role for aid to shore up countries emerging from conflict or prolonged political instability.

TAR: As Western countries look inward and cut their budgets, are we seeing the end of development aid?

MAKHTARDIOP:Thingsarestarting to change in the way people want to leverage aid. The rates of return on investment in Africa are high. But if you look at the eurobonds issued to finance some African needs, you still have a pricing that is far too high for African countries. Why is it still that high when you look at the macroeconomic fundamentals in Africa? I think the role of aid is to help reduce uncertainty in investments.

How can African governments boost employment?

We really need to reduce uncertainty in sectors that are creating jobs – to move from rain-fed agriculture to irrigation, which gives much more predictability in your investment and return through the private-public-partnership type of schemewherethegovernmentcan give the land and where the private sector will invest. We need to deal with the adverse climatic conditions that are creating so much uncertainty [...]. The second sector

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FRONTLINE

NUMBER CRUNCHING ROUND THE WORLD June 1960 Born in Dakar, Senegal 1980s Economics degrees in the UK and France.

VINCENT FOURNIER/JA

1997-2000 Economist at the IMF.

is the light-manufacturing sector, which tries to get the benefits of delocalisation now that labour costs in Asia are higher.

instance. When he was heading Prudential in London, what he did that made him so successful before he moved to Credit Suisse was that he realised that the Asian market was growing and he shifted the strategy of Prudential to focus much more on it. Some of the people in that industry have begun wondering if Africa is the next direction.

How can a government’s monetary policies help create jobs and boost production?

I wouldn’t necessarily try to go the route of interest-rate control. If the government wants to help some segment of the market, you need to transfer resources to the people you want to target instead of having a blanket policy of interest-rate control or financial repression, which creates other types of distortion in your economy.

Can South Africa’s policy of conditional cash transfers work in other African countries?

Yes, it can definitely work elsewhere in Africa. Our senior economist David Evans was looking at all kinds of conditional cash transfer, not only in Africa but in different parts of the world. This study showed that the poor have been investing in assets, in small businesses and in education with conditional cash transfers.

How can funds held by insurance companiesbemobilisedforlongterm investment in Africa?

In my interaction with the companies, there is more and more interest. Take Tidjane Thiam for THE AFRICA REPORT

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2000-2001 Senegal’s finance minister under Abdoulaye Wade.

Oct 2001 Joined the World Bank as country director for Kenya, Eritrea and Somalia.

Jan 2009 World Bank country director for Brazil.

May 2012 World Bank vice-president for Africa.

Analystsareforecastingalengthy period of low prices for many commodityexports.Howwillthis affect growth prospects?

It can be a real opportunity.

Those commodity sectors are very capital intensive. The impact on employment was really a spillover of those activities. You have countries like the DRC or Angola that are facing a serious reduction in the revenue linked to commodities. It forces the system to be much more disciplined on the public investment programme.

Is the ‘Washington Consensus’ – on issues like deregulation and privatisation – still relevant?

We are moving from dogmatism and ideology to pragmatism.

The past decade has taught us two things. Those who didn’t like the Washington Consensus agreed that having good macroeconomic policy, not closing borders and bringing the private sector into your development are important.

On the other side, those who tell you that if you pronounce the word ‘state’ you are banned from the room are understanding that it is not as simple as that.

Does the economic power of Asia mean that the pendulum is swinging back to the developmental state model?

We’ve been in the development businessforalongtime,andIdon’t like the pendulums. People tell you Senegal will never be Singapore.

Singapore is a city-state with a history and a leader that have played a particular role in Singapore. Asia is Asia: you have a rate of savings that is unprecedented in the world, people are saving like crazy [...].

After you make your ‘salsa’ – using your culture and institutions, your history, your political leaders, your relations between unions and government, your social media, your non-governmental organisations – you mix all that and something will come out which is your very own development path. ● Interview by Nicholas Norbrook and Patrick Smith

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ILLUSTRATION BY JEAN-PHILIPPE GAUTHIER; MARC SHOUL FOR TAR; GBEMIGA OLAMIKAN FOR TAR; VINCENT FOURNIER/JA

PEOPLE

(L-R) LESLIE MAASDORP, CHINELO ANOHU-AMAZU AND RECKYA MADOUGOU, REWRITING AFRICA’S FINANCIAL FUTURE

FACES OF FINANCE As the African alumni of international banks begin to take up high-ranking positions in Africa’s top financial organisations – witness the arrival of Citibank’s Ade Ayeyemi to take up the reins at Togo’s pan-African lender Ecobank in early September – a fresh infusion of local talent is linking global markets with African opportunities. These are some of the figures who will shape a new future for African finance

By Crystal Orderson, Patrick Smith and Nadia Rabbaa

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Leslie Maasdorp A NEW BANK FOR A NEW ERA One of the New Development Bank’s vice-presidents talks to The Africa Report about the launch of the new institution that is all set to rival the World Bank

L

eslie Maasdrop, South Africa’s representativeattheNewDevelopment Bank (NDB), is at the forefront of economic change of global geopolitical importance. The launch of the NDB, along with the China-backed Asian Infrastructure Investment Bank, marks the biggest shift in development finance since the end of the Second World War when the World Bank and International Monetary Fund (IMF) were founded.

The NDB started operations in late July with $10bn from each of its members – Brazil, Russia, India, China and South Africa (BRICS) – and is seen as a developing-country rival to the World Bank.Againstthebackdropofcomplaints that the World Bank is too slow, ideological and lopsided in favour of developed countries, rich governments worry that new financial institutions such as the NDB signal a loss of their power. South Africa lobbied for the NDB to have its headquarters in Johannesburg but lost

out to Shanghai. The NDB is now setting up its African Regional Centre in South Africa’s economic capital.

Maasdorp,abankerandformerAfrican National Congress economic policy planner, is one of the NDB’s vice-presidents.

Just off the plane from Shanghai and keen to learn Mandarin, he tells The Africa Report that worries about the NDB seeking to replace the other international financial institutions are overblown because the NDB wants to cooperate with existing financiers: “We firstly want to learn from these institutions.”

The chance to work at the NDB is a new challenge for Maasdorp. “I will spend time between Mumbai, Moscow, São Paulo, Beijing and Johannesburg, so it will give me a scope and a breadth of work which I hadn’t necessarily had before. I’ve worked in banking before, but you work on transactions. Now, you engage these countries at the levels of their economic policy-makers in the ministries of finance, the central banks, the big state-owned enterprises.” He previously worked as president for Southern Africa for Bank of America Merrill Lynch and as an international advisor to United States-based investment bank Goldman Sachs. He was also a youth activist and union organiser, which he says will serve him well at the NDB: “Organisational skills are still very essential to the tool kit that you use now we’re establishing a bank from day one.”

While Maasdorp says that the NDB will learn from its peers and look for deals and

COUNTER HEGEMONIC FORCE However, other officials in South Africa see the new development financiers as an important political move. Eddy Maloka, a special advisor to South Africa’s international relations minister, says: “BRICS countries share a particular view of the world and want to create a counter hegemonic force.”

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PEOPLE

THE AFRIC A REPORT

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IAN KHAMA Botswana’s president became chairman of the Southern African Development Community in August before making headlines by castigating heads of state who refuse to give up power.

BASIL MRAMBA The former finance minister was jailed for three years in July after he was convicted of corruption linked to the awarding of gold-mining contracts.

Ex-energy minister Daniel Yona was also jailed for three years.

LAMIDO SANUSI The emir of Nigeria’s Kano State and a former central bank governor was appointed as chairman of the board of directors of private equity firm Blackstone’s Black Rhino division.

JOHN VITALO The chief executive of Atlas Mara announced a $300m deal with the United States development finance group, the Overseas Private Investment Corp, to boost lending in Africa.

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DUDU MYENI In July, the South African Airways chairperson was forced to deny claims of conflict of interest between running the airline and her role as head of the president’s charity, the Jacob Zuma Foundation.

ALL RIGHTS RESERVED; MOHAMED HAMMI/SIPA

NEW DICHOTOMY The NDB will focus on the five BRICS countries and plans to work on projects in other developing countries later on.

Maasdorp explains that the principle behind the bank is one of equality, as each country has one vote and has to put up an equal share of the planned $100bn capital base. He says that the bank founders are concerned about its relationshipwithborrowers.“Howcanwe take the needs and aspirations of borrowing countries more into the equation so it’s not kind of a lender versus borrower sort of dichotomy the way it was in the past?” he asks. One way that the NBD will change the relationship between lender and borrower is that it will not impose conditionalities, like policy reforms that countriesthataccessitsloansmustadopt, as the World Bank and IMF do.

The NDB is expected to issue its first loans by April 2016. “So the first aspect of our project pipeline will be looking at what is out there that needs that further impetus, that either needs further project expertise or that needs further funding […] Then I think we are going to prioritise what we believe are priority sectors [...] The emerging thinking is that energy – followed by transport – is probably ranked right at the top because of the massive energy deficits that a number of our countries are experiencing.”

Maasdorp and his fellow bankers are well aware of the challenges of making operational an organisation that will be almost half the size of the World Bank.

“We’re trying to set up a new institution with modern infrastructure, with ambitions to build a 21st-century sort of institution [...] We now have to capacitate the bank, bring in staff and build capability, build our information technology infrastructure, get a credit rating and define our procedures. There’s so much to be done.” ● Crystal Orderson

GOOD TIMES

YOSHIKAZU TSUNO/AP/SIPA; VINCENT FOURNIER FOR TAR; ALL RIGHTS RESERVED

areas where it can co-finance projects that are currently in the advance stages of planning, there is much that it will do differently. “We’re starting out with a perspective that we want to embrace new technology in a very aggressive way,” he says. “We’re going to be much more focussed on sustainability, on green finance, on green technologies, on renewable energy.” He says another thing that will set the NDB apart is: “We are going to try and simplify the procedures, get rid of bureaucracy, have much more flexibility in the way we do things.”

MOHAMED FRIKHA The politician and chief of Tunisia’s private airline Syphax confirmed the temporary suspension of all flights in July due to what the company’s lawyer termed “financial difficulties”.

BAD TIMES

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PEOPLE

Chinelo Anohu-Amazu THE QUIET REVOLUTIONARY The director general of Nigeria’s pension commission is working to build trust in the system and integrate workers from the informal sector the next four years. “The target is to hit 20 million contributors by 2019, but that’s actually a very conservative figure,” explains Anohu-Amazu. “If we get enough governmental support, we can exponentially increase that by targeting the informal sector, where we have the hairdressers, the maintenance workers, the plumbers. Those are workers. They’re earning, but they’re off the radar because they don’t have employers.”

When we suggested that some informal workers may be reluctant to join a contributory pension scheme because

it could make them liable for income tax, Anohu-Amazu was sceptical. “It’s not an issue of paying tax, it’s an issue of saving a portion of what they earn for their retirement benefits.”

Pension funds can play a key role in attractinginvestment,shesays.“Investors coming into the country will do well to partner where the local funds are going because of the long-term nature of pension funds [...] It’s a catalyst to come and co-invest because we are really very prudent.” Talks are underway to allow Nigerian pension funds to be invested more heavily in infrastructure and private-equity firms.

MEETING LIABILITIES The trickiest question in this pensionfuelled optimism is one of trust. “In the seven to eight years of operation, there has not been one single case of fraud in the new pension system […]

This is not because of how fabulous the people who are running it are […] It’s because the systems are entrenched to prevent fraud.” All pension contributors are registered biometrically and get quarterly reports on the management of their funds.

The pension commission, Anohu-Amazu explains, is solely the regulator. The funds are held by licensed custodians, owned mainly by Nigerian banks, which report daily to the commission to ensure they do not exceed limits on investment levels.

“We’re not venture capitalists.

We’re not private equity. We have liabilities that must be met. And you’re not going to tell a 65-yearold man who’s retiring […] we can’t pay you yet because we’re waiting for an upturn.” And that responsibility, written into its constitution, helps the commission to keep a perspective on what is set to be one of the continent’s biggest sources of investment financing in the coming years. ● Patrick Smith FOR TA R

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orsomeonewhooverseesbillionsof dollars in pension funds and pilots sweepingreforms in Africa’s biggest economy,ChineloAnohu-Amazudidnot shout her credentials from the rooftops when she visited The Africa Report’soffice in Paris. She spoke at a meeting at the Organisation for Economic Cooperation and Development a couple of kilometres away and has been urging African states to coordinate more effectively on pension reform and build up funds that can be used for cross-border development and investment.

Since being confirmed as director general of Nigeria’s National Pension CommissionlastOctober,Anohu-Amazu has been stepping up her diplomatic efforts in a bid to attract more investors into Africa’s markets. At the United Nations Conference on Financing for Development at Addis Ababa in July, Anohu-Amazu explained how well-managed pension funds offered an important source of finance for infrastructure and housing development. Speakers such as Thabo Mbeki, a former president of South Africa, called for more imagination in the investment of Africa’s pension funds at a time when government finances are getting tighter.

But such innovations would require full accountability and political commitment, says Anohu-Amazu: “Right now, the safest place for pensions to be[investedin]isfederalgovernment bonds […] but it’s not the most efficientbecausewewouldratherhave it in corporate bonds providing servicesforboththecontributors and the retirees alike.”

A OLA

MIKAN

NEW CONTRIBUTORS The sums at stake are substantial. Since Nigeria’s pension reforms started in 2004, some 6.5 million workers are now paying into the system.

Total pension funds in Nigeria are now worth more than N4.5trn ($22.3bn), and that figure could triple in

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PEOPLE

Reckya Madougou HUMAN-FOCUSED FINANCING

ALL RIGHTS RESERVED

Appointments

VINCENT FOURNIER/JA

Anoj Singh The chartered accountant began a six-month interim posting as chief financial officer at troubled South African electricity utility Eskom in July. Singh’s previous job was at Transnet, a parastatal performing better than Eskom.

Benin’s former microfinance minister set up International Key Consulting to lobby for inclusive development finance declared that they were gaining access to credit for the first time, 90% explained that it helped them provide three meals a day for their families and 87% got access to healthcare and education for their children,” she explains.

For Madougou, the poor are all potential growth creators if given the right skills and appropriate access to money.

“If we want Africa to find its autonomy, we need to diversify the financing tools offered to the population so that people can create their own companies and be growth producers instead of growth consumers,” she adds. “I have seen people creating an income-generating activity with 5,000 CFA francs [$8.3].”

As winner of the 2007 US Secretary of State’s International Women of Courage Award, Madougou is one to speak her mind. She could one day run for the presidency in her home country, but her current political battle is around the 2005 Paris Declaration on Aid Effectiveness, which calls for more action on debt relief and sustainability.

“Debt keeps tying our countries to debt holders. Aid cannot be our principal source of income,” Madougou insists.

She and her allies on the continent argue that effective African microfinancing mechanisms will empower women, reduce dependence on aid and build the industrial base from the ground up.●

ALL RIGHTS RESERVED

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eckya Madougou says that financiers must put their trust in the continent’s women. The former microfinance and justice minister who now lobbies for access to finance for all takes inspiration from Liberia’s President Ellen Johnson Sirleaf and France’s justice minister Christiane Taubira, and her campaigning goes beyond the borders of Benin.

“The battle for more inclusive finance is a fight for women, as they are the first to sufferfromeconomicexclusion.Themost common discrimination they face is limited access to credit even though they are the best payers. Women have a good risk profile,” MadougoutellsTheAfricaReport.

She advocates a more human-focused financingsysteminAfrica,onethatwould help the development of the continent by lifting up disadvantaged populations.

“The paradox of banking in Africa is that there is an excess of liquidity in the banks themselves, while companies lack suitable financing options,” says Madougou.

“I understand that banks have to absorb a lot of risk. But on a continent where 90% of the companies are small and medium-sized enterprises, what kind of development can we hope for from such a financial system?”

Madougou tries to share her lessons fromBeninwithotherWestAfricancountries. “Ninety-two per cent of the beneficiaries [of our programme in Benin]

Arunma Oteh In July, World Bank president Jim Yong Kim appointed Oteh, the former director of Nigeria’s Securities and Exchange Commission, as vice-president and treasurer of the international financial institution. She will take up the role from 28 September.

ALL RIGHTS RESERVED

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Patrick Njoroge With shrinking tourism revenues and a depreciating shilling, the former advisory to the International Monetary Fund’s deputy managing director was named as Kenya’s new central bank governor in June.

Nadia Rabbaa THE AFRIC A REPORT

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AUSTERITY

KEEPING GROWTH With Western governments wary of committing more money to aid, African states are left looking for other sources of finance for their development

By Benjamin Fox in Addis Ababa and Patrick Smith

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ore than 150 leaders are due to pack into the UN headquarters in New York on 25-27 September to sign up to the most ambitious set of development goals ever devised.

Leaders are to pledge their commitment to achieve 17 Sustainable Development Goals (SDGs) over the next 30 years such as to “end poverty in all its forms everywhere”, “end hunger and promote sustainable agriculture”, “promote peaceful and inclusive societies” and “reduce inequality within and among countries”.

The timing for such ambition is not propitious: millions of people in southern Europe complain about austerity while rich countries subsidise their farmers THE AFRIC A REPORT

and benefit from hundreds of billions of dollars of illicit flows from developing economies. And then there is sharply growing global inequality together with worsening violence and authoritarian rule in parts of Africa and the Middle East.

For Makhtar Diop, vice-president for Africa at the World Bank (see page 22), the key issue for governments is mobilising resources, which are likely to come from a combination of national revenue, private-sector loans and development aid. “Work has been undertaken on illicit flows, corruption and the informal sector in Africa [...]. Now there is agreement that something needs to be done more seriously about increasing domestic resource mobilisation,” he says. ●

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AFRICAN GOVERNMENTS MUST HEED THE SIGNAL AND MAKE THE SWITCH IF THEIR INFRASTRUCTURE NEEDS ARE TO BE MET

ON TRACK PAN SIWEI/XINHUA PRESS/CORBIS

More philosophically, debate rages about the value or even the meaning of global development goals like the SDGs. Many poor economies failed to achieve the Millennium Development Goals, set in2000,whichaimedtohalvethenumber of people in extreme poverty and radically boost literacy by 2015. Since then, the international mood has changed.

After the West’s financial crash in 2008, rich countries have been sharply cutting aid and getting still tougher on trade, tax and intellectual property rules. That was the backdrop for the Financing for Development conference held in Addis Ababa on 13-16 July.

Although the hope was that the Addis conference would agree ways to finance THE AFRIC A REPORT

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the achievement of the lofty, new SDGs, it soon became clear that another wave of aid was not on the horizon. Aid was stripped out of the text and negotiations in Addis, and the final communiqué included no financial commitments.

The European Union (EU), which accounted for €58.2bn ($63.4bn), or nearly half, of all development aid in 2014, was the only big delegation to set an aid commitment. It promised again to hit the target of 0.7% of gross domestic product (GDP) by 2030. But this is far away, and European governments from east to west have slashed aid budgets to an average of 0.4% of GDP. A proposal by Norway to set a goal to cut transfer pricing, trade scams and

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tax dodging was quickly stamped on by an alliance of embarrassed African and European officials. Yet, determined action on these issues is critical to raising development finance, according to Thabo Mbeki, chair of the UN/African Union High-Level Panel on Illicit Financial Flows. He told the Addis meeting: “The $50bn lost each year [from illicit flows] is more than official development assistance and foreign direct investment [...]. We want to have a mechanism to improve tracing and training for countries so that they can collect. Most of this is in the extractive industries.”

Recognising the reluctance of some governments to probe corrupt arrangements with foreign companies, Mbeki

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added: “Some of our countries will only act under pressure.”

Developing economies need to collect more tax, especially from those multinationalcompaniesoperatingsophisticated avoidance schemes. Joseph Stiglitz, a former chief economist of the World Bank, was coruscating on these issues: “If [rich Western countries] are not going to give money, let’s not undermine the ability of the developing and emerging markets to collect money that is rightly theirs.” Carlos Lopes, executive director of the UN’s Economic Commission for Africa, wants a practical fix: “This is an African problem with a global solution.

At the national level we can have much more efficient customs services, and we must start to prosecute illegal tax activity.”

Much time was spent on a battle by developing countries, led by India, to set up a UN agency to reform and monitor the international tax system. Rich countries, in the form of the Organisation of Economic Cooperation and Development (OECD), blocked the plan (see box).

Neither side has the monopoly of wisdom on the matter, according to Diop: “The hard thing is that whether it’s the OECD or the UN doesn’t make the fundamental difference – a significant part of our resources are escaping through illicit flows, the weakness of our tax administration and sometimes our governance.

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MULTINATIONALS IN THE EXTRACTIVE INDUSTRIES CONTINUE TO TURN BIG PROFITS AND PAY LOW TAXES

creditors this year compared with less than $150bn a decade ago.

Another way to bridge Africa’s financing gap, and one much favoured

by European governments, is to ‘blend’ aid with commercial credits, especially for big infrastructure projects. Such blending may combine aid grants or low-interest loans with credits from international development banks and commercial lenders. Africa remains a long way from raising the estimated $90bn a year it needs to invest in infrastructure, and such blending of aid and commercial finance remains more at the margins, to be used only in the minority of African economies classified as low-middle or middle income.

The EU issued blended finance of just €490m in 2012, representing 4% of its aid.

Others such as the European Network on Debt and Development non-governmental organisation lambast publicprivate partnerships for driving up costs: its researchers claim construction costs involving private finance are on average 24%moreexpensivethanpubliclyfunded infrastructure projects. Some European officials concede that there is more thinkingtobedoneonsettingupsuchalliances and ensuring accountability.

Fresh from the Addis conference, those arguments – over tax policy, growing indebtedness and the questionable virtues of public-private partnerships – are likely to break out again at the New York summit in September. The harsh reality is that neither proponents nor critics have yet got a roadmap to meet even a substantial part of Africa’s financing needs as demand for electricity, water, roads, education and healthcare rises exponentially. And without that map, the SDGs risk becoming yet more wishful thinking. ●

If you take the real-estate tax in capital cities in Africa, you have a lot of money that can be collected in that area.” But revised tax systems in Africa must be more than a “tropicalised version” of European systems, he adds.

Instead of agreeing new rules on tax, the Addis conference found some consensus on raising funds from banks and insurance companies. Other conference delegates sounded alarms about Africa’s growing indebtedness, which reached more than $400bn to local

HOW TO FIND THE FINANCE BOOSTING TAX REVENUE: Developing countries want tougher rules to block tax avoidance schemes and for the United Nations (UN) to police the system.

But rich countries insist tax standards should be drawn up by the Paris-based Organisation for Economic Cooperation and Development (OECD), in which few developing economies have a vote.

CRACKING DOWN ON ILLICIT OUTFLOWS: Governments should monitor trade terms assiduously and end the deliberate mispricing (under-invoicing of exports and over-invoicing of imports) and transfer-pricing mechanisms that cost Africa over $50bn a year, according to the High-Level Panel on Illicit Financial Flows.

COMMERICAL FINANCE: Floating bonds on the international markets can help pay for vital infrastructure and productive investments that can have a multiplier effect. Two health warnings: such loans are not sustainable when governments use them to finance recurrent spending or prop up currencies; and borrowing will get much costlier after the US interest rate rise expected in September.

NEGOTIATING AID: Global aid levels increased by 66% from 2000 to 2013, according to the OECD, and hit $131.3bn in 2014. That is still far less than developing countries lose from illicit outflows or attract from private investment. And as aid levels are falling again, it will be harder to come by for those countries not emerging from conflict or as a guarantee for counterpart private financing. ● P.S. THE AFRIC A REPORT

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OPINION

Jude Fejokwu Chief executive officer, Thaddeus Investment

STOCK EXCHANGES NEED INDEPENDENT MANAGERS

T

he system is more important than the individual. This is the lesson that successful societies around the world have learnt.

Judgesshouldbeimpartialandlawsshould not be written for the benefit of a single person. The idea is that when you get institutional integrity right, the rest will follow.

Stock exchanges are not exempt from this principle.

Across the world, exchanges have governing boards; these governing boards are headed by a chair who drives the strategic agenda and policy setting for the exchange. Take Hong Kong, Tokyo, Frankfurt, São Paulo: their chairmen do not own significant stakes in any listed companies. People who chair the governing councils of exchanges should not be too closely intertwined with the stock exchange through significant ownership or a personal connection with a company listed on the exchange.

Turn your attention to Africa and that is not the case. In Kenya, the chairman of the Nairobi Securities Exchange (NSE) is Edward Njoroge. He served as the managing director of the Kenya Electricity Generating Company (KenGen) from March 2003 to June 2013. He was at the NSE and KenGen at the same time for about five years. He just completed his seventh year on the board and successfully demutualised and listed the NSE in September 2014.

He was also responsible for the listing of KenGen on the NSE in May 2006.

became limited by shares and demutualised does not send the necessary message of a new beginning.

There are problems of board independence elsewhere. One of Njoroge’s first tasks after the demutualisation in September 2014 was the appointment of a new chief executive officer (CEO) to replace Peter Mwangi, whose tenure came to an end in November 2014. Njoroge and the other board members selected Geoffrey Odundo, a non-executive member of the board, to replace Mwangi. A non-executive director immediately switching to an executive role does not help board independence.

Chairs of governing boards across the world do not own significant stakes in listed companies The NSE has not strictly violated the principle that the chairman of the exchange should not be the owner of a company listed, but is the NSE board independent? Could Njoroge’s influence be considered overbearing? Shouldn’t he and the whole board have stepped down after demutualising the exchange and listing its shares? There is a risk that we see a case of old wine in new bottles. To be the chairmanof an exchange whenitwas owned by members and continue in that role when the company

Njoroge had the opportunity to go outside to hire a new chief executive but chose someone already on the board for more than three years. This put more control in his hands and made the boardroom atmosphere less conducive to freedom of thought and fresh ideas from the outside.

But if there are corporate governance concerns regarding the NSE, how much is it a problem for the Nigerian Stock Exchange (NGSE)? The president of the NGSE’s national council is Aigboje Aig-Imoukhuede, who owns a stake in listed company Access Bank (#25). While he was Access Bank CEO, he joined the exchange as vice-president and was officially elected in May 2013. He retired as the bank’s CEO on 31 December 2013.

Aig-Imoukhuede is not the only person who wears many hats. In 2014, the NGSE chairman – Aliko Dangote, who owns a majority stake in three listed companies and has a minority stake in a fourth – announced he was resigning from his NGSE position to devote his time fully to his vast business interests.

Aig-Imoukhuede took over the position of chairman from Dangote in July 2014. Dangote remains on the council in the capacity of an ex-officio member.

Here is where Aig-Imoukhuede’s personal ties to the bank proved problematic. Two months after he took over as NGSE chairman, the exchange’s management approved the technical suspension of Access Bank’s shares in preparation for the bank to raise fresh equity from existing shareholders. The NGSE management said it was in receipt of a letter from Access

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Bank requesting the freezing of its share price, which it granted swiftly. Access Bank’s board believed that the technical suspension was in the overall interest of the bank’s shareholders and would preserve their value. The technical suspension was intended to be lifted on 27 January 2015 and normal trading activities was to resume on 28 January.

Diamond Bank (#29) had just completed its rights issue in August 2014. But its share price was not placed on technical suspension and there is no public record of the bank even making a request to the NGSE management to do so. Why? The Securities and Exchange Commission (SEC) had years earlier announced that listed companies would no longer be able to freeze their share price while raising equity from new or existing shareholders. Companies had complied without incident and the NGSE had successfully enforced this until 15 September 2014 when Access Bank was given preferential treatment that it was, in my opinion, not entitled to. Rules are rules.

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The SEC, through the leadership of Arunma Oteh, swung into action to return order to the Nigerian market by immediately requesting that the technical suspension of Access Bank’s shares be lifted as there was no warranted basis for the action. She also wanted to find out who among the NGSE management approved the technical suspension, knowing that it was not the right thing to do under the circumstances.

Commendation is due to Oteh for rising up in a timely fashion and bringing sanity and decorum back to the governance of the NGSE. In my opinion, the management of the NGSE approving the technical suspension was due to the presence of the owner of Access Bank on the council and the influence that this gives. If the owner of Access Bank was not heading the NGSE’s council at the time, would the freezing of the stock price for eight working days have happened?

The previous president of the council owned shares in four listed companies while serving, and the current one owns share in one. It is time for change, and presidents should not own any listed companies.

The Nigerian people affected change at the helm of the country’s affairs on 28 March. The chief proponent of that change, Muhammadu Buhari, said he belongs to everybody and he belongs to nobody.

We need another change. Our stock market should also belong to nobody and belong to everybody.

Who will bell the cat? ●

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THE MOUKA MATTRESS “ACTIVEREST” CAMPAIGN

BY LAGOS ADVERTISING AGENCY, DDB

DDB LAGOS

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PRIVATE EQUITY

LET’S SLEEP ON IT The succession of deals for Nigeria’s Mouka mattress company is a sign of bounce in the private equity market that helps family-run companies profit from growing consumer spending trends

A

s a result of his unsuccessful 2008 presidential run, US businessman Mitt Romney inadvertently highlighted the plight of American mattress company Sealy. Its unhappy fate – loaded up with debt and ‘flipped’ by a succession of private-equity companies including Romney’s Bain Capital – seemed to cementthereputationofanindustryseenas keener on extracting value than building it. So, when private equity company Actis announced on 7 July that it had sold on its majority stake in Nigerian mattress company Mouka to private equity firm Abraaj for an undisclosed sum, you could be forgiven for wondering whether history was repeating itself.

But, while suspicions about private equity funds may remain in the US, in Africa the sector is in a different phase –takingcompaniesfromtheirearlystages and gearing them up with modern man-

agement techniques. Hasib Moukarim, a company director and member of the family that founded the Mouka mattress business in 1972, agrees. He argues that private equity can help to preserve family-owned businesses. “That step taken by us proved to be successful for both parties, Actis and the family, as the turnover and profitability more than doubled in five to six years,” he says.

“focused a lot of attention on trying to make the process more efficient,” recalls Opubor. To consolidate Mouka’s national footprint, it invested in operations in the northern city of Kaduna and in Benin City, about 240km east of Lagos.

Next, came the hard work on the marketing and sales side. Mouka was already a solid brand in Nigeria, one of two nationally known mattress makers along with competitor Vitafoam.

Distribution is a key to success in consumer businesses, and this is tough in Nigeria and more widely in Africa.

“The reality is, even though there are large urban centres in Nigeria there is still a very large population of people who live outside of those urban areas,” says Opubor. Reaching those populations required investment in sales teams, recruitment of new distributors and more extensive advertising. ● ● ●

CUTTING AWAY THE FAT John Opubor, director of the Actis office in Lagos, explains: “They were a classic Nigerian company. They had grown to a good size but wanted to institutionalise.

That’s why they wanted us in.” Actis started with industrial processes, trying to bring down manufacturing costs. Electricity was one focus, and the procurement of raw materials was another. Bringing in industrialists who know the sector, Actis THE AFRIC A REPORT

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Jacob Kholi of Abraaj, the company that bought a controlling stake in Mouka in July, explains: “Actis had to institutionalise the company, introduce governance best practices. And they have succeeded.”

Kholi argues that with the increasing amount of investment going into African businesses, there will be an increase in these secondary transactions, as with Mouka. “You have funds that are doing verygoodbusinessin this sector thathave come to the end of their holding period and have to move on. Not for any other reason but just because most private equity [funds] are closed funds and they have a holding period,” he explains. The flip side, says Opubor, “is what does that mean for valuations when you have so much capital coming into the market?

You have larger guys with large funds coming in [and] needing to put money to work in what is still a relatively small pool of assets.” ●●●

NEW HOMES NEED BEDS Nonetheless, Opubor says there are benefits for both parties in secondary transactions. The due diligence and corporate governance work, such as the adoption of modern accounting practices, has been done. “So you know you are buying a clean asset”, he says, while the seller can get a good price.

Meanwhile, because it is a growth market, there is still plenty of value to be created. Mouka’s Moukarim agrees, saying: ACTIS HELPED CEMENT MOUKA’S NATIONAL FOOTPRINT BY INVESTING IN PROJECTS IN KADUNA AND BENIN CITY

“Now, with Abraaj taking looking at alternative inover from Actis and new vestment vehicles. These managers and ideas comdo not generally include ing in, we expect higher private equity, which regrowth and revenues.” mains too risky for penKholi says that Nigeria’s sion funds. But these local demographics are in the pools of capital are lookcompany’s favour and the ing at listed companies on consumerboomisstillinits the local exchange, which infancy. This is especially helps bring liquidity into true when it comes tohousthe market. ing, where demand far outAnother option is the strips supply: the Centre for growth in South African The housing Affordable Housing Fincompanies that, with their shortfall in Nigeria domestic market saturatance in Africa estimates SOURCE: CENTRE FOR AFFORDABLE HOUSING FINANCE IN AFRICA ing, are looking for new there is a deficit of 16m entry points into the rest housing units in the country. “Once you have a house, you have of Africa. “We in Abraaj have had some success in selling our businesses to comto furnish the home!” Kholi points out. panies coming out of South Africa,” says Abraaj’s purchase of Turkish mattress Kholi. “SABMiller for example – we sold maker BRN Sleep Products in February them a bottled water manufacturer that may also come in handy. Kholi insists had become regional.” Abraaj also sold the Mouka deal has to stand on its own merits, but Abraaj is also looking to apply a biscuit maker to South African food lessonslearnedfromtheTurkishmanufacconglomerate Tiger Brands. turer. “If there are opportunities for these Abraaj’sinvestmentinMoukawilllikely two companies to collaborate, we would not be as long as eight years, the time it took Actis to exit. “The vintage year of the certainly bring that to the table,” he adds.

Beyond that, the plan is to look at what investment was right before the downdifferentproductscanbeintroducedusing turn,” recalls Opubor, “and following that, the current distribution platform, as well in 2009, was the Nigerian banking crisis.” as working on new emerging distribution Inaddition,agreenfieldinvestmenttends channels. Mouka also wants to boost its to take more time than subsequent ones.

In the meantime, Actis is still looking sales to other West African countries. for investments that straddle the conAnd when the time comes for Abraaj sumer and manufacturing sectors in to exit, one option is an initial public Nigeria like Mouka does. “But it’s diffioffering through the Nigerian Stock Excult to find a business of scale, and we change. Kholi points to recent financial are looking to put $50m at the minimum reforms, seen in many countries as well to work in a transaction,” Opubor says. ● as Nigeria (see page 28), which have alNicholas Norbrook lowed pension administrators to start

16m

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SHARIA-COMPLIANT LENDING COULD ATTRACT BILLIONS MORE IN INVESTMENT TO BUILD UP SENEGAL’S INFRASTRUCTURE

the Banque Islamique du Sénégal, we have the advantage of a good relationship with the Islamic Development Bank (IDB) and we are the first country to explore these opportunities in the region.

We have a population of 95% Muslim people as well. It has been a long time in planning, but we think that we can be a hub for Islamic finance in Africa.”

Traditionally, Senegal has looked towards the West for loans, borrowing from lenders such as the World Bank, the International Monetary Fund and France.

In 2011, Senegal issued a $500m eurobond, marking a change of course in its borrowing patterns. But with a gradual readjustment of tax and other laws to be able to accommodate sharia-compliant financial instruments and growing ties with Gulf states such as Saudi Arabia, Kuwait and the United Arab Emirates, Senegal could become a prime destination for Arab investors who are looking for higher returns on their money.

GODONG/GETTY IMAGES

RESILIENCE “We saw that the Gulf countries had an excess that they wanted to invest but in a sharia-compliant way,” says N’Diaye.

“To attract this investment, we set up sharia-compliant instruments. With the debt crisis in Europe, we saw that Islamic finance was more resilient. The 2008 financial crisis was due to speculation, so we can see that Islamic finance is more attractive.”

Islamic financial instruments take into account basic investment principles set out in Islamic law, or sharia.

These include not charging interest, not investing in sectors forbidden by Islam, investing in a tangible asset and the sharing of profit and loss between the lender and borrower. In Senegal’s case, the 2014 sukuk used the finance ministry’s administrative building as the asset in which to invest.

Senegal’s stability is what makes it an attractive investment opportunity for Arab countries, says Mouhamadou Lamine Mbacké, the managing director of the Dakar-based Institut Africain de la Finance Islamique, an advisory and training organisation that has worked with the government on developing Senegal as a centre for Islamic finance.

“West Africa is a natural destination for Islamic finance. And in West ● ● ●

ISLAMIC FINANCE

SUKUK FOR SENEGAL With a 95% Muslim population, political stability and growing links with the Gulf States, the country has high hopes of becoming a continental hub for Islamic banking

W

hen Senegal issued a 100bn CFA franc ($168m) sovereign Islamic bond in June 2014, it beat economic giants Nigeria and South Africa to market and began a race to create a hub for Islamic finance in Africa.

Following Senegal’s Islamic bond, or sukuk, Nigeria, Niger and Côte d’Ivoire have also expressed interest in devel-

oping a sharia-compliant sector of the market in a bid to attract investment from the Gulf states.

Senegalese officials are optimistic about the country’s prospects. “We have a dynamic financial centre in Dakar,” says Alioune N’Diaye, the finance ministry’s director for money and credit.

“We have an Islamic bank in Senegal, THE AFRIC A REPORT

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FINANCE SPECIAL

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MARKETS & MONEY

SEEKING SUKUK Sudan

Amount US$ million Senegal Gambia

SUKUK ISSUES JAN-MAY 2015

SOURCE: SOUCE: IIFM (INTERNATIONAL ISLAMIC FINANCIAL MARKET)

26

Bahrain

TOTAL 16 651 TOTAL ISSUES 250

2

Number of Issues

Number of Issues

Nigeria

1

Total Size of Issues ($m)

140

17 790.88

Bangladesh

60

5 141.26

Brunei Darussalam

33

1 734.05

Gambia

28

1 399.99

Hong Kong

12

13 501

Indonesia

6

755 344

Malaysia

6

221 239

Saudi Arabia

3

4 663

Turkey

2

1 000

UAE

1

987.05

Africa, Senegal is probably the most stable country. I think we can attract a lot of direct investments.”

Mbacké argues that there is a cultural shift happening in the region, with countries such as Senegal throwing off their traditional connections and turning instead to countries with whom they share ideological principles. The launch of the sukuk gave Senegal a huge amount of publicity in the Gulf and has opened the doors for investors in other areas of Islamic finance.

“I don’t think that Senegal is very well known as far as investors in Islamic finance are concerned, because it is more the English-speaking countries [that are known],” says Mbacké. “But the sukuk gave a lot of attention to Senegal. I think from the issuance of the sukuk, many Islamic finance investors are now coming to Senegal.”

●●●

ENTHUSIASTIC LENDERS According to the government, which in 2014 launched its five-year Plan Sénégal Emergent (PSE) to grow Senegal’s economy significantly by 2018, Arab investors are now one of the main lending groups in the country. At the PSE meeting in Paris in 2014, at which donors pledged 3.7trn CFA francs of new money to help Senegal with infrastructure development, 38% of the money promised was from Arab investors. “The IDB pledged 550bn CFA,” says Moustapha Ba, the director general in charge of finance at the ministry of finance, “and after one year we have received 182bn CFA francs of that money. The IDB is

Mbacké agrees: “Investing in [subSaharan Africa] is more profitable than investing in the Western world because the cost is lower, the return is higher and everything has yet to be done in Senegal.” Mbacké’s organisation has its sights set on opening an Islamic bank in Senegal and will begin by starting an Islamic microfinance institution later this year to provide small businesses with sharia-compliant loans. “Microfinance is a big industry,” he says, “but interest rates are going over 30%. We think that Islamic finance is the solution because there are no interest rates and also because we finance assets, not money. We think that Islamic finance will keep the advantage of the conventional microfinance and that it will take away the bad parts, which is the interest rates.” If, after two years, he says, the microfinance institution is going well, they will look for investors to start a bank.

SOURCE: ZAWYA

44

now the main lender in Senegal. There is a very strong trend towards nontraditional Arab lenders.”

MORE BONDS TO COME But while Senegal seeks to position One Senegalese microfinance instituitself as sub-Saharan Africa’s first choice tion has already had some success. Le for Arab investors on the continent, Millénium Compagnie Islamique du obstacles still remain. “You need a regSénégal started off under another name ulatory framework for Islamic finance in 2002 and had 14 outlets and about to take place so that investors are not 7,000 customers by 2011. disadvantaged from a taxation standAccording to Standard & Poor’s, point,” says Samira Mensah, a financial worldwide sukuk issuance could reach services analyst specialising in Islamic $115bn in 2015, with Malaysia and Saudi Arabia leading the market. In March, finance at Standard & Poor’s. “Senegal Senegal’s President Macky Sall said the used the existing conventional regulation of the Union Economique et Monétaire Ouest Africaine The sukuk is a perfect match for as well as regulation specificSenegal, which needs long-term ally introduced by the ministry of finance to be able to issue funding and has tangible assets the sovereign sukuk. Senegal hasn’t yet met the conditions to become government would sell $500m of standan Islamic finance hub. They need time ard bonds in the international market to develop Islamic finance alongside and could issue more Islamic bonds to conventional finance and to deepen the help finance the budget. In April, the offer of Islamic instruments, otherwise government voted in a law to allow waqf, investors won’t buy into it.” or funds that distribute resources for social projects. The Senegalese governHowever, Mensah says, Islamic finment is also in the process of launching ancial instruments such as sukuk are suited to the Senegalese economy. “The a project with the IDB to modernise the idea of issuing the sukuk was to develop country’s daaras, or Koranic schools. infrastructure projects, so this is a very “We are thinking about complementgood fit. Africa in general is a good fit ary ways of diversifying our economy,” says money and credit director Alioune for Islamic finance. To develop infraN’Diaye. “Conventional finance has its structure you need long-term funding and to diversify your funding base, and place and will keep that place, but we to provide investors with investment will also have the opportunity to use opportunities. To issue sukuk, you need Islamic finance. Islamic finance is a real estate assets, and Senegal has plenty really dynamic force today, which we of land which is not yet developed. It hope will bring results.” ● Rose Skelton in Dakar is a perfect match.”

THE AFRIC A REPORT

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© DR

ADVERTORIAL

One Energy brings power to Ghana © DR

© Arne Hoel

© DR

The Ghana 1000 project is a turning

point for power generation for West Africa. With deep private sector

expertise allied to strong government support and the latest technology,

this gas-to-power project will deliver

© DR

electricity faster and cheaper to

Ghanaians.

-I-

>>>

One Energy brings power to the people

I

“

The country loses an estimated 2-6% of GDP annually due to insufficient wholesale power supply.

”

Project location map Aboadze in Western region of Ghana. ▼

© DR

© Arne Hoel

GENERAL ELECTRIC One Energy brings power to Ghana

t is an all too familiar event across the continent: the lights go out, and a generator fires up to bring them back on again. Patients in hospitals are put at risk. Children finish homework by kerosene lamp. Businesses are hit, translating to lost wages, and missed opportunities.

Ghana is not immune. The power crisis of the past three years has made life tough for everyone. Buying and running generators reduces the amount households can spend on other critical goods and services. The country loses an estimated 2-6% of GDP annually due to insufficient wholesale power supply.

Small wonder that fixing Ghana’s energy crisis has become the number one priority for the government. “I do not intend to manage the situation as it has been done in the past, I intend to fix it,” said President John Mahama during his February 2015 State of the Nation address. “I owe it to the Ghanaian people.”

But in these difficult times of lower global commodity prices and stretched budgets, how to do it?

Introducing Ghana 1000 The Ghana 1000 project is transformational. It brings fuel solutions to enable secure power while waiting on indigenous gas. This innovation displaces expensive/ dirty fuel. It pulls together leading international and local companies to build what will be one of Africa’s largest single power parks, aiming to deliver 1300MW of generation capacity once its final phase is completed. Under its incorporated Ghanaian entity, One Energy, the consortium of GE, a global infrastructure leader, Endeavor – Africa focused Power company, Eranove – regional O&M leader and SAGE – strong local fuel importer brings integrated gas to power solution which will enable faster and cheaper generation of power. The floating storage regasification unit will enable Ghana 1000 to use Liquid Natural Gas in combination with indigenous gas to fuel a generation program that is phased to meet Ghana’s needs.

One Energy has also selected world-class power generation technology for the project and will partner with leading service and finance providers to build a state of the art power plant that will not only deliver reliable, low-cost electricity, but will have the flexibility to run clean natural gas produced from Ghana’s burgeoning natural gas industry. .

Each member of the consortium brings more than just their individual skills to the project, they also bring strong ties from international funders. “Endeavor is supported by Denham Capital, a leading energy and resources-focused global private equity firm with more than $7.9 billion of invested and committed capital that has made a number of power investments in Africa and other emerging economies, and by the U.S. Government’s Power Africa initiative. We also maintain a very close relationship with various U.S. and international financial institutions,” says Endeavor CEO Sean Long. “Additionally, we also serve as a strategic advisor to the World Bank’s Global Infrastructure Initiative. Our role in the Ghana 1000 project is to be the lead investor and to co-lead the overall development, financing and construction of the project.”

The consortium has structured the project so that there are no direct costs for the government. “This allows the government to spend its resources where it’s needed most like schools and hos-

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GENERAL ELECTRIC One Energy brings power to Ghana

The Cost of Insufficient Power Generation Today, Ghana’s power situation is at an impasse.

Though there is a nominal generation capacity of about 2,412 megawatts and dependable generation capacity of 1,750 MW. “Currently, Ghana has a power generation deficit in excess of 600MW as a result of lower than expected output from its hydroelectric installed base and the unavailability of many of its thermal power plants due to maintenance and fuel issues”, explains Louis Josiah of Ghanaian partner, Sage Petroleum.

When the Ghana 1000 consortium started to develop the project last year, everyone was focused on building a secure, cost-effective power supply to meet the growing country’s needs. This year, the urgency of the power crisis became apparent and in a meeting with Hon Kwabena Donkor in January of this year, the GE Chairman, Jeff Immelt and Endeavor CEO, Sean Long, agreed that the consortium had to help to address the urgent power needs too.

This is when the Bridge Power project was conceived.

In an effort to address Ghana’s immediate power shortages, Endeavor, GE and SAGE in the form of Bridge Power consortium are developing an additional 340MW power project to be located in TEMA. Using GE’s aero-derivative technology fuelled initially

by LPG, the Bridge Power consortium will be able to start bringing incremental power to Ghana by the end of 2015. This consortium, together with Eranove (in the form of the Ghana 1000 consortium), will ensure the delivery of a total of more than 1GW of power over the next four years, timed to meet Ghana’s power needs and evacuation capacity build-out. ■

Integrated Gas to Power Projects The Bridge Power and Ghana 1000 projects are integrated gas to power projects which means that they incorporate their unique fuel solutions – LPG in the case of Bridge Power and LNG regasification technology in the case of Ghana 1000. The country has historically leaned on hydropower to run its power stations. But ever-lower reservoirs at the Akosombo dam have increased dependency on light crude oil (LCO) generators. And while oil remains dependable, it is one of the most expensive ways to generate electricity. The savings of displacing LCO as a fuel are significant. In the case of Ghana 1000, Liquid Natural Gas (LNG) is approximately a third less expensive than LCO and the average power tariff savings are estimated to be 4-6 cents per kWh. ■

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“

The impact the Ghana 1000 project will have on the economy is significant: employment, government revenue, and a fillip to GDP growth.

”

GE Gas Turbine.

© DR

pitals,” says Leslie Nelson, Executive GM, GE Power & Water – Africa. The government will facilitate a long-term agreement with the Electricity Company of Ghana (ECG) for the long-term purchase of power from the project.

“This partnership is about job creation, skill and technology transfer as well as capacity development for Ghanaians,” says Emmanuel Agyei-Mensah, CEO of Sage Petroleum.

One key example to its commitment to local communities is a current program aimed at helping Ghanaian youths. The Ghana 1000 project will operate in the Shama District, the most densely populated area in Western Africa where the youth constitute 14.4% of the population. Access to primary schools is fairly good within a 10 km radius.

However, low levels of attendance can be found and almost 50% of the unemployed are students .

The One Energy consortium is looking to change that, and will implement a program to help the citizens in the Shama District with enterprise development, education, training and skills development, as well as water and sanitation programs. Even though the power plant is not yet constructed, the consortium has already implemented youth career workshops to help those in the area understand the requirements needed to find their chosen careers and prepare them for the regional job market. “The consortium is committed to working with the youths within the district, helping them attain competitive jobs in the future,” says Long. ■

GENERAL ELECTRIC One Energy brings power to Ghana

Economic Benefits

© Arne Hoel

Independent consultants IHS believe that LNG will also stimulate electricity exports, with the combined savings and exports adding an extra $500m by 2020.

Given the pressures that Ghana’s currency has faced in recent times, the reduction in spending in dollars on importing LCO will help strengthen the cedi. Indeed, the impact the Ghana 1000 project will have on the economy is significant: employment, government revenue, and a fillip to GDP growth. IHS expect an extra 253,000 jobs to be created, 450 million cedi in government revenue, 2 billion cedi increase in annual labour wages, and a 4 billion cedi rise added to GDP. “As we provide consistent power for Ghanaian residents and businesses, the quality of life will improve as well as the economic impact of Ghanaian industries”, says Long.

“This includes greater tax revenues, which will help bring down production costs and increase labour productivity, while providing capital investments in machinery and other technological advances for businesses. Additionally, by increasing power generation capacity alongside critical business reforms, Ghana will move closer to becoming a key industrial and manufacturing hub in West Africa.” ■

“

There are no direct costs for the government.

This allows the government to spend its resources where it’s needed most like schools and hospitals.

© DR

”

A flexible fuel solution The first of its kind in Africa, the LNG solution will enable the power project to operate from the start on gas rather than LCO. The LNG will be brought by delivery vessels, transferred offshore to the floating storage and regasification unit (FSRU) located 3km offshore from the Takoradi enclave, where it will be regasified before it is piped onshore to the power plant.

“A key principle for the consortium was to structure a flexible LNG solution to ensure that it will not unnecessarily burden Ghana should Ghana’s fuel needs ever change to the point that LNG is no longer required” emphasizes Michele van der Westhuizen, Project Lead for GE. “The LNG supply can be tailored to meet Ghana’s changing needs - either decreased as indigenous gas comes on line, or increased as Ghana’s need for power increases beyond that which can be supported by the current fuel mix” indicates van der Westhuizen. So LNG will complement domestic natural gas supply which even at its peak will not be enough to meet the nation’s ever-growing demand for gas.

Also with an eye to flexibility, Excelerate has agreed to lease an existing floating storage and regasification unit (FSRU) to the project. This significantly reduces the cost and lead time for the project compared to having to design and build a new vessel. Further, “the mobile nature of an FSRU means that it can be redeployed in a different part of the world when it is no longer needed versus a permanent onshore facility which will become obsolete if no longer needed in Ghana” says Nelson.The FSRU brings additional benefits. Its excess capacity will allow other power generators to shift from liquid fuels to LNG which could save Ghana up to $1bn per year and its storage capacity will enable power plants with low capacity utilization to get access to gas.

Like-minded strategic partners who can deliver like Shell and Excelerate have been a critical component in tailoring a solution to meet Ghana’s needs,” says van der Westhuizen. The multiplicity of strategic partners and, other key stakeholders in this project is an advantage.

CEO of Eranove, Marc Albérola says “in the case of Ghana 1000 project, the large size of the plant allows to reach a critical size in order to have access to gas via FSRU Optimization of operations and maintenance with a positive effect on production cost. For example it allows to rationalize the stock of spare parts - an important cost item in a power plant.” Eranove’s subsidiary, CIPREL has a longstanding experience of operating and maintaining gas-fuelled power stations. Built in 1994, CIPREL was one of the firsts IPP operated in West Africa. Eranove and CIPREL will use their expertise to serve Ghanaian businesses and individuals and apply the same key success factors: notably, hiring mainly local staff to be able to adapt to the context and culture of the country, focus on staff training and daily coaching , Quality – security – Environment certifications, and a CSR approach. By bringing in both the technology and the fuel partner, the Ghana 1000 project removes a traditional thorn from African power projects: the fuel supply. “Fuel

- IV -

From tanker to Power plant - Local content key

Patrick Awuah, President and Founder, Ashesi University College signing the MOU between Ashesi and GE on training and capacity building.

To manage that LNG flow, local partners are critical. “For us, localization is not an option – it’s a business imperative. Ghana 1000 was birthed by a team in Ghana”, says Nelson. “Local partnerships and capacity building are not only critical for this project’s success but the overall business environment and quality of human capital”. GE is supporting the engineering programs at Ashesi University, the Kwame Nkrumah University of Science and Technology and the Applied Sciences program at the University of Ghana. And Ghana’s Sage Petroleum is certainly not just here for the ride. One contribution will be to ensure that the plant, once commissioned, is optimized for minimal downtime. “To make this happen, it is important that the fuel supply chain for the project is robust and adjusted for the specific local circumstances of Ghana’s market”, explains Sage Petroleum’s Josiah. “We have extensive experience in fuel trading and management and bring deep sector and market expertise to the project, right from its development through to production, in a manner that very few players can. This will ensure optimal plant uptime.”

It’s not just local partners that are evolving with the Ghana 1000 project. For example, for Endeavor, this is the first gas-to-power project where they have taken an active role in finding a suitable fuel solution to power the plant.

And for GE, though its involvement in power projects in Africa has traditionally been limited to equipment supply and long term maintenance agreements, “now the company is more active in facilitating earlier stage development of power projects by dedicating resources and risk capital” explains Ron Mincy, Managing Director of GE’s project finance team in Kenya. “In addition, GE provides advocacy support, technical assistance, and engages the capital markets to meet long term financing and credit enhancement needs. Ghana 1000 is a great example of this ‘total solutions’ approach. ■

GE works in Ghana to support economic growth through infrastructure development in power, healthcare, oil and gas and transport. GE is a solutions provider in Ghana, working with the government, corporate customers and other stakeholders to solve infrastructure challenges.

In Oil & Gas, GE gas turbines and compressors

play a critical role on the FPSO Kwame Nkrumah, powering the vessel and compressing natural gas for storage and transportation. In healthcare, GE has begun rolling out a massive healthcare professional training program that will substantially improve maternal and infant care in rural areas using GE’s unique portable ultrasound devices. In transport, GE remains committed to partnering with the government to invest in the country’s rail infrastructure, par-

© DR

GE in Ghana

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Ghana will serve as an energy hub for power and fuel that will unlock the economies for millions beyond the border.

”

© John Aparicio

availability is a critical bottleneck for projects across Africa”, says Steve Jernigan, CFO of Endeavor Energy, “and the approach we have taken on the Ghana 1000 project helps to significantly derisk the project for our investors. However, local producers will also play a key role in the Ghana 1000 project. As Ghana 1000’s LNG facility and domestic gas fields like Sankofa begin to displace oil for power generation, the overall cost of power for Ghana will fall. This could raise the GDP by 1.7%, produce 250,000 new jobs and boost the economy by $2.5 billion. In addition, by becoming a stable, long-term downstream user of Sankofa gas, Ghana 1000 will help to develop and bolster the local hydrocarbons industry and provide more local jobs. “Currently, the downstream gas market in Ghana is in its infancy so Ghana 1000 will play a vital role for the Sankofa project as a substantial anchor offtaker of gas”, explains Long. ■

© BRYTIKON

GENERAL ELECTRIC One Energy brings power to Ghana

Ron Mincy ticularly in the mineral rich western corridor.

The Ghana GE team has grown from two employees to almost 70 today. Since 2011, GE has invested over $50 million in Ghana, through training and developing Ghanaians, sourcing from local suppliers and service providers and investment in new office space. Over the next five years, GE is committed to facilitating more than $2 billion dollars in investments, driven by investments in oil and gas, power and healthcare.

GE in collaboration with the US Africa Development Foundation (USADF) and US Agency for International Development (USAID) recently launched a $2m off-grid Energy challenge, a competition which allows innovators in Africa to showcase off-grid energy solutions that address energy gaps. Three Ghanaian companies recently won $100,000 each. ■

GENERAL ELECTRIC One Energy brings power to Ghana

Money freed up for government

“

By bringing in both the technology and the fuel partner, the Ghana 1000 project removes a traditional thorn from African power projects: the fuel supply.

”

The project has also been helped by the continent-wide shift to an Independent Power Plant (IPP) model, where the government helps arrange power purchasing guarantees and a platform, but does not run or build the plants themselves. The shift towards the IPP model in Africa has made it possible for governments in the region to tap into private capital markets both domestically and abroad to fund investments in the power sector”, says Jernigan. “This has freed up government resources for other areas of the economy where private capital may be more difficult to attract.

So with the transformative Ghana 1000 project, the government and people of Ghana win twice: first, by the 1300MW of power delivered fast and more cheaply than before; second, money no longer diverted to power can be spent on the education, housing and healthcare that citizens need.Last but perhaps most important, by foregrounding gas in their energy mix, Ghana will take a step towards eliminating carbon emissions. A far greener energy than oil, Ghana can bet on gas as the ideal stepping stone towards a carbon neutral future, as solar and hydropower projects eventually step up to take the weight. ■

Benefits for West Africa This will also have positive spill-overs to the rest of the region. West African countries suffer similar electricity shortages. The LNG import infrastructure created by the project can help provide low cost fuel for power stations in Togo, Benin, Burkina Faso and Côte d’Ivoire. Ghana will serve as an energy hub for power and fuel that will unlock the economies for millions beyond the border, a concrete contribution to the regional economic integration agenda of ECOWAS and other regional bodies.

There are lessons from abroad that provide a parallel to Ghana’s situation. Argentina and Brazil both face similar challenges and opportunities – for example, pipeline gas supply uncertainty, from Bolivia to Argentina and Brazil, and in Ghana’s case from Nigeria; increased gas-fired power generation supplementing low hydropower output because of lower rains; and LNG is cheaper than other liquid fuel alternatives. Argentina and Brazil both moved quickly to push through LNG import projects, and discovered that pent-up demand was far greater than initially expected.

This suggests that when Ghana unlocks its LNG supply, it should prepare itself for consumption levels that exceed forecasts, ushering in a new era of cheap power driving the Ghanaian economy. The additional uses could include regional power generation (either through the export of power generated in Ghana or through exported natural gas) or other domestic industries, like fertilizers, plastics, and pharmaceuticals. ■

Meet the partners

Project sponsors:

The Ghana 1000 project features an impressive roster of international and local companies, each with deep expertise in their field.

ENDEAVOR ENERGY Endeavor Energy is a privately held international independent power producer (IPP) company, headquartered in Houston, Texas, focused on developing and investing in power generation facilities in Africa.

Emmanuel Agyei Mensah, CEO Sage Petroleum.

Sean Long, CEO Endeavor Energy.

Marc Albérola, Eranove CEO.

With the financial backing of Denham Capital (www.denhamcapital.com), an energy and resources-focused global private equity firm with $7.9 billion of invested and committed capital, the company possesses significant financial and operational capabilities to generate and participate in multiple power development projects in Africa. Endeavor Energy is also a sponsor of the U.S. government’s Power Africa initiative. For more, visit www.endeavor-energy.com.

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GE GE (NYSE: GE) imagines things others don’t, builds things others can’t and delivers outcomes that make the world work better. GE brings together the physical and digital worlds in ways no other company can. In its labs and factories and on the ground with customers, GE is inventing the next industrial era to move, power, build and cure the world.

SAGE PETROLEUM Sage is the largest licensed Oil Trading Company in Ghana.

The company’s activities are carried out by experienced and highly trained professionals and supported by our key partnerships with refi-

GENERAL ELECTRIC One Energy brings power to Ghana

Leslie Nelson

© DR

Executive GM, GE Power & Water – Africa

“

We all want this to happen.

”

This is a private sector led project, what role for government?

A project of this magnitude will not be successful without government support.

neries, international trading companies and local partners in various countries.

In line with our pedigree as recipients of multiple consecutive International Quality Awards, our activities are managed and supported by an advanced, real time Risk Management platform that gives real time insight into all aspects of the company’s business including stocks, logistics, finance, profitability and risk exposures. For more, visit www. sagepetroleumgh.com/ ERANOVE The Eranove group is a West African leader in public service management and electricity and drinking water production.

The group provides operational assistance to its subsidiaries: technical su-

The Ministries of Energy and Power have forward thinking leadership that see how affordable and reliable power can drive economic success and are playing a critical role in getting this project to a bankable stage. Government’s credit enhancement for state owned distribution companies like Electricity Company of Ghana (ECG), the World Bank and AfDB’s partial risk guarantee support for the project and the fasttracking of processes to move the project quickly are examples of the urgency government attaches to this project - we all want this to happen.

What is GE’s participation in the project?

GE is a premier infrastructure and technology company that provides solutions to some of the world’s biggest problems. For this project, we are offering a bouquet of services – we are co-developers, investors, original equipment manufacturer and service provider, unlike competition. Power presents a great opportunity here in Africa and with our technical leadership and scale, we are rightly positioned to solve the continent’s toughest energy problems. We have taken the strategic decision to actively facilitate the development of landmark power projects that have the potential to open up the market for more investment in key

pervision, procedures, procurement, cash flow, management control, legal & tax, etc. For more, visit www.eranove. com

markets, and Ghana is no exception.

The Ghana 1000 project by virtue of its size and integrated gas-to-power model falls within this category. We have put together a formidable consortium of renowned local and international players such as Sage Petroleum, the fuel supplier, together with Shell; Endeavour Energy, developer and lead investor; and Eranove, operator and investor.

We have great confidence in this team’s ability to run a successful operation.

Some infrastructure developers have developed a reputation of bringing the finance with them, often through the CDB. How is GE managing the financial side?

We have within our global network, individuals and organizations with large pools of capital and a keen interest in investing in Africa’s power sector. All project equity was committed in Q1 of 2015 by partners, and with access to investors who share GE’s vision for a robust and effective African power sector, demand for equity is oversubscribed.

How will the Ghana 1000 project cope with a scenario where another party is elected into power before the project is completed?

We are happy to note that this project is not political. We are talking of Power here, which affects the lives of everyone.

We have no doubt in our minds that no matter the government of the day, it will continue to enjoy government support.

Besides government is not really funding this, so the issue of a new government refusing to fund does not really arise. ■

Key partners: ROYAL DUTCH SHELL Shell is an Anglo–Dutch multinational oil and gas company ranked No. 1 on the 2013 Fortune Global 500 and generated $451bn of revenue. For more, visit www.shell.com EXCELERATE ENERGY Excelerate is an American developer (100% subsidiary of George Kaiser) of LNG transportation and regasification infrastructure, a provider of LNG storage and regasification services and an importer of LNG. For more, visit www. excelerateenergy.com ■

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GENERAL ELECTRIC Osagie Ogunbor Senior Manager, Communications GE West Africa +2348141377176 926/927 Bishop Aboyade Cole Street Victoria Island, Lagos Nigeria

www.ge.com/ng/

DIFCOM/FC

INTERVIEW

53

COUNTRY FOCUS

AHMED JALLANZO/EPA/MAXPPP

Nigeria

THERE WILL BE TOUGH TIMES AHEAD, BUT THE NIGERIAN BANKING SECTOR HAS ENORMOUS SCOPE FOR GROWTH

STEP UP, NEW GUYS Africa’s new largest economy has only a fifth of its rival South Africa’s share of the banking wealth. So there’s room for ambitious talent to get in there and start innovating. With the emphasis on good governance, a prescience for global headwinds and technological agility, the new leaders will be cut from a very different cloth to their venerated elders

By Tolu Ogunlesi in Lagos

THE AFRIC A REPORT

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FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

T

o every generation its struggle.

Nigeria’s current and emerging bankingleadersarefacingadifferent set of challenges to those of their predecessors (see box).

“Leadership for the new generation will turn on who can best adapt to the changing global environment – leveraging globalisation, technology and corporate governance,” says Opeyemi Agbaje, chief executive of Lagos-based consultancy RTC Advisory Services.

The corporate governance aspect will be critical, Agbaje says. “The banks of today cannot be run the way they used to

COUNTRY FOCUS

NIGERIA

300 km NIGER

CHAD

Kano BENIN

ABUJA

NIGERIA Lagos Port Harcourt

CAMEROON

Gulf of Guinea NIGERIA IN NUMBERS POPULATION

178.5 million

GDP (current US$) GDP GROWTH (annual %)

6.3%

INFLATION

8.1%

BANK CAPITAL TO ASSETS RATIO (%)

11%

FOREIGN DIRECT INVESTMENT $4.69 billion BANK NON-PERFORMING LOANS TO TOTAL GROSS LOANS (%)

3.7%

MARKET CAPITALISATION (as of 31 March 2015)

$81.6 billion

TOTAL RESERVES (includes gold, current US$)

$37.5 billion

SOURCES: WORLD BANK 2014; UNCTAD 2014; NSE; EASE OF DOING BUSINESS 2015

$568.5 billion

run.” He argues that the Nigerian bankers of tomorrow will be those who can position themselves as financiers the world can trust to run a credible institution.

It is up to today’s and tomorrow’s bankers to exploit the dynamics of rapidly changing technology and to navigate the macroeconomic headwinds and tightening regulation driven by local and global realities. Added to this will be the challenge of growing the banks’ global footprints. Size will continue to matter where the Nigerian banking industry is concerned. Nigeria might be Africa’s largest economy today, after displacing South Africa with its 2014 rebasing of gross domestic product data, but you cannot tell by looking at its banks. The combined assets of its five leading banks are only about a fifth of the five leaders in South Africa; their combined market capitalisation is roughly an eighth. There is plenty of room for ambitious bankers seeking to close this gap.

their board seats. One person to watch out for is Yewande Sadiku, 43, the chief executive at Stanbic IBTC Capital, the financial advisory and capital markets arm of Stanbic IBTC (#50).

Waiting on the sidelines is a fifth generation of Nigerian bankers: the ones who will run banks five or 10 years from now.

Traditionally, Nigeria’s bank executives have come from commercial banking backgrounds, but the fifth generation is likely to buck that trend, with leaders whose careers will have been spent primarily in investment banking and private equity – and, possibly, outlying fields like mobile banking and consumer lending start-ups.

Folahanmi Fagbule is one of them. In 2009, after a 19-month stint as head of research at securities firm Afrinvest, he joined the Africa Finance Corporation, where he is now vice-president for investments. Chijioke Dozie, 36, is another example. In 2008, Dozie, along with his brother Ngozi, founded Kaizen Venture Partners, a private-equity firm that focuses on acquiring heavily indebted businesses from banks and then turning them around. In 2012, he launched One Credit as a financial services institution providing short-term consumer loans. US-based electronics payments company Net1 acquired a 25% stake in One Credit in June. “If [One Credit] get the consumer credit business right, they could be bigger than some conven-

MORE WOMEN WANTED One thing many watchers would like to see change in the club of bank leaders is the gender balance. Banking in Nigeria is – and always has been – an almost exclusively boys’ club. Currently, only two of the country’s 24 banks are run by women. In 2012, central bank governor Lamido Sanusi asked banks to ensure that women take up 40% of their management positions and 30% of

FDI INFLOWS (US$bn) 1 1.27 1.31

1990 1995 2000

4.98

2005

6.10

2010

7.13

2012

5.61 4.69

2013 2014

SOURCE: UNCTAD

2011

HEALTH SPENDING PER CAPITA (US$) 120 100

Nigeria Sub-Saharan Africa (developing only)

80 60 2005 06

07

08

09

10

11

12

13

SOURCE: WORLD BANK

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NIGERIA

tional Nigerian banks,” says one Nigerian private-equity specialist.

Whatkindofinstitutionswillthesenew leaders find? For the preceding generation of bankers, the preoccupation was starting from scratch – taking advantage of the liberalisation of the industry by military leader Ibrahim Babangida in the late 1980s and early 1990s. In 1985, there were 40 banks in Nigeria; by 1990, there were107.Theseoldtimersledtheirbanks through a wave of failures in the early to mid-1990s,followedbyanunprecedented period of banking consolidation in 2004 and 2005. Nigeria’s 89 banks rearranged themselves into 25 after Central Bank of Nigeria governor Charles Soludo’s reforms. Several mergers and acquisitions happened, pulling in $3bn, an estimated $500m of which was foreign investment.

LESSONS FROM 2009 But corporate governance did not improve at the same pace: the consolidation emboldened the new mega-banks to increase their appetite for risk substantially.

In the following three years, the total loan values grew more than threefold, compared to a twofold increase in the five years preceding it. The ensuing bubble, marked by rampant margin lending and a toxic assets crisis, brought the industry to its knees in 2009.

So did this cause a ‘change of culture’ in Nigerian bankers, similar to that which Bank of England governor Mark Carney THE NEW BANKERS WILL MAKE THEIR INSTITUTIONS AS NIMBLE AS THEMSELVES

has called for in the UK? metic and ask if another Nigeria ranked Perhaps. Certainly, this is meltdown is on the way.

Globally, oil producers like when Nigerian bankers Nigeria have been hard hit started to assimilate ideas out of 176 in the by the tumble in the price of risk management. of oil from a 2014 high of Lamido Sanusi, replacing 2014 Corruption $110. Earlier this year the Soludo, announced that Perception Index government’s foreign renine of Nigeria’s 24 banks were in distress. He sacked serves fell to their lowest their management, poured level in a decade, promptin $6bn of bailout money ing the central bank to imand pushed for the creation pose restrictions on foreign of the Asset Management currency trading.

Company of Nigeria to In 2014, the banking absorb more than 12,000 index of the Nigerian SOURCE: TRANSPARENCY INTERNATIONAL non-performing loans Stock Exchange was its worth more than $35bn. worst-performing sector, Sanusi’s intervention ensured no and that trend could continue. Earlier banks failed and no depositors lost their this year, Fitch’s issuing of a stable rating for 10 of Nigeria’s lenders was premised funds. It also triggered another round of acquisitions by local and foreign playupon the “ability or willingness of the Nigerian authorities to provide support”. ers. Atlas Mara, the investment group co-founded in 2013 by former Barclays The ratings agency also projected that chief executive Bob Diamond and enthe banks’ bad loan burden will breach trepreneur Ashish Thakkar, now owns the central bank’s suggested limit of 5% 29% of Union Bank of Nigeria (#46). of total loan exposure this year.

RTC’s Agbaje envisions that in the near But against this backdrop are those future more Nigerian banks will be who advocate long-term optimism. sold to foreign partners, following in Andrew Lapping, portfolio manager the wake of Atedo Peterside, a third– of Allan Gray Africa Equity Fund, says generation banker who in 2007 sold a Nigeria’s banking stocks are currently controlling stake in IBTC Chartered to undervalued. “In the near term, the Nigerian banking industry will face tough South Africa’s Standard Bank (#1) to times. [But] if you’re looking at a fiveform Stanbic IBTC Bank.

Sceptics say the post-Sanusi corporate year investment horizon, now’s the governance adjustment has been costime to buy,” he says. ●

136

A GENEALOGY OF NIGERIAN BANKING SAMUEL ASABIA, Gamaliel Onosode and S. B. Falegan are part of the first generation of Nigeria’s bankers.

Asabia was the first Nigerian chief executive of First Bank of Nigeria, Nigeria’s oldest bank.

Onosode was chairman and chief executive of Nigeria’s first merchant bank, Nigerian Acceptances Limited (later NAL), between 1973 and 1979.

The second generation was led by the executives of the ‘big four’ – First Bank, Union Bank, United Bank for Africa (UBA) and

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Afribank – in which the government held a majority shareholding.

Joseph Sanusi ran two of these – UBA and First Bank – and went on to become central bank governor in 1999.

The man he succeeded, Paul Ogwuma, also belonged to the second generation, as did Umaru Mutallab, executive vice chairman and CEO of UBA from 1978 to 1988.

The third generation emerged in the late 1980s and early 1990s, when the military government of Ibrahim Babangida pursued a liberalisation of the

industry, awarding dozens of new commercial and merchant banking licences. Many in this group were ‘ownermanagers’, holding a sizeable number of shares in the banks they ran: Fola Adeola and Tayo Aderinokun (Guaranty Trust Bank), Jim Ovia (Zenith), Tony Elumelu (UBA), Aigboje Aig-Imoukhuede (Access), Ladi Balogun (FCMB), Erastus Akingbola (Intercontinental), Atedo Peterside (Stanbic IBTC) and Cecilia Ibru (Oceanic). ● T.O.

55

NIGERIA

COMPANIES THAT BOUGHT ASSETS IN 2013 COULD BE SCRAPING THE BOTTOM OF THE BARREL TO REPAY THEIR LOANS

BANKS

OIL CLOUDS THE WATERS Nigeria’s financial institutions are adopting a cautious approach given the lack of clarity about government policy and the unpredictability of international oil markets

A

gainst a backdrop of cheap oil prices,reducedgrowthprojections and a devalued and under-pressure currency, Nigeria’s banking sector faces uncertainty in the months ahead.

Even the resolution of Nigeria’s political uncertainty, with the relatively smooth May transition of power, has not materially improved the sector’s prospects.

Analysts, including Lagos-based Adesoji Solanke of Renaissance Capital, are concerned that the new government may attempt to counteract the major fall in Nigeria’s oil revenue by raising taxes as well as clamping down on revenue ‘leakages’ – corruption and other losses of government funds. Whether or not President Muhammadu Buhari’s economic team doubles Nigeria’s value-added tax rate, as former president Goodluck Jonathan’s finance minister Ngozi Okonjo-Iweala suggested prior to the handover in May, banks could be one focus of such attempts to raise funds.

Renaissance Capital, among others, argues that the government could eliminate tax exemptions on banks’ interest earnings. This could force banks’ return on equity (ROE) below their costs, thus significantly changing the sector’s attractiveness to investors. This would worsen

the party could achieve the two-thirds senate majority necessary to remove Emefiele from office.

The concentration of assets in Nigeria’s largest banks also poses a problem for the a downward trend in ROE highlighted by industry. The top five banks hold around half the banking industry’s assets, and Ecobank Capital’s Nairobi-based head of banking research, George Bodo. “systemic risks are high due to the high He says banks’ already low net interest concentration of assets,” says Bodo. He margins have and will continue to enargues that Nigeria should not allow its systemically important banks to become courage a reduced focus on wholesale and corporate banking activity in favour too big to fail. Nevertheless, their balance of retail banking to provide banks with sheets remain strong.

Bankers will closely watch the Central cheap funding through deposits, thus BankofNigeria’s(CBN)pronouncements increasing interest margins. Estimating thatROEdippedbelow10%in2013/2014, on foreign currency, exchange rates, “ROE could fall to as low as 5% in the private and public sector cash reserve ratios, the policy interest rate and capital next five years,” says Bodo, if banks do requirements. Further downward presnot take action.

Recent events also raised sure on the naira, which the possibility that Nigeria critics claim has been excould lose its second centacerbated by CBN foreign ral bank governor in two exchange restrictions in years. The very public July place since late 2014 and slap-down from Presidthe relatively low level of ent Buhari of central bank Nigeria’s foreign currency governor Godwin Emefiele reserves, creates further uncertainty for both banks – accused of bringing along bankers like Tony Elumelu and their business borrowOil and gas and Jim Ovia to a private ers.Thehighproportion,alproducts beit varying among banks, presidential dinner in accounted for more of dollar-denominated Washington DC – signals lending adds to this risk. how unpopular Emefiele than nine-tenths One silver lining is that is among the ruling All of Nigeria’s exports theCBNmayyetreversethe Progressives Congress. It in 2013 foreign exchange ● ● ● is unlikely, however, that

93 %

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PIUS UTOMI EKPEI/AFP

COUNTRY FOCUS

SOURCE: ATLAS OF ECONOMIC COMPLEXITY

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COUNTRY FOCUS

NIGERIA

● ● ● restrictions, which analysts say could hurt banks’ 2015 earnings, to avoid a threatened removal of Nigerian bonds from an influential JP Morgan bond index (see TAR73, Aug-Sept 2015). Nigeria’s removal could encourage portfolio investment outflows, thus increasing inevitable outflows should the US Federal Reserve or other major economies raise interest rates or investors react adversely to Buhari’s tentativeness in appointing his cabinet ministers and announcing his economic plans.

A CBN policy reversal on foreign exchange would, however, do little to assuage the effect of cheap oil on Nigeria’s federal revenue, its oil and gas sector and in turn the financiers of oil and gas activities. Structural changes in the international oil market, including but not limited to US shale production and improved international refineries having less need for the light grades of crude oil typically produced in Nigeria, mean that last year’s collapse in oil prices was not a flash in the pan.

NIGERIAN BANKS’ EXPOSURE TO OIL AND GAS OVERALL OIL AND GAS EXPOSURE AS % OF OVERALL LOANS

BANK

UPSTREAM OIL AND GAS EXPOSURE AS % OF OVERALL LOANS

DOWNSTREAM OIL AND GAS EXPOSURE AS % OF LOANS

FIRST BANK OF NIGERIA (#15)

40

21

19

SKYE BANK (#35)

33

29

4

GUARANTY TRUST BANK (#22)

28

24

4

DIAMOND BANK (#29)

27

18.6

8.4

24.7

13.3

11.4

24

17.5

6.5

21.3

13.2

8.1

STANBIC IBTC (#50)

19

13.5

5.5

ZENITH BANK (#19)

17.9

6.5

11.4

16

16

0

ACCESS BANK (#25) FIDELITY BANK (#41)

SOURCE: RENAISSANCE CAPITAL

FIRST CITY MONUMENT BANK (#42)

UNITED BANK FOR AFRICA (#21)

prices were high or when it was less clear that cheap oil might be close to a new normal. Companies that bought assets around 18-24 months ago, if they are not hedged, may “have to sell down assets to strategic partners”, according THREATS TO MARGINALS In Nigeria, cheap oil threatens the viabto FBN Capital’s Akinkugbe. Prolonged cheap oil could eventually force deility and finances of several operators of ‘marginal’ fields, typically indigenous fault on loans, thus greatly increascompanies that, according to Lagosing non-performing loan (NPL) levels based FBN Capital head of energy and among exposed banks. natural resources Rolake Akinkugbe, Local banks have recently begun should be ripe for merger activity desto finance more oil and gas transacpite the low level of consolidation so far. tions. While a decade ago they mostly Some of these upstream operators lacked the capital to participate in major transactions, Akinkugbe estimates they face the further threat of a department provided around 90% of financing for of petroleum resources revocation of the billions of dollars in corporate oil their licences, affecting those whose asset deals in the past three years. She assets may be close to producing oil argues that capital increases, includand providing much-needed cash for ing those after the 2009 banking crisis, their owners. The potential threats to have encouraged banks to over-expose Nigeria’s banks, however, do not arise themselves to the sector. from these marginal producers which, The most exposed ingiven their stage of development, have reduced acclude some of the major Oil prices have cess to bank financing. banks deemed systemicalmost halved ally important by the CBN. Another threat, albeit since highs of In a sector whose overall downplayed by analysts and the banks themselves, credit exposure to the oil around could arise from major asand gas sector approaches set acquisitions of recent 25%, First Bank of Nigeria years. These, for example, (#15), Guaranty Trust per barrel in include the sales of Shell, Bank (#22), Access Bank August 2014 Total and Eni’s stakes in (#25), Diamond Bank major Niger Delta licences. (#29) and SkyeBank(#35) Critics argue that the all have particularly high exposure. By contrast, CBN predominately indigengovernor Emefiele’s former ous purchasers overpaid employer Zenith Bank Nifor their assets, agreeing sale prices either when oil geria (#19) has only single-

digit percentage exposure to upstream oil and gas, which is notable for a bank of its size and capacity.

According to Akinkugbe, if oil prices were to fall drastically to $20 per barrel, heavily exposed Nigerian banks would be engulfed by asset write-downs and defaults. Given, however, the cashgenerating nature of the majority of funded assets, the secured nature of financing deals and even the partial cushion provided by asset acquirer’s oil-price hedging, she argues that banks should emerge largely unscathed unless prices fall below $40 per barrel.

This figure is at the lower end of admittedly varying estimates of the break-even price for Nigeria oil operations and the somewhat higher price assumptions under which financing arrangements were agreed. Nigeria’s banks are now mostly taking a wait-and-see approach on further financing during 2015. They may also increase secondary-market deals to sell on their oil company financing to international banks to reduce risk.

This more sanguine view is reflected elsewhere. Ecobank’s Bodo, for example, observes that Nigeria’s Tier 1 banks are exposed to major players more able to withstand low oil prices and that Tier 2 banks have been reducing their oil and gas exposure. The collateralised nature of most deals further reduces risks. Renaissance Capital similarly says the risks from upstream exposure are overblown, with banks extending or restructuring loans to avoid default where needed, even if NPLs are likely to increase. ●

$100

SOURCE: REUTERS

60

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Martin Yeboah ●

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Your HR Business Partner for Africa Expatriate Recruitment Recruitment of African Profiles & Local Content policies support HR Consulting & Staff assessment Executive Search Manpower supply Paris (France) Lagos (Nigeria) Accra (Ghana) Luanda (Angola) Abidjan (Ivory coast) Casablanca (Morocco) +33 1 71 19 47 32 contact@adexen.com www.adexen.com

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62

COUNTRY FOCUS

NIGERIA

INTERVIEW

Wale Shonibare Managing director, United Capital (formerly UBA Capital)

EVERYTHING IS DRIVEN BY GOVERNMENT POLICY Shonibare argues that Abuja has the power to influence bank lending and to direct it towards productive sectors of the economy

TAR: Where do you make most of your income from?

WALE SHONIBARE : Most of the profile of the group comes from the investment banking business.

We do a lot of landmark transactions. For instance on the power sector privatisation, we advised 50% of the bidders for the assets.

Bidders raise money to acquire government assets – we do a lot of that. Then we’re also very active in oil and gas with the Shell asset disposals. We’ve been very actively involved in supporting the [new] indigenous owners of these assets who are having to raise significant amounts of money.

And now that everybody is broke – including the state governments and they’re having to come to the capital market to issue bonds – we are one of the most dominant players in that sector. At a sovereign level, we’re also involved. We’re doing the first diaspora bond for the Nigerian government as one of the local book runners.

Given the lending for upstream assets and what with the price of oil being where it is, are some Nigerian banks holding on to a tricky proposition?

Well, you know the great thing about oil and gas is that for as

long as the oil is in the ground, you’ll always recover your loan.

You may have to take some shortterm provisions, but it’s better than lending to a business that goes bankrupt. If the oil’s there, okay you have to cope with lower prices, which means you have to restructure the tenor of the loan, but it’s still better. Banks love oil and gas because they hardly ever go completely bad.

The Nigerian pension regulator says that when it comes to pension funds investing in infrastructure, the will is there but the packaging isn’t. What can be done?

There are very strict regulations around the world about how you can deploy pension monies – and rightly so because you’re

The great thing about oil and gas is that for as long as the oil is in the ground, you’ll recover your loan talking about people’s pensions.

Particularly in the case of infrastructure, you’re also having to finance greenfield projects that do not have a credit history. It’s difficult to get a rating. Typically, pension funds are only allowed to invest in investment-grade THE AFRIC A REPORT

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instruments. If you don’t have a rating, then it means you’re issuing a junk bond and pension funds are not allowed to invest in junk bonds.

So what happens in other parts of the world when you want pension funds to invest in infrastructure is you credit enhance those instruments. We’ve seen it on the road sector with the privately financed road in Chile in the 1990s. They created bonds with credit enhancement to allow Chile pension funds to get involved. You have special institutions that do credit enhancement for infrastructure, in particular monoline insurance companies which started life in the US credit wrapping municipal bonds.

Whatthoseinstitutionsdoisthat they provide the investment-grade rating because they are triple-AAA rated. By wrapping the bond like an insurance product, you say to the pension funds: ‘If anything goes wrong, I will pay you as the monoline insurance company’.

We have a gap in this market. We don’t have any monolines operating here.

Secondly, for existing infrastructure, the natural place for power companies to go to raise money is the capital markets. It’s

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A ROLE IN PROJECT FINANCE 1989 Awarded a bachelor’s degree in engineering from the University of Glasgow

ANDREW ESIEBO FOR TAR

1995 Earned an MBA in finance from Imperial College London

It seems that the banks are getting plugged into productive lending as opposed to consumer lending. Why? Everything is driven by government policy. For a long time and it is even still the case now, we’ve been a very import-dependent economy, and government is realising that you have to promote local production. I mean, that’s the only way the naira is going to remain stable, if we produce as a country and not just import. There was a time we imported cement. Now we’re

only now with privatisation that power companies will be able to benefit from that. In about two or three years’ time when we’ve cleaned up the accounts of these power companies – under government they didn’t publish accounts for maybe three or four years and they were not investment grade – we’re going to list these companies on the Nigerian Stock Exchange.

A pension fund can buy the shares, and these companies will be issuing bonds so pension funds will be able to get involved.

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2000 Became an associate director of KPMG in London 2006 Named director for corporate finance at KPMG in Dubai 2009 Appointed managing director at UBA Capital

COUNTRY FOCUS

an exporter of cement because government introduced the right policies to promote local production of cement.

The same is happening in agriculture where, thankfully now, incentives are being provided to farmers in a way that bypasses the fraudulent practices of the past. The central bank itself has taken a more active developmental role by introducing all these special funds that will provide low-cost money to certain sectors of the economy.

At the same time, government is closing the loophole that meant that banks can make easy money by just going to finance government deficits and not doing very much with the money [...] So you have to provide an incentive for banks to take the additional risk of lending to the real sector. It’s happening, but there are many more reforms to come.

And the other thing is because the banks are now quite large, they can’t sit on all this money [...] You have to deploy funds, so many of them are having to look at small and medium-sized enterprises and more retail-type banking. If you have a large population, you have to bank that population profitably.

Would tax revenue be a route through which government could wean itself off oil money?

They have an opportunity to do that because the rebasing has shown this is an economy of almost $600bn and there’s economic activity that’s grown that has not been taxed. We have a tax collection rate of about 12%, which is one of the lowest in the world – in fact one of the lowest in Africa [...] So it means there’s a lot of work to be done. That’s why running an oil-based or natural resource-based economy makes you lazy – because you don’t have to put the administrative systems to allow efficient tax collection. ● Interview by Nicholas Norbrook

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COUNTRY FOCUS

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INTERVIEW

Corneille Karekezi Managing director, African Reinsurance Corporation

INSURANCE DEVELOPMENT HAS TO BE TOP-DOWN The head of the Nigeria-based reinsurance company says that governments are failing to do enough to strengthen the industry and to encourage people to buy insurance products

M

ostcarsownersdonothave it. Plenty of small businesses lack it. A majority of people have not got it either. On the whole, insurance is not very common in Nigeria. Expanding coverage will take a cultural shift from the government, those taking out policies and the insurers themselves, says Corneille Karekezi, who runs the African Reinsurance Corporation.

The informal sector remains a stumbling block for many insurers.

“The bigger the formal sector you have, the more interaction there is with the banks.” Insurance penetration in the majority of African countries remains low. The continental average penetration rate – South Africa excluded – is 0.6% for non-life insurance and 0.3% for life insurance, according to a reportfromauditcompanyKPMG. InNigeria,thecontinent’slargest economy,insurance’scontribution to gross domestic product (GDP) hovers around 0.6% despite attempts to grow the industry. “Insurance must be even smaller than Nollywood,” Karekezi jokes. But it is true, and the film industry is indeed contributing more to GDP, at 1.4%, according to data from the National Bureau of Statistics.

Recent studies found that only one out of eight cars in Nigeria is insured. It is a major problem for a country with poor roads and frequent car accidents. Karekezi

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64

says that insurers and regulators are fighting back with a campaign to raise awareness.

“The National Insurance Commission (NAICOM) doesn’t have its own arms, legs and eyes. Its heart is the culture, [and] the average Nigerian thinks that God will take care of the future. For now, NAICOM is just regulations,” says Karekezi. He points out that while the average middle-class Nigerian may own a car, television and house, most lack insurance.

“People have lost faith in insurers because they don’t pay.”

Karekezi argues that the insurance regulator and government should be more assertive. “How can we make sure that when we

Nigeria’s insurance industry contributes less to GDP revenues than the Nollywood film industry harvest [crops] we put aside some seeds for the next season? People don’t do that. You’ll need government agencies in the area to manage that risk [and] insurance against drought,” he says. “You could impose insurance on people to whom you have given seeds, whether it’s a gift or donation. Intelligent and smart compulsory insurance will benefit people.”

But insurance companies would have to meet customers half way, and that would mean THE AFRIC A REPORT

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less paperwork and lower premiums. Again, it falls to the regulator to make sure these processes are duly managed, he explains.

Karekezi says that African insurers can look to the continent for inspiration. South Africa has developed a mature market with tailor-made products to suit a number of different demographics, he adds. “There is insurance for funerals, people with diabetes and AIDS. They [insurers] are attacking the niches because the general public is insured.”

Nevertheless, the rest of Africa is attracting a lot of investment interest. A number of insurance companies are seeking to invest an estimated $3bn. Despite much interestfromabroad,Karekezisays, local companies are still dominating the market.

But companies can only do so much. Morocco’s government has a comprehensive five-year insurancedevelopmentplancomplete with targets. The country currently has an insurance penetration rate at 3.1%, and companies such as Wafa Assurance and Saham are increasingly acquiring firms in neighbouring countries and across sub-Saharan Africa. “Insurance development has to be a top-down approach,” he concludes. “It’s a macro thing, but unfortunately many countries do not think about that.” ● Billie Adwoa McTernan in Lagos

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66

COUNTRY FOCUS

NIGERIA

OPINION

Morten Jerven Associate professor, Simon Fraser University

NIGERIA’S POLITICAL AND STATISTICAL REVOLUTIONS

O

neSundayafternooninApril2014, thesize of the Nigerian economy nearly doubled.

Yemi Kale, director of the Nigerian Bureau of Statistics (NBS), announced that Nigeria’s new gross domestic product (GDP) for 2013 was N80trn ($510bn), compared with the old estimate of N42trn.

This statistical earthquake not only cast great doubt over comparisons of wealth and poverty in Africa and beyond, but the GDP rebasing also had geopolitical importance. According to the new numbers, Nigeria had leapfrogged South Africa to become the largest economy in Africa.

“Impossible!” cried some. “Outrageous!” cried much of South Africa. Such statistical news seems to make a mockery of any objectivity with regard to numbers and provides the perfect hook for media stories of lies, damned lies and statistics, and the oh-so-familiar scenario of a statistical bureau catering to political leaders. For most observers it is hard to comprehend the difficulty of putting the complex social and economic reality of the biggest economy in Africa into concrete numbers. In Nigeria, the total size of the population has been fiercely contested since the 1960s. The poverty rate is anybody’s guess, and calculating the total size of the economy remains a work in progress.

Nevertheless, the GDP revision was both long overdue and widely anticipated. The NBS had been using a 1990 benchmark year estimate to calculate GDP and economic growth. The real shock was not that the upward revision was so large but that this benchmarkhadnotbeenupdatedfor suchalongtime.

In 2011 Kale became statistician general of Nigeria. Many people regard economic statistics as inherently objective, but that is not the case. Local politics, global politics and the availability of solid information determine their quality. These variables make the job of any chief statistician that much more challenging.

Kale was apprehensive before announcing the new GDP numbers in 2014. He had already had to delay the publication of the figures, which were anticip-

ated since 2010. “I was embarrassed six times,” he explains. But when he saw the size of the change he wanted to sit down and double-check all the numbers himself. “We were afraid that the numbers would be politicised,” says Kale. He feared suggestions they had been cooked up to give the sitting politicians an artificial boost.

Contrary to what some have claimed, the NBS does not need a formal endorsement from the International Monetary Fund (IMF) and the World Bank to issue new numbers. Kale anticipated that an informal approval from such institutions was necessary nevertheless. “I understood the geopolitical significance.

We invited the African Development Bank, the World Bank, even economics professors in Nigeria, so that they could all see the numbers. The IMF wanted us to wait until the summer to announce so that their technical consultant could have a final look, but [finance minister] Ngozi Okonjo-Iweala asked whether we were ready. And we said: ‘Yes, we are ready,’ and so we released the new numbers. It was important to get them out early before it got politicised because of the [oncoming] elections.”

“If I am going to do this job properly, I need to be ready to lose my job,” Kale argues Talking about the 2015 election of oppositionist and former military leader Muhammadu Buhari, Kale says: “Politics in Nigeria is maturing. This time the debates were often issue-based rather than just based on identity. This means that politicians are more often evaluated on the basis of their performance, and therefore statistics become part of the debates.”

Kale points out that his office and the statistics it produces are praised when the numbers suit the political agenda of a concerned politician. But when his numbers put politicians in a bad light, they are quick to accuse him of distorting the facts.

During the 2015 election campaign, former central bank governor Charles Soludo attacked finance minister Okonjo-Iweala for cherry-picking statistics produced by Kale’s agency to make her case.

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Okonjo-Iweala responded fiercely, using statistics more convenient for her case while also criticising the work of Kale and his colleagues.

Particularly contested in the debate were poverty rates.Inthe exchange,Soludo referred toNBSstatistics that said poverty was 75%, whereas Okonjo-Iweala quoted World Bank data putting the figure at 35%.

The two surveys were not comparable, and Kale was not comfortable with either of them.

“I was very upset,” Kale explains, recalling the incident. “I was called upon to respond, but we hadtostayoutthedebate.Bothparticipants attackedthestatisticsputoutbytheNBS. They should have known better but did it for purely political reasons.

Data was not the issue; it was politics. But it was hurting me and my office. I was not happy.”

Kale’s job is complicated by the fact that there are many issues on which reliable data are hard to come by, such as the poverty rate. When asked what we actually know about poverty in Nigeria, Kale says: “We don’t know. That’s the short answer.”

Kale and his office are entitled by law to correct and comment on erroneous use or wrong interpretations of their data, but they choose their fights carefully. “We intervene when there are statements such as ‘NBS numbers say…’ and it is wrong, but we cannot deal with every issue. We are also mindful of not pushing our legal entitlement too strongly,” he says.

Kale is careful to underline that there is no political tampering with statistics in Nigeria, but that does not mean that politicians do not try. “Politicians call and say that they are unhappy about this and that statistic and that it is damaging their political ambitions of getting re-elected. I am sorry, but we went to the field and this is what we found.”

If GDP is hard to estimate, population is harder because all of Nigeria’s censuses have been heavily contested. Between the census held by the colonial authorities in 1953 and the census held in 1962, Nigeria gained independence. In 1953, the population correctly anticipated that the census would form the basis for estimating tax receipts, so people tried to avoid being counted.

In 1962, the census would be used to determine federal expenditure and political rights. The 1962 population count was rejected, and a new census was called for in 1963. The end result was a count of 30 million in 1953 and an almost doubling to 56 million in 1963. The census was widely considered fraudulent and, since then, it has been impossible to agree upon the size and distribution of the population.

Kale has talked about the well-known problem of the population of Lagos being underestimated.

During a census, people would leave Lagos to be THE AFRIC A REPORT

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counted in their home state in order to give their home state the benefit.

The problems with population counting are so endemic that the National Population Commission has for decades been an independent entity. The upside for the NBS is that it does not get tainted by the bad reputation of the population commission.

The downside is that the NBS has no influence over these statistics. “If anything, I think that population is overestimated now. The vital statistics system is not sufficient to generate population growth data, so it has only projected 3% flat and unchanged growth since 2006. That assumes that there are no changes in mortality rates and fertility rates since 2006.” A new population number is due in 2016, and current projections indicate a population of almost 174 million in 2013.

The job has taken its toll on Kale, whose term in office expires in 2016. “If I am going to do this job properly, I need to be ready to lose my job,” he argues.

He had already offered his resignation when the integrity of his office was questioned in the squabble between Soludo and Okonjo-Iweala.

Will he take another stint? “Right now, I am tired.

Maybe someone else should have a go,” he says.

There is a lot of talk of the ‘data revolution’ and calls for data scientists to solve development problems.

Come 2016, there may be some big shoes to fill. ●

AN EMERGING COUNTRY BY 2 0 2 0

WHY INVEST IN CÔTE D’IVOIRE ≥ A far-reaching government programme

≥ West Africa’s economic engine

≥ Legislative reforms for incentives

• An ambitious strategy to become an emerging country by 2020

• West Africa’s economic engine (ECOWAS, 15 members, 300 million people)

• Tax and customs breaks during the investment period

• A National Development Plan (PND) in two stages: 2012-2015 and 20162020 • 2012-2015 PND investments stand at €16.7 billion

• The French-speaking sub-region’s biggest economy (WAEMU, eight countries, 100 million people)

≥ A high-potential domestic market

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• The World Bank’s Doing Business report has praised the changes in the business environment: • Côte d’Ivoire has ranked among the world’s Top 10 reforming countries for two consecutive years • It has risen 30 spots in two years • It has climbed 135 places in the “Ease of Starting a Business” category

≥ An Airbus A380 at Abidjan Airport

≥ Appropriate infrastructure

GOALS OF THE 2012-2015 NATIONAL DEVELOPMENT PLAN

• A domestic road network and efficient links to neighbouring countries • Competitive ports

• People living in harmony in a safe society under good governance (9.56% of investments)

• International airports • Healthcare facilities • Universities and graduate schools NABIL ZORKOT/LES ÉDITIONS DU JAGUAR

• 23 million people, whose buying power has risen by 15% in the past three years • The economy is growing by 10% and the population by 2.6% a year, which means per capita GDP will double between now and 2020

• Specific breaks for SMEs and SMIs

• A regional integration policy that fosters economic growth

• Private investment, now accounting for 62% of the total, will rise to 70% by 2020 • Growth has bordered on 10% a year since 2012, which means Côte d’Ivoire has one of the world’s most dynamic economies

• Total exemption on profit, patent and property taxes for five, eight or 15 years (depending on the area of operation)

AFP/ SIA KAMBOU

• Safety for people and property

• Higher, sustained production of wealth, fairly distributed to all (63.82%) • Equal access to quality social services for everybody, especially women, children and other vulnerable groups (14.58%) • People living in a healthy environment with a decent quality of life (9.37%)

≥ The new Henri Konan Bédié Bridge interchange

• Repositioning Côte d’Ivoire on the regional and international stage (1.77%)

AN EMERGING COUNTRY BY 2 0 2 0 NABIL ZORKOT/LES ÉDITIONS DU JAGUAR

≥ Investment opportunities in growing areas

≥ Côte d’Ivoire, the world’s leading cocoa bean producer, processes some of its output.

≥ An adapted banking and financial system • A common WAEMU zone currency at fixed parity with the euro • Competitive banking and insurance networks • Home of the BRVM, the eight WAEMU countries’ regional stock exchange • Headquarters of the African Development Bank

• Côte d’Ivoire is the world’s leading cocoa producer (1.5 million tonnes a year), second-leading cashew nut producer (450,000t), Africa’s leading rubber producer (305,450t) and the world’s leading exporter of palm bunches (1.75 million tonnes).

• In the food industry, the goal is to process 65% of cocoa (35% today) and 100% of cashew nuts (14% today) by 2016.

• Iron, gold, manganese, diamonds, bauxite, copper, oil and gas: a rich, varied potential • Services are growing at a steady pace. This sector already accounts for half of Côte d’Ivoire’s GDP and is expanding at the rate of over 15% a year.

THE ONE-STOP WINDOW FOR PRIVATE INVESTMENT The Centre for the Promotion of Investment in Côte d’Ivoire (CEPICI) is a platform for meetings, exchanges and dialogue between the public and private sectors.

It also hosts the one-stop window, which assists investors and companies with their administrative procedures. Its performance speaks for itself: 6,487 businesses set up, 426 billion FCFA in investments approved and the creation of 5,243 permanent jobs expected in 2014.

www.cepici.gouv.fr

• The private sector has invested a total of €5.8 billion in 13 major energy projects • 13 major transport projects (€3.5 billion) • Public-private partnerships, tapping a total of nearly €15 billion, are underway in food processing, ICT, the environment, urban planning, health, education and tourism

≥ Côte d’Ivoire has competitive ports.

DIFCOM/FC - PHOTOS DR SAUF MENTION.

≥ Developing public-private partnerships

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MOROCCO

A BATTLE ROYALE Three Moroccan banks – one part owned by a royal holding company – have led an expansion charge into sub-Saharan Africa. Now, they have changed tack, seeking slower growth and consolidation

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o give them valuable experience and seize opportunities beyond the domestic market, the government of an Asian country with a medium-sized economy decided in 1999 on a ‘going out’ policy for the country’s corporations. China’s banks and construction firms are now active on every continent, and the former medium-sized economy has become the world’s second largest.

Given the difference in scale, Morocco’sambitionsaresomewhatmore modest. But its own version of that ‘going out’ policy can be seen in the encouragement with which King Mohammed VI tours sub-Saharan Africa (SSA)with a gaggle of Moroccan businessmen in tow.

“Africa must trust in Africa,” thundered Mohammed VI on a trip to Côte d’Ivoire’s capital, Abidjan in 2014, speaking both to North African businesses still chary of the trip over the Sahara and prospective clients south of the desert.

Two banks in particular have crossed swords over the prize of emerging demand for banking services in SSA. Publically-listed Attijariwafa Bank (#7), is owned by a holding company, the Société Nationale d’Investissement, controlled by the royal family. The second is the private-sector owned Banque Marocaine du Commerce Extérieur (BMCE, #13), which decided in March

a quarter of the market (see box).

Morocco’s banks are in competition for clients, but they often seem to be acting in unison. Abdou Diop, president of the South-South commission of the Confédération Générale des Entreprises du Maroc, argues the issue of competition between the three banks south of the Sahara is not clear cut: “They manage their interests so as not to step on each other’s toes. They are working in three different niches and are focused on different geographies.” He adds that the growth potential is large as the banks have different strategic approaches. “Attijariwafa is more based on retail banking. BMCE enters a market as a minority shareholder and builds up slowly until it is the majority partner.

BCP buys a bank and then develops it.”

By Nadia Rabbaa in Casablanca to rename itself BMCE Bank of Africa.

BMCE is the majority shareholder of the Bank of Africa (#37) and is refocusing its activities on the continent.

The two Moroccan banks have different regional strengths. North and Central Africa remain the preferred territory for Attijariwafa, and BMCE is gaining ground in Anglophone East Africa. West Africa is an area of intense competition. In Côte d’Ivoire, for example, a third Moroccan group – Banque Centrale Populaire (BCP, #9) – is pushing both aside.

Some countries are seeing the impact of the Moroccan competition more than most. In Mali, the three Moroccan banks have subsidiaries: Attijariwafa is present

MANAGING RISKS Morocco’s central bank, the Bank Al Maghrib (BAM), is also influencing the overseas expansion of Moroccan banks.

It has imposed limits on foreign exposure to avoid upsetting the balance of the national banking system. “We look at the competition in an indirect way to see if it implies too much Attijariwafa, BMCE and BCP risk taking,” says Hiba Zahoui, combined control more than half deputy director of the banking supervision unit in the BAM. of all branch networks in Mali She adds: “The more a group via the Banque Internationale pour le is spread over multiple jurisdictions, Mali; the BCP via Banque Atlantique; and the more complex and long-winded the BMCE via Bank of Africa Mali (#179) harmonisation of procedures will be.” and the Banque de Développement du Indeed, since the governance crisis Mali (#184), also controlled by BMCE. in West Africa’s Ecobank (#14) in early 2014, the BAM has been more active in The three banks control more than half of the branch network in the country the supervision of Moroccan-owned bank subsidiaries and has formed workand manage two-thirds of bank assets. ing groups focused on each bank that In the most enticing of Francooperates elsewhere in Africa. African phone markets, the rapidly growing Côte d’Ivoire, banks owned by the three operations outside of Morocco now Moroccan musketeers have cornered represent about a quarter of the ● ● ● THE AFRIC A REPORT

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● ● ● profits that Attijariwafa, BMCE list. Attijariwafa’s insurance arm Wafa and BCP make.

Assurance might be a leader at home, Morocco’s banks have entered an era but it has mostly struggled abroad. Out of consolidation in Africa. Attijariwafa ahead is Finance Com, the holding co-chief executive Ismail Douiri tells company that owns BMCE. In June it created an Africa-focused joint venture The Africa Report that further expanwith Saham Assurance. sion is not a priority because, “we are While Moroccan banks are bringing in a period where the driving focus is EXPANDING the acceleration of growth where we are more competition to Africa’s markets, EMPIRES currently present.” He says the bank will are they changing business practice finish up some expansion projects that in Africa? One Senegalese businessAttijariwafa have already begun, such as in Benin man who requests anonymity says: BMCE and Chad. BCP officials also plan to limit “I don’t know why Attijariwafa keeps their African growth. putting Moroccan exNevertheless, Mopats in charge of local International focus Extending its reach rocco’s banks are looking branches, especially Attijariwafabank, part owned by BMCE Bank changed its name at bustling Anglophone here where there is to BMCE Bank of Africa (BMCE BOA), the royal holding group SNI (Société markets with envy. Has real banking knowin March this year, illustrating where Nationale d’Investissement), is BMCE stolen a march on how. There have been Morocco’s largest bank with 6.8 it sees its future. The Moroccan group Attijariwafa because of its strikes and waves of has long held a stake in BOA, million clients and more than 16,000 activities in East Africa, departures, like at the employees around the world. The bank becoming the majority shareholder picking up the codes and CBAO Attijariwafa in in 2009. It now owns 70% of BOA’s has offices in 23 countries, including language of global busiDakar.” Douiri says assets. BMCE has around 11,000 staff 11 African countries. A pioneer in Africa, the group benefited from the and is the only Moroccan group ness? Douiri does not see that the company present in East Africa, having a total withdrawal of the French bank Société it as a problem: “Our exdoes not have a policy Générale in late 2008 and bought up of 28 subsidiaries worldwide, of which ecutives speak English. preference for em14 are in African countries. its subsidiaries in francophone Africa. ploying Moroccans in And there are greater similarities between, say, its African operations.

Benin and western NiHowever, many Moroccan banks have an Africa strategy without looking geria than between Benin and Tunisia.” at the Nigerian market.” But while he expanded internationally without Other banks are less sure about the sees potential in Nigeria’s low banking the skills necessary to navigate other penetration rate, he argues that the cortransition to the Anglophone marcultures. They are learning on the porate sector is overbanked. “Yes, we ket. A senior executive at one Morocjob now. For example, Attijariwafa’s will go in, but it is all a matter of how,” can institution, says: “We have begun Douiri explains: “We had no idea that thinking about Anglophone countries, Douiri concludes. intra-African migration was so large.” but it will be more difficult as all our To meet the needs of African migrants, Entering this Nigerian market has also the bank has put in place a payments been on BMCE’s agenda, although this procedures are in French. But it’s not seems now to have stalled. Competiplatform that links Gabon and Mali. insurmountable.” tion is set to increase in terms of the The Moroccan push is probably not The key question then is what about products Moroccan banks offer, with neo-imperialist, but more learning is Nigeria? “Nigeria is on our radar,” explains Attijariwafa’s Douiri. “You can’t insurance products foremost on the certainly required. ● SOURCES: ATTIJARIWAFA/BMCE

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MOROCCO’S ECONOMIC DIPLOMACY IN CÔTE D’IVOIRE IN APRIL AND MAY, the Côte d’Ivoire government raised 132bn CFA francs ($222m), with 90% coming from Moroccan institutions.

Actibourse (Bank of Africa), Africaine de Bourse (Attijariwafa Bank) and Atlantique Finance (Banque Centrale Populaire, BCP) each took a 40bn CFA tranche of bonds. Without the Moroccan intervention, such a large amount may have been hard to raise, especially under current market conditions. Insiders

see the hand of the palace in pushing such an orderly uptake of the Ivorian paper, pointing to the fact that King Mohammed VI visited Abidjan a few weeks after the issue.

Certainly, the Moroccan authorities have a very active economic diplomacy agenda.

Souleymane Diarrassouba, chief executive of Atlantic Business International (#73), the BCP-owned holding company that controls Groupe Banque Atlantique, agrees: “The arrival of the Moroccan banks has been good for the

country. They have created more economic and commercial links between the two countries and created more business opportunities.”

He points to the experience Moroccan banks have in retail banking and financing small and medium-sized enterprises, which they have duplicated in Côte d’Ivoire while adapting techniques to local realities. For him, the real acid test has been in the banking penetration rate, which has significantly risen – albeit from a low THE AFRIC A REPORT

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level – sincethe arrival of the Moroccan banks.

Banking penetration stood at 5% in 2004 and reached 12% in 2014, according to official statistics.

What about the local banks that complain when the three Moroccan banks put up advertising welcoming the king of Morocco to Abidjan?

Diarrassouba laughs away these concerns: “Morocco is a brother country and a friend. And when the king of Morocco comes to Côte d’Ivoire, he is at home.” ● N.R.

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WHILE MICRO AND LARGE COMPANIES ARE GETTING FINANCE, MEDIUM-SIZED ENTREPRISES ARE SUFFERING

ILLUSTRATION BY SÉVERIN MILLET FOR TAR

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ETHIOPIA

SPLENDID ISOLATION It may be small, constrained by regulations and slow to develop, but by some measures Ethiopia’s network of privately run banks is one of the healthiest to be found in Africa

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he Ethiopian state has carved out a major role for itself in the financial sector, but privately owned banks are still managing to do well. With well-capitalised portfolios and profit margins exceeding continental averages, Ethiopia’s public and private banks are enjoying a period of strong growth. Deposits are on the rise, and an International Monetary Fund report last year found that “return on assets and return on equity showed comfortable performance, at 3.1% and 44.6%, respectively.” This is good news for Ethiopia, which boasts one of Africa’s fastest-growing economies.

Still, Ethiopia’s private banks are lucky the sector is closed to foreign competition

business owners are paying the price.

Among the many challenges that private enterprises face in Ethiopia, “access to finance ranks top,” says Getachew Regassa, secretary general of the Addis Ababa Chamber of Commerce, which counts about 15,000 companies as members. “To start with, the credit system is based on collateral, so collateral itself is an issue, and the other issue is the availability of credit to different segments of the private sector.”

Getachew adds that while private banks do not seem to discriminate according to sector, size matters. Large companies have easy access to credit, while tiny businesses benefit from the government’s investments in microfinance. This leaves medium-sized companies out in the cold. The World Bank made a similar assessment this year, noting that banks “tend to see small and medium enterprise lending as having higher risks and lower profitability than lending to large enterprises.”

NO NEED FOR RISK Addisu Haba, who chairs the Ethiopian Bankers Association, says it makes sense for private banks to avoid risky investments, especially since there is no shortage of clients seeking loans.

“The problem is not that we are discriminating because they are small or medium enterprises,” he explains. “If you don’t have people with collateral, then you go to someone who has it.”

As the president of Debub Global Bank, which is less than three years old, Addisu knows the challenges faced by small private banks, which are dwarfed by the state-owned Commercial Bank of Ethiopia (CBE, #23). In recent years, all three public banks, which include the Construction and Business Bank and the Development Bank of Ethiopia, have accounted for at least 60% of loan disbursals. The CBE alone has more than 800 branches, while not one private bank has reached the 200-branch benchmark.

because they are not yet ready to compete with their continental and global peers. The government in Addis Ababa only allowed private banking in 1994, so the country’s 16 institutions are young.

They are also constrained by a regulatory framework that leaves them unable to offer credit cards or Private banks can compete by investment banking services. offering better customer service Compared to more mature or focusing on a certain sector institutions in countries like neighbouring Kenya, Ethiopia’s Private banks can compete by offerprivate banks have a long way to go. ing better customer service, focusing The private banks’ health is partly a result of protective government policies on certain sectors or simply having a and the small size of the sector as a branch in the right place. But comwhole. But that leaves this country of 95 petition is dampened in part by a low million people vastly under-banked, and interest rate for savings, which is ● ● ● THE AFRICA REPORT

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set below the rate of inflation by the National Bank of Ethiopia (NBE), the country’s central bank.

“Public or private is not the main issue,” argues Alemayehu Geda, an economics professor at Addis Ababa University. “If you are a private entrepreneur, what matters is access to the money and the cost of borrowing, which is about the same [from either a public or a private bank].”

Still, many private bankers remain optimistic about their prospects. Helaway Tadesse is a senior vice-president at Zemen Bank, which caters mostly to corporate clients. He says banks are increasingly competitive when it comes to interest rates paid on deposits, and that these are now positive in real terms for long-term savings deposits. He adds ●●●

that continuing economic growth bodes well for the sector as a whole, noting that returns on equity have fallen somewhat from their peak of a few years ago but are still at comfortable levels. “Operationally, banks are not exposed to serious risks as lending is funded fully by customer deposits, as opposed to, say, short-term lines of credit,” Helaway says. “And there aren’t what you would consider very risky products or instruments in the system other than conventional loans.”

But the sector has not been without controversy. One issue is the lack of foreign exchange, which is steered toward government-prioritised projects.

Although trade finance constitutes one of the private banks’ key sources of revenue, the dearth of foreign currency can

force importers to wait months to open letters of credit. Some analysts also recommend that the NBE adopt a more flexible exchange rate, which could boost exports by allowing the Ethiopian birr to drop in value.

REGULATORY SQUEEZE A new issue that pits the state against private banks arose in 2011, when the governmentmandatedthatprivatebanks spend 27% of their loan portfolio on lowinterestbondsfromthecentralbank,thus constraining their liquidity and lending capacity.Anda2011increaseinminimum paid-upcapital,from75m($3.6m)to500m birr, sent smaller banks scrambling for moreshareholdersandfunds,andmadeit difficultfornewcomerstoenterthesector.

The regulation met with resistance, and bankersarestillpushingformeasuresthat would either increase yields or place time limits on the bond obligation.

The Addis Ababa Chamber of Commerce, too, has become an advocate for privatebanks.Inrecentyearsithashelped convince the NBE to ease liquidity requirements and played a key role in challenging the 27% rule on bond purchases.

But Addisu, who chairs the Ethiopian Bankers Association and was president of Bank of Abyssinia when the measure was introduced in 2011, says the sector has learned to live with the regulation – and may even have been strengthened by it. “We thought that it would choke the growth of the banking system as a whole,” he says. “So we worked hard to mobilise more deposits. This country is under-banked, so there was always room for us to mobilise more resources.”

While the government argues that regulations are in place to lessen risks for banks and to steer finance toward favoured projects (see box), private enterprises still struggle to access the credit they need. Proponents of the system argue that things are moving in the right direction. “Regulatory changes are slowly working to make the financial environment more conducive for risk taking,” says Zemen Bank’s Helaway. He points to a credit bureau that is capturing a growing share of businesses, as well as a trend toward better record-keeping for tax-compliance purposes. “Over time, these developments, plus the intensifying competition among banks, will propel private banks to move beyond just picking the safest and most traditional credit requests.” ●

INTERVIEW

Sufian Ahmed Ethiopia’s minister of finance

THE STATE SUPPORTS THE PRIVATE SECTOR THERE IS A COMMON MISCONCEPTION about banking regulations in Ethiopia, finance minister Sufian Ahmed tells The Africa Report. In a country with impressive economic growth but very little private-sector dynamism, a 2011 regulation mandated that private banks devote 27% of their loan portfolios to low-interest treasury bills.

The measure constrained access to credit, and many assume those funds are channelled into the Grand Ethiopian Renaissance Dam, a flagship state project that will cost more than $4bn and generate up to 6,000MW of power.

Sufian corrects this assumption, saying the 27% rule “tells the private sector banks to allocate a portion of their loans, not to the government but to private sector

[entities] that are engaged in investment in manufacturing. The channelling mechanism is that the central bank issues a bond, the money goes to the Development Bank of Ethiopia and ends in the private sector.

It doesn’t end here in the treasury. It finances long-term investment in manufacturing.”

The regulation, then, is part of the plan to transform Ethiopia’s economy from the top down – not by funnelling money to the state but by fuelling capitalintensive sectors that are beneficial in the long run.

And in any case, adds Sufian, the banking sector is not struggling – far from it. The banks “are well-capitalised and they are very, very profitable,” he adds. “The profitability rates for Ethiopian private

banks are much higher than the average for Africa. And they finance 99% of trade. Whether it is import or export service, they finance it, which is good for the economy.”

Other regulations, including the prohibition on foreign competition, tough restrictions on investment services and increased paid-up capital requirements, are still necessary to protect and foster the growth of the financial sector, argues Sufian. This does not mean they will be in place forever. “[For] securities, insuring and reducing the risks, banks should be properly regulated.

So we are creating this capacity, and we think we are in the right direction.

When the time comes, I think the central bank will amend its regulations step by step.” ● J.F. THE AFRIC A REPORT

Jacey Fortin in Addis Ababa ●

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SMEs

SMALL STRUGGLES, BIG REWARDS Governments and other institutions are looking for ways to help small companies, which are major creators of employment and economic growth, to access funding from commercial lenders

N

nakeme Gbelebu pores over a list.

It is a feeding schedule for fingerlings, the small fish he hopes to grow into a commercial catfish catch at his fish farm outside Benin City in Edo State, Nigeria. He has three ponds but has run out of money to buy the aerators for a fourth pond. And so for now, he continues at his day job providing administrative support at a big hotel in Lagos.

Finding jobs for the 350 million Africans who will hit the job market over the next three decades has policy-makers up in cold sweats at night (see page 16).

But while some reach for large-scale industrial policy to focus the economy squarely on manufacturing or agriculture to create jobs, there is another avenue to consider: small and medium-sized enterprises (SMEs).

ECONOMIC LINCHPIN With inclusive growth the watchword for leaders from the African Union to the African Development Bank (AfDB), supporting SMEs has become a cause célèbre and with good reason – they really are the backbone of employment.

“In South Africa, SMEs employ 61% of the total population,” says Eliki Boletawa, a team leader at the Alliance for Financial Inclusion (AFI).

But while nearly everyone can rally behind the rhetoric of supporting small businesses, bankers are yet to fully embrace them. A recent AfDB report outlined some of the financial hurdles: less than a quarter of African SMEs have a loan or line of credit, compared to nearly half in comparable developing economies. In addition, in sub-Saharan Africa, 45% of firms cite access to finance as a major constraint to growth. An estimated 84% of investments in SMEs in Africa are financed through internal funds. The Benin City catfish farm is a prime example. “I have never even asked a bank,” smiles Gbelebu. “They don’t look at us.”

So how can small companies get over traditional hurdles like a lack of collateral and a paucity of information to provide to potential lenders? Technology, government support and a new attitude from a corporate banking sector that now sees SMEs as an opportunity are helping to turn the tide.

The situation faced by SMEs in South Sudan might seem exceptional, as the country has spent more than half of its short existence mired in civil conflict. In the three worst-affected states – Upper Nile, Jonglei and Unity – banks have been overrun and looted, and financial services have halted. But while security remains the top priority, businesses across the continent will recognise the challenges elsewhere in South Sudan.

“Banks are sitting on a lot of liquidity, [but] they are wary of lending,” explains James Garang, an assistant professor at Upper Nile University, “and they won’t lend to SMEs without collateral.” With land titling still rudimentary, using property as collateral is out of reach for most small businesses in South Sudan.

Banks are also chary of lending to individuals who might seek to disappear.

“Suppose I take a loan in Juba and then run away to another state like Northern Bahr el Ghazal. The bank has no way of finding out where I am and even if

they do, it is hard to bring me to court,” Garang concludes.

But even when there are strong identity checks and credit bureaux that help give comfort to banks, financial institutions are not keen on lending to SMEs – partly because these companies often lack well-defined organisational structures, bookkeeping and solid business plans. Helping re-engineer SMEs into viable companies is a key focus for the AFI’s SME working group, which aims to bring lessons from around the world to its South African and Kenyan participants.

Twokeyproposals,whichhaveworked in many other countries, are SME support bureaux and credit-guarantee schemes. The bureaux help SMEs in the traditionally expensive task of creating modern and transparent financial accounting practices, a necessary leap towards convincing a banker to part with his cash. By centralising this task, a government can help many SMEs, as well as provide assistance with other elements like market research, seeing what

ENTREPRENEURSHIP BY SECTOR Results of a survey of more than 2,000 entrepreneurs across 38 countries Manufacturing

9%

Agriculture

14% 5%

Services 27%

Education

18% 27% Healthcare

ICT SOURCE: TONY ELUMELU FOUNDATION 2015

THE AFRIC A REPORT

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FINANCE

ILLUSTRATION BY SÉVERIN MILLET

loan applications by the nine leading commercial banks between 2011 and 2014 was 50%; and only 14% of SMEs had access to a loan or overdraft account. SMEs in Nigeria could clearly use a support bureau, with around 95% of them lacking financial statements or reporting, according to the report.

Elsewhere, however, corporate banks and other institutions are starting to seize opportunities. In Kenya, the ease with which money now circulates around the economy due to mobile-money schemes like M-Pesa facilitates small businesses, especially now that agency banking – where a mobile-money vendor can perform limited banking operations – is commonplace. Where before a business might spend half a day travelling to a bank branch, “they now have them at the end of their street,” says Upper Nile University’s Garang, “and they can send money to suppliers and customers just as easy.”

products might work in which segments and linking SMEs with potential clients.

Credit-guarantee schemes are also widely spread in developing countries, whereby a government takes some of the credit risk onto its own balance sheet.

For this to work and not become riddled with corruption, “it needs high-level support”, says AFI’s Boletawa. “In Malaysia, the prime minister along with ministers fromsevenotherportfolioscametogether and said we need to have this.” A subsidiary of a Malaysian development bank created a register of SMEs and acted as a link between banks and borrowers, assessing the proposalsfrom theSMEs then liaising with the financial institutions and guaranteeingaround60-70%ofeachloan.

SME SUPPORT NETWORKS Both these routes require significant government support. Morocco has its own version of an SME bureau and is also supporting SMEs with legislation, another route for using the public purse to back small businesses. Since 2014, THE AFRICA REPORT

●

FINANCE SPECIAL

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KEY TO GROWTH Equity Bank (#66) is the most aggressive Kenyan commercial lender to SMEs – and owes its graduation into the ‘big bank’ class precisely because of its large SME loan book. In 2012, “Equity Bank made 166,000 SME loans valued at over $680m,” writes James Mwangi, Equity Bank’s chief executive.

And the Nairobi-headquartered lender has internalised the lessons of both technology and the need to extend help to SMEs in structuring their businesses. Its agency banking model has prospered in the markets in which it operates – Kenya, South Sudan, Tanzania, Uganda and Rwanda – and it ensures that SMEs receive help in de-

20% of government contracts are reserved for SMEs. The Casablanca Stock Exchange (CSE) is also working with the London Stock Exchange to pick groups of small companies to receive two years of business training and contacts with investors.

Karim Hajji, chief executive of the CSE, explains: “SMEs often have a problem reaching capital Only 2% of Nigerian adults markets. They are not aware received loans from a financial of the needs of investors as institution over the past year far as information, reporting requirements and strategic veloping business plans and connects business plans.” them with potential clients.

In Nigeria, even though a coordinated government approach to funding Other corporate banks abroad are SMEs has been tabled (see TAR Fintaking notice. In September 2014, Rawbank (#177) in the Democratic Reance Special 2014), small businesses public of Congo, for example, set up have yet to seduce the commercial an SME support service bankrolled banking sector. A recent report from by the International Finance Corporathe Economic Intelligence Unit hightion. Meanwhile, Ghana’s Access Bank lights some stark challenges: Only 2% tapped the European Investment Bank of Nigeria’s adult population received for a €15m ($17.3m) facility destined loans from a financial institution over the past year; the rejection rate for SME for SMEs in July. ● Nicholas Norbrook

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TOP 200 BANKS

FINANCE

A RECORD YEAR THE AFRIC A REPORT

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83

Financial institutions in our rankings reported assets of more than $1.5trn for the first time. But economic headwinds from China and the US signal troubles ahead

By Gemma Ware

SIPHIWE SIBEKO/REUTERS

A

FOR BANKS THE AFRIC A REPORT

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frica’s biggest banks enjoyed a year of buoyant asset growth. They will need it. If local currencies continue to slump against the US dollar and if commodity prices – particularly oil – remain depressed, buffers will ease the shock.

In our 2015 ranking of Africa’s Top 200 banks, based on banks’ 2014 results, total assets topped $1.5trn for the first time since our rankings began in 2006.

This rise in Africa’s bank assets marks an 8.4% increase on our 2014 ranking and a rebound after a 3.9% drop the previous year.

Across the continent, banks are continuing to profit from their lending. The total net interest income – the difference between interest earned on loans and paid on deposits – for our Top 200 banks was $76.5bn in 2015, up 25.7% on 2014.

Of this, just less than half came from South Africa-based banks, which were also the continent’s most profitable: six of the 10 most profitable banks in our ranking are South African, topped by the continent’s largest, Standard Bank Group (#1). But some banks punch above their weight when it comes to profit making: Nigeria’s Guaranty Trust Bank (#22) was the continent’s ninth most profitable.

Breaking down our Top 200 by region, all banks apart from those in Central Africa experienced growth in assets between our 2014 and 2015 rankings.

Central Africa’s weak showing is likely to be due to fewer of its banks making it onto the Top 200 list this year – 13 compared to 17 last year. They have been squeezed out as more banks make the Top 200 from North, East and Southern Africa.

84

TOP 200 BANKS

Asset growth in those banks outside South Africa has been strong due to “low penetration levels and high asset yields”, according to Kato Mukuru, head of equity research at Exotix, an investment bank.

Most governments have continued with short-term borrowing at high interest rates, leaving banks little incentive to change business models and focus on extending services to unbanked customers. Mukuru says banks have also protected their margins by managing to keep their funding costs – the price at which they finance their activities – low.

There has also been a healthy recovery in African banks’ total deposits, now standingat$1trnforourTop200banks–a figure not seen since 2011. This deposit growth was matched by an increase in lending, with both total deposits and total loans growing at just over 5% between our 2014 and 2015 rankings. To give an order of magnitude, however, China’s stock exchanges recorded $3trn in losses in two months this year – so Africa’s financial system has some way to grow.

NORTH AFRICA REBOUNDS North Africa in particular has seen a strong recovery in its deposit base this year, which stood at $361bn in the 2015 ranking, up 8.5% from $332.5bn in 2014.

Two of the top five banks that grew fastest in terms of total assets were Egyptbased: the Housing and Development Bank (#84) and the National Bank of Kuwait – Egypt (#64). But in the years since2010,ithasbeenWestAfricanbanks in our Top 200 list that have seen the fastest growth in deposits, with a rise of 112% from $78.6bn in our 2010 ranking to $167.2bn this year. Nigerian banks have consolidated their performance in the years since the bad-debt scandal of 2009.

The International Monetary Fund predicts sub-Saharan Africa to record economic growth of 4.5% in 2015, but this is subject to global risks and a tightening in the flow of financing around the world.

As the US economy continues to recover, the Federal Reserve is expected to raise interest rates before the end of the year, causing concerns among some analysts that emerging markets could be negatively affected as the value of the dollar increases. Jared Coetzer, who works on institutional sales for pan-African equities at South African-based investment banking group African Alliance, tells The Africa Report that a more expensive dollar might mean banks turn to fund themselves through euros or borrowing

CHANGE IN TOTAL ASSETS (% and US$bn) Top 5 climbers

42.01%

34.96%

47.87% 47.98%

32.72%

2,1 4 6 8 0 0

0.93

1.49

2.96

3.23

0.94

BANK OF AFRICA – MALI (Mali)

AFRASIA BANK (Mauritius)

HOUSING AND DEVELOPMENT BANK (Egypt)

STANDARD BANK MAURITIUS (Mauritius)

FIDELITY BANK GHANA (Ghana)

Top 5 fallers

CCEI BANK GE (Equatorial Guinea)

ECOBANK GHANA (Ghana)

BANQUE INTERNATIONALE ARABE DE TUNISIE (Tunisia)

BARCLAYS BANK MAURITIUS (Mauritius)

ARAB TUNISIAN BANK (Tunisia)

1.69

1.80

4.69

3.23

2.70

21.59%

17.01%

12.92%

12.59%

15.02%

Top 200 asset breakdown Southern Africa

North Africa

West Africa

Central Africa

East Africa

$1.375trn

$1.368trn

$1.448trn

$1.391trn

$1.508trn

2011

2012

2013

2014

2015

from South Africa. “For banks with large US dollar liabilities already, a continued strengthening of the dollar could lower bank equity values as bank assets and earnings growth might not keep pace with a rising debt burden,” he says.

Some African currencies are already facing turbulence against the US dollar. Central banks, including those in Kenya, Uganda and Nigeria, have moved to shore up their currencies by raising benchmark interest rates. Each troubled currency is subject to different economic headwinds: Ghana’s cedi because of a weak economy, Nigeria’s naira and the Angolan kwanza because of the fall in THE AFRIC A REPORT

the oil price, which dipped to below $40 per barrel in late August; Kenya’s shilling because of security threats denting tourism revenue; and the South African rand because of a lack of electricity.

In South Africa, Coetzer expects banks to prepare for an increase in nonperforming loans (NPLs). “We are facing an unprecedented electricity crisis and the interest rate cycle has turned higher.

The resource super-cycle has come to an end and consumers are going to feel the pinch,” he says. The slowincreasein NPLs should be offset by increases in banks’ net interest income as interest rates rise.

The South African Reserve Bank ● ● ● ●

FINANCE SPECIAL

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TOP 200 BANKS

● ● ● raisedbenchmarkrates,forthefirst time in a year, to 6% in late July.

Exotix’s Mukuru says that, so far, Ghanaian banks have been some of the “hardest hit” by currency weakness, but that “this has created strong asset growth” because banks have a lot of dollars on their balance sheets. “This has generated exceptionally high return on equity in cedis as we are yet to see a material deterioration in asset quality,” he says. He predicts, however, that this deterioration will come eventually. “To mitigate, the banks in Ghana and across Africa have been converting US dollar exposures to local currency. That is really the only way to protect themselves. The question is, are they too late?”

HEDGING FOR THE WISE Banks such as Nigeria’s United Bank for Africa (#21) have hedged to protect themselves against the low crude price and weak naira. Coetzer says the naira is expected to drop in value by up to 20% in the second half of 2015. He says that with foreign exchange assets taking up 40-60% of Nigerian banks’ risk-weighted assets in December 2014, “we have done stress tests on capital adequacy ratio levels under a devalued naira and find that there are indeed banks which may need to raise Tier 1 and Tier 2 capital.”

In East Africa, banks that have been expanding steadily during the past few years are looking further afield. Kenya’s Equity Bank Group is now #66 in our rankings, up two places on last year and a stellar climb since our 2010 ranking, when it was #103. In May, Equity Bank announced it would buy ProCredit Bank Congo in the Democratic Republic of Congo as part of a move to expand to 10 new countries in the next five years. It has Burundi and Ethiopia in its immediate sights and its eyes on Zambia, Mozambique and Zimbabwe in the medium term.

As more African governments and businesses migrate operations such as paying wages or pensions online, opportunities to leap ahead will emerge. In Nigeria, MasterCard signed a deal with the Nigerian National Identity Management Commission in 2014, branding the country’snewnationalidentitycardswith MasterCard and building-in an ability to do financial transactions. In the pilot, 13 million people received cards, with plans to extend it to another 100 million people. The banks ready to step in and process the payments will bring in new customers – and be the ones to watch. ●

BREAKDOWN OF AFRICAN BANKING ASSETS (US$bn) Total loans Southern Africa

North Africa

West Africa

Central Africa

East Africa

749

740

749

742

789

2011

2012

2013

2014

2015

Total deposits 1 012

943

968

970

1 019

2011

2012

2013

2014

2015

Total net interest income 51

55

59

60

76

2011

2012

2013

2014

2015

43%

Top 10 most profitable

Almost half the total profits generated by the banks in our Top 200 were booked by these top 10:

The gender divide Proportion of male to female bank CEOs among our Top 200

188

Bank Standard Bank Group FirstRand Group Barclays Africa Group Standard Bank of South Africa Nedbank Group First National Bank South Africa Zenith International Bank Attijariwafa Bank Guaranty Trust Bank Commercial International Bank

Country South Africa South Africa South Africa South Africa South Africa South Africa Nigeria Morocco Nigeria Egypt

Total profits

12

Profits $m 1 908 1 703 1 218 1 005 877 748 586 568 536 533

9 672

METHODOLOGY WE COMPILED OUR RANKING of Africa’s top 200 banks by sending out detailed questionnaires to more than 900 financial institutions spread across the continent. Their replies were used to create a systematic ranking of Africa’s top banks based on total asset size. Our list features only the top 200 banks. All data is communicated to us by the banks or their parent companies. These figures relate to the 2014 financial year. Where that information was unavailable we used 2013 figures, indicated in the rankings by italics. The data was converted to US$ using the exchange rates applicable on 31 December 2014 to ensure a consistent comparison.

Numbers in the ‘Rank 2014’ column refer to a bank’s position in The Africa Report’s ranking of September 2014. ● THE AFRIC A REPORT

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TOP 200 BANKS

87

If you were a Nedbank shareholder last year […] you would’ve had 23% growth during the course of 2014.” Michael W.T. Brown CEO Nedbank Group (#5)

RANK ’14

1

1

0 Standard Bank Group

South Africa

163 815 926

14 091 297

79 912 268

90 154 481

2

2

0 Standard Bank of South Africa

South Africa

97 380 704

4 925 812

68 944 832

68 866 490

3

3

0 Barclays Africa Group

South Africa

85 350 831

3 064 890

54 781 305

53 796 436

4

4

0 FirstRand Group

South Africa

81 401 108

2 572 197

59 051 369

66 137 265

5

5

0 Nedbank Group

South Africa

69 673 756

3 337 451

52 774 978

56 255 511

6

6

0 National Bank of Egypt

Egypt

65 649 096

1 171 401

18 650 673

56 254 594

7

7

0 Attijariwafa Bank

Morocco

44 371 575

2 147 642

28 163 339

28 475 240

8

9

1 Banque Misr

Egypt

38 262 785

1 242 917

7 475 429

33 498 803

Morocco

34 189 345

1 628 364

22 755 574

25 380 368

South Africa

33 593 007

-

-

-

DIFF.

RANK ’15

RANKINGS 1-40

BANK NAME

-1 Groupe Banque Centrale Populaire

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

9

8

10

-

11

11

0 Banque Nationale d'Algérie

Algeria

29 691 617

1 009 578

20 752 772

19 954 898

12

13

1 Banque Extérieure d'Algérie

Algeria

29 366 000

701 000

18 487 000

23 266 000

13

10

Morocco

27 273 740

1 269 499

17 115 100

17 777 620

14

15

Togo

24 243 562

2 279 881

12 311 642

17 436 970

15

14

-1 First Bank of Nigeria

Nigeria

23 580 676

1 324 127

11 831 861

16 566 132

16

12

-4 First National Bank South Africa

South Africa

23 387 295

2 609 044

-

-

17

18

1 Commercial International Bank

Egypt

20 056 206

872 327

6 789 698

17 010 628

18

17

Nigeria

19 330 268

1 163 967

7 695 833

14 002 043

19

20

Nigeria

17 703 962

1 078 593

6 928 338

12 791 151

20

16

-4 Crédit Populaire d'Algérie*

Algeria

17 357 460

491 789

8 680 144

13 043 581

21

19

-2 United Bank for Africa Group

Nigeria

15 000 771

1 045 031

5 820 194

12 102 878

22

21

-1 Guaranty Trust Bank

Nigeria

12 792 410

773 189

6 926 949

8 786 870

23

-

- Commercial Bank of Ethiopia

Ethiopia

11 874 156

586 893

4 386 412

9 406 093

24

22

-2 Qatar National Bank Al Ahli*

Egypt

11 620 828

116 455

5 561 865

9 679 830

25

23

-2 Access Bank Group

Nigeria

11 426 678

543 093

6 029 822

7 897 495

26

-

Angola

11 328 924

308 012

7 875 845

3 553 441

27

30

Egypt

11 021 198

253 633

4 245 718

8 986 765

28

24

-4 Banco Angolano de Investimentos

Angola

10 691 408

359 406

3 548 622

9 233 400

29

26

-3 Diamond Bank

Nigeria

10 442 560

594 999

4 295 644

8 107 431

30

28

-2 Banco de Fomento Angola

Angola

10 419 378

-

2 228 237

9 059 910

- Rand Merchant Bank

-3 Banque Marocaine du Commerce Extérieur 1 Ecobank Transnational Inc.

-1 Zenith International Bank* 1 Zenith Bank Nigeria*

- Banco Espirito Santo Angola* 3 Arab African International Bank

31

-

Angola

10 099 214

453 780

6 885 144

7 480 561

32

27

-5 Ecobank Nigeria

- Banco de Poupança e Crédito*

Nigeria

9 547 752

965 486

4 807 588

6 737 116

33

25

-8 Société Générale Maroc

Morocco

9 318 896

455 814

7 275 905

6 090 546

34

-

Egypt

9 312 193

488 648

3 475 768

8 314 692

35

33

-2 Skye Bank

- Banque du Caire*

Nigeria

7 716 638

343 583

3 536 347

5 171 005

36

32

-4 Banco BIC*

Angola

7 678 534

268 351

2 029 841

6 290 183

37

43

Senegal

7 369 632

472 373

3 807 613

4 891 348

38

31

-7 Banque Marocaine pour le Comm. et l'Ind.

Morocco

7 318 051

361 424

5 654 466

4 780 172

39

35

-4 Faisal Islamic Bank of Egypt

Egypt

6 987 889

240 812

4 753 431

6 243 346

40

36

-4 The Mauritius Commercial Bank

Mauritius

6 587 779

317 742

4 268 621

5 200 776

6 Groupe BOA

2014 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2013 RESULTS

THE AFRIC A REPORT

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TOP 200 BANKS

Union Bank of Nigeria (#46) reported N10.2bn ($51.2m) profit after tax for the first six months of 2015, a 53% increase on the same period in 2014

41

34

-7 Fidelity Bank

Nigeria

6 445 546

265 125

2 941 355

4 452 785

42

37

-5 First City Monument BanK

Nigeria

6 349 651

394 400

3 355 630

3 984 517

43

42

-1 Bank of Alexandria

Egypt

6 197 894

317 430

2 937 711

5 103 146

44

40

-4 BGFIBank Holding Corp.

Gabon

5 691 799

344 722

3 524 683

4 520 986

DIFF.

RANK ’14

RANKINGS 41-80 RANK ’15

88

BANK NAME

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

45

41

-4 African Bank

South Africa

5 484 363

1 327 938

4 296 752

-

46

38

-8 Union Bank of Nigeria

Nigeria

5 479 723

281 681

1 698 488

2 864 960

47

54

Egypt

5 452 886

204 000

4 389 361

296 780

48

39

Morocco

5 417 418

230 740

3 869 364

4 082 926

7 African Export-Import Bank -9 Crédit du Maroc

49

51

Kenya

5 315 267

628 176

3 075 657

4 089 627

50

48

-2 Stanbic IBTC Bank

2 Kenya Commercial Bank Group

Nigeria

5 128 863

253 353

2 212 280

3 008 524

51

46

-5 Banque Nationale Agricole*

Tunisia

4 804 733

203 947

4 169 324

3 480 361

52

47

-5 Crédit Immobilier et Hôtelier

53

-

54

44

55

53

Morocco

4 763 383

187 821

3 600 333

2 476 601

Morocco

4 745 266

169 986

203 968

4 324 694

Tunisia

4 685 165

260 878

3 169 079

4 021 741

-2 Capitec Bank

South Africa

4 641 669

719 413

2 796 539

3 545 299

- Al Barid Bank -10 Banque Internationale Arabe de Tunisie

56

55

-1 Sterling Bank

Nigeria

4 477 249

373 388

2 015 867

3 561 777

57

52

-5 HSBC Mauritius

Mauritius

4 424 007

60 839

2 713 529

2 630 355

58

50

-8 Crédit Agricole Egypt

Egypt

4 348 767

173 782

1 729 094

3 707 998

59

49

60

67

61

60

62

45

-10 Amen Bank 7 Bank Audi Egypt -1 Kenya Commercial Bank -17 Société Tunisienne de Banque

4 279 258

135 249

3 273 607

2 962 428

4 263 543

143 806

1 806 850

3 790 877

Kenya

4 096 068

349 184

2 697 249

2 150 332

Tunisia

3 929 163

140 396

3 003 181

2 853 953

63

56

Sudan

3 901 795

-

-

210 898

64

71

7 National Bank of Kuwait – Egypt

Egypt

3 861 797

105 282

1 402 932

3 110 944

65

58

-7 Afriland First Group

Cameroon

3 748 421

187 089

1 978 173

2 902 476

66

68

2 Equity Bank Group

Kenya

3 735 157

516 512

2 321 607

2 665 756

Angola

3 648 100

157 881

1 857 276

2 823 096

Mauritius

3 547 689

66 482

1 610 854

974 503

Burundi

3 538 555

121 722

2 511 711

126 774

67

-

68

63

69

-

-7 Arab Bank for Economic Dev. in Africa*

Tunisia Egypt

- Banco Privado Atlantico* -5 Standard Chartered Bank Mauritius - PTA Bank

70

61

-9 Land and Ag. Dev. Bank of South Africa*

South Africa

3 505 196

91 848

3 168 378

-

71

62

-9 SBM Bank Mauritius

Mauritius

3 491 330

178 055

2 085 796

2 753 395

72

64

-8 Standard Chartered Bank Nigeria*

Nigeria

3 394 381

277 797

2 327 918

2 815 634

73

65

-8 Atlantic Business International*

Côte d'Ivoire

3 391 366

182 148

1 933 785

2 001 866

74

57

75

66

76

59

-17 Banque de l'Habitat

Tunisia

3 345 901

131 618

2 551 109

2 480 349

Tunisia

3 326 729

164 317

2 374 529

2 550 252

-17 Barclays Bank Mauritius

Mauritius

3 234 447

94 581

1 503 825

2 503 867

12 Standard Bank Mauritius

-9 Attijari Bank*

77

89

Mauritius

3 230 923

32 216

249 837

3 025 659

78

-

- Blom Bank Egypt*

Egypt

3 180 902

54 150

1 352 450

1 637 667

79

-

- Arab International Bank

Egypt

3 143 263

63 942

1 347 070

1 690 161

80

73

Mozambique

3 129 650

288 012

1 783 512

2 316 617

-7 Banco Internacional de Moçambique

2014 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2013 RESULTS

THE AFRIC A REPORT

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FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

first independent network established in sub-Saharan Africa. Today, the group is made up of 600 employees operating in 25 countries.

ADVERTORIAL

Ascoma Group is the leading insurance broker in Monaco and the

“Our ambition is to expand our African network and serve our clients wherever they are”

Hervé Husson, CEO of Ascoma.

Headquarters Ascoma Assureurs Conseils 24 boulevard Princesse Charlotte 98000 Monaco T. (+377) 97 97 22 22 info@ascoma.com

International Desk Ascoma International 34 rue Godot de Mauroy 75009 Paris - France T. (+ 33) 1 47 42 63 75 ascoma-international@ascoma.com

Ascoma Côte d’Ivoire Boulevard Carde (Plateau) Immeuble Les Hévéas 01 BP 1554 Abidjan – Côte d’Ivoire T. (+ 225) 20 300 300 cotedivoire@ascoma.com

Health Insurance Bd Roume (Plateau) - Immeuble Roume Bureaux 01 BP 1554 Abidjan - Côte d’Ivoire T. (+ 225) 20 301 301 ascoma_sante_cotedivoire@ascoma.com

www.ascoma.com

In which sectors do you operate in Africa?

We operate in all the sectors that make up the local economies: agro-industry, oil and gas, energy, transport, industries, banks, distribution, telecom, construction, etc. Our subsidiaries benefit from the steady growth rates of the continent’s economies. We serve local clients as well as major international clients, as Ascoma is the African correspondent of many worldwide brokers. To better coordinate these international programs, we have a dedicated office in Paris, which is also in charge of reinsurance placements. Ascoma is also very strong for health insurance in Africa, with our own medical expenses management system that provides direct billing: the client does not need to advance any cost.

Is there hope for Africa’s fledgling insurance sector?

The penetration rate of insurance remains low in Africa and for now the region represents only a small portion of the world insurance market. However, the scope for improvement is extremely significant and the prospects remain very favourable. It should be noted that there is a direct correlation between the development of Africa’s insurance market and the development of a middle class whose income, activities and increasing wealth require insurance coverage. We can therefore conclude that in the near future, all the favourable conditions will have been put in place to develop the sector on the continent.

In June 2015, Ascoma took part in the conference « Promoting employees’ health » in Abidjan. What else are you doing at Ascoma to guarantee the well-being of your employees?

Of course, every Ascoma employee benefits from a health cover. But this is not enough.

Fully aware of the human, economic and social impacts caused by malaria and other chronical illnesses, Ascoma has since 2004 adhered to ‘Entreprises & Santé’, organizers of the Abidjan conference. We launch different awareness campaigns targeted at our employees and their families, for instance last year during the Ebola crisis. The next one after the Abidjan conference could be about diabetes.

How do you envision the Group in the next 10 years?

Our ambition is to expand our African network with new openings like we recently did in Niger, Burkina Faso, Mali and Sierra Leone so as to enable us to respond directly to insurance needs wherever our clients are. Therefore, we view our work in Africa on a comprehensive scale. We would also like to continue improving the services that we provide to our clients. For example, within the framework of our health insurance solutions, we were recently the first on the continent to launch a biometric identification card. ■

DIFCOM/FC

© EVEN

What is Ascoma’s history?

Its origins date back to a French brokerage firm created in 1896 in Paris by my greatgreat-grandfather that became Faugères & Jutheau. Afterwards, the group moved its base to Monaco in 1950 and it was during this period that the first African subsidiaries were created in Cameroon, Ivory Coast and Gabon. We are now in 22 sub-Saharan countries, besides our 3 European offices Monaco, France, and Luxembourg.

TOP 200 BANKS

RANK ’14

DIFF.

RANKINGS 81-120 RANK ’15

90

81

78

-3 Co-operative Bank of Kenya

82

-

83

75

84

96

Our best experiences have been on greenfields, so for the small countries we know greenfield it will be.” James Mwangi CEO Equity Bank Kenya (#91)

BANK NAME

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

Kenya

3 093 693

347 810

1 945 632

2 394 098

Togo

3 069 150

55 073

564 955

-

Mozambique

2 970 176

203 775

1 754 205

2 192 350

12 Housing and Development Bank

Egypt

2 963 525

246 844

990 166

2 112 122

-16 BNP Paribas El Djazaïr

Algeria

2 881 053

141 304

1 306 273

2 281 531

Egypt

2 856 220

-

1 342 506

-

- West African Development Bank -8 Banco Comercial e de Investimentos

85

69

86

81

87

76

-11 Suez Canal Bank

Egypt

2 830 469

74 206

734 812

2 236 859

88

74

-14 BGFI Bank Gabon*

Gabon

2 758 251

154 422

2 104 430

2 332 399

-17 Société Générale Algérie

-5 Ahli United Bank Egypt*

89

72

Algeria

2 757 023

150 796

1 326 009

2 243 304

90

87

-3 Abu Dhabi Islamic Bank – Egypt

Egypt

2 736 973

86 491

1 143 553

2 312 213

91

86

-5 Equity Bank Kenya*

Kenya

2 713 030

269 829

-

-

92

-

South Africa

2 705 786

-

349 819

763 018

93

70

-23 Arab Tunisian Bank

Tunisia

2 695 665

92 957

1 668 140

1 902 956

94

84

-10 Export Development Bank of Egypt

Egypt

2 685 915

76 526

1 162 561

2 062 803

95

79

-16 Al Baraka Bank Egypt*

Egypt

2 608 710

-

-

2 222 424

96

77

-19 Banque Sahélo-Saharienne Inv. et Comm.

Libya

2 578 952

125 906

923 701

1 531 988

97

85

-12 Barclays Bank of Kenya

Kenya

2 448 149

212 507

1 359 585

1 786 204

98

90

Kenya

2 411 855

187 537

1 330 602

1 670 086

99

92

100 118

- Grindrod Bank*

-8 Standard Chartered Bank Kenya -7 CRDB Bank 18 Diamond Trust Bank Kenya

Tanzania

2 357 654

154 665

1 425 366

1 898 916

Kenya

2 293 087

179 608

1 492 175

1 744 759

101 104

3 Oragroup SA

Togo

2 292 237

150 745

1 447 386

1 530 605

102 105

3 Banco Millennium Angola*

Angola

2 283 997

151 491

832 458

1 663 066

-9 First National Bank of Namibia

Namibia

2 260 364

96 384

1 721 006

1 852 861

Angola

2 259 115

83 852

1 075 034

-

-23 Unity Bank

Nigeria

2 244 247

246 799

1 190 991

1 504 249

106 116

10 Banco Caixa Geral Totta de Angola

Angola

2 235 703

167 805

612 070

1 084 396

103

94

104

-

105

82

- Banco de Desenvolvimento de Angola*

107

83

-24 Banque de Tunisie

Tunisia

2 156 797

105 147

1 710 473

1 564 211

108

88

-20 Union Internationale de Banques

Tunisia

2 152 776

105 444

1 842 331

1 686 573

109

95

-14 Banco Sol*

Angola

2 103 685

95 929

775 720

1 864 894

110

-

111

99

Nigeria

2 092 977

95 450

501 463

1 702 942

-12 Wema Bank

Nigeria

2 077 313

100 736

810 666

1 406 134

112 102

-10 Bank Windhoek

Namibia

2 049 183

90 200

1 742 926

1 618 016

113

-15 North Africa Bank*

Libya

2 035 550

11 805

145 908

1 120 920

-13 National Microfinance Bank*

Tanzania

2 000 913

270 349

984 718

1 575 401

Angola

1 977 139

71 325

416 063

1 825 848

Angola

1 962 324

63 557

858 800

1 508 392

98

114 101 115 120

- Citibank Nigeria*

5 Standard Bank de Angola

116 103

-13 Banco de Negócios Internacional

117

-20 CfC Stanbic Bank

97

118 111 119

-

120 100

Kenya

1 962 029

91 727

957 686

1 038 893

Côte d'Ivoire

1 887 007

129 124

1 098 349

1 560 758

- Standard Bank Namibia

Namibia

1 878 701

45 047

1 346 886

1 503 183

-20 Banque Al Baraka d'Algérie

Algeria

1 844 218

84 669

886 539

1 486 235

-7 Soc. Gén. de Banques en Côte d'Ivoire

2014 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2013 RESULTS

THE AFRIC A REPORT

●

FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

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Filiale du groupe allemand ProCredit, elle offre le meilleur des services bancaires en RDC. Leader de l’innovation technologique dans le secteur bancaire congolais, la ProCredit Bank a fait des services aux PME son coeur de metier. +243 81 830 2700 SIEGE ProCredit Bank SA, 4b, Avenue des Aviateurs, Kinshasa / Gombe mail@procreditbank.cd - www.procreditbank.cd - Code SWIFT : PRCBCDKI

L’expertise Allemande au service des PME et de l’épargne

TOP 200 BANKS

DIFF.

RANK ’14

RANKINGS 121-160 RANK ’15

92

Number of months clients of Banque Atlantique – Côte d’Ivoire (#148) have to pay off the special ‘Ramadan loan’ offered by the bank in June and July

BANK NAME

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

121 108

-13 First National Bank of Botswana

Botswana

1 821 621

98 583

1 252 811

1 479 667

122 107

-15 ABC Holdings

Botswana

1 809 843

92 168

1 159 321

1 460 456

123 106

-17 Ecobank Ghana

Ghana

1 802 321

292 045

867 138

1 323 219

Nigeria

1 795 348

-

252 365

698 168

124

-

- Mainstreet Bank (Ex-Afribank Nigeria)

125 114

-11 BGFIBank Congo

Congo

1 790 724

86 734

829 775

1 560 849

126 109

-17 Gulf Bank Algeria*

Algeria

1 770 383

134 029

1 035 009

1 167 564

127 125

-2 Bank of Khartoum

Sudan

1 744 715

117 373

1 103 935

1 331 763

-35 CCEI Bank GE

Equatorial Guinea

1 688 623

111 135

1 244 946

1 277 756

128

93

129 115

-14 Investment & Mortgages Bank

Kenya

1 671 132

98 588

1 101 458

1 075 455

130 119

-11 CBZ Bank

Zimbabwe

1 670 353

88 351

1 125 938

1 416 931

131 113

-18 Commercial Bank of Africa*

Kenya

1 662 922

72 588

781 813

1 192 712

132 127

-5 NIC Bank

Kenya

1 580 261

86 700

1 090 237

1 088 715

133 126

-7 Natixis Algérie

Algeria

1 569 364

85 575

868 773

1 287 099

Côte d'Ivoire

1 523 475

107 940

806 076

1 173 057

1 518 756

80 539

1 227 679

1 080 415

134 134

0 Ecobank Côte d'Ivoire

135 112

-23 Union Bancaire pour le Comm. et l'Ind.

Tunisia

136 121

-15 Misr Iran Development Bank

Egypt

1 490 130

37 329

529 530

1 154 171

137 152

15 AfrAsia Bank

Mauritius

1 489 792

37 255

523 887

1 228 976

138 123

-15 Standard Bank Mozambique

Mozambique

1 466 010

77 229

687 119

1 104 413

139 122

-17 CBAO Groupe Attijariwafa Bank

Senegal

1 431 251

115 597

1 275 373

1 051 192

Benin

1 430 433

63 787

483 279

889 970

Algeria

1 406 475

50 756

563 287

1 123 871

Kenya

1 334 317

73 684

711 554

1 135 313

Egypt

1 333 329

34 968

489 295

1 032 968

Cameroon

1 330 332

86 339

898 358

1 070 874

Ghana

1 323 984

185 809

385 646

955 839

Botswana

1 321 884

61 482

839 410

1 037 006

140 139 141 117 142 147 143 165 144 143 145 124 146 145

-1 Bank of Africa – Benin* -24 HSBC Algeria 5 National Bank of Kenya 22 Union National Bank Egypt -1 Afriland First Bank -21 GCB Bank (ex-Ghana Commercial Bank) -1 Standard Chartered Bank Botswana

147 130

-17 Société Générale Cameroun

Cameroon

1 310 549

90 378

864 908

1 009 948

148 135

-13 Banque Atlantique – Côte d'Ivoire*

Côte d'Ivoire

1 275 044

61 393

566 183

851 064

149 131

-18 Barclays Bank of Botswana

Botswana

1 264 909

92 003

839 866

925 754

150 136

-14 Stanbic Bank Uganda

Uganda

1 262 794

100 870

582 617

767 648

151 138

-13 Zambia National Commercial Bank*

Zambia

1 252 093

99 382

536 558

990 417

152 137

-15 Standard Chartered Bank Ghana*

Ghana

1 249 731

117 297

472 668

744 023

153 133

-20 BICEC

Cameroon

1 249 135

99 517

712 533

997 483

154 132

-22 Société Générale de Banques au Sénégal

Senegal

1 247 386

82 677

994 412

946 501

155 140

-15 Bank of Baroda – Mauritius*

Mauritius

1 241 457

5 967

488 130

936 931

Benin

1 231 081

54 908

579 167

854 992

156 148 157 141

-8 Diamond Bank Bénin

Sudan

1 220 620

46 772

814 934

1 051 237

158

-

- Chase Bank Kenya

Kenya

1 183 279

78 133

620 439

865 616

159

-

- Stanbic Bank Ghana

Ghana

1 137 279

134 420

516 402

751 661

Egypt

1 131 000

-

291 000

926 000

160 146

-16 Faisal Islamic Bank Sudan*

-14 Arab Banking Corporation – Egypt

2014 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2013 RESULTS

THE AFRIC A REPORT

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FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

TOP 200 BANKS

Looking at the economic situation, non-performing loans may go up.”

Edward Effah Managing director of Fidelity Bank Ghana (#178)

RANK ’14

161

-

162 164 163 158 164 151 165 157 166 144

DIFF.

RANK ’15

RANKINGS 161-200

BANK NAME

- Banco Nacional de Guinea Ecuatorial 2 Ecobank Burkina -5 Awash International Bank -13 Dashen Bank -8 Stanbic Bank Zambia -22 Deutsche Bank Mauritius

167 173

6 Ecobank Senegal

168 149

-19 BIAO Côte d'Ivoire*

169 170 170 154 171 172

COUNTRY

1 BICIG -16 Standard Chartered Bank Zambia 1 Ecobank Benin

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

Equatorial Guinea

1 129 474

41 382

143 618

1 071 053

Burkina Faso

1 120 910

70 594

652 092

794 156

Ethiopia

1 081 442

36 327

438 695

735 743

Ethiopia

1 074 391

27 770

461 297

864 971

Zambia

1 071 368

42 785

522 981

772 087

Mauritius

1 053 120

1 764

262 539

939 237

Senegal

1 047 160

67 804

564 138

782 042

Côte d'Ivoire

1 036 189

72 465

641 395

852 212

Gabon

1 032 855

60 669

417 545

668 590

Zambia

1 026 043

72 329

487 525

828 348

Benin

1 013 860

74 883

585 697

697 252

172 155

-17 SBI Mauritius

Mauritius

1 012 656

24 887

738 663

741 362

173 162

-11 Banco Regional do Keve*

Angola

1 005 955

19 715

400 836

850 745

174 160

-14 Coris Bank International

Burkina Faso

987 234

60 073

611 969

575 291

175 156

-19 National Bank of Commerce*

Tanzania

968 420

97 065

417 173

794 449

176

-

177 175 178 178 179 190

- Zenith Bank Ghana -2 Raw Bank 0 Fidelity Bank Ghana

955 384

81 416

341 124

574 079

947 820

79 710

337 210

689 820

Ghana

938 885

101 349

484 796

552 496

Mali

928 585

48 849

411 812

480 062

180 150

-30 Barclays Bank of Ghana

Ghana

926 768

147 741

365 807

777 307

181 153

-28 Société Ivoirienne de Banque

Côte d'Ivoire

924 615

73 288

637 332

745 187

Burkina Faso

919 711

49 369

630 080

598 605

182 177 183

11 Bank of Africa – Mali

Ghana DRC

-5 Bank of Africa – Burkina

Côte d'Ivoire

908 805

46 100

372 346

508 138

184 161

-23 Banque de Développement du Mali*

Mali

902 611

53 080

372 350

657 897

185 163

-22 Banque Nationale d'Investissement*

Côte d'Ivoire

878 637

51 136

460 290

625 110

186 166

-20 Société Générale South Africa*

South Africa

863 332

8 875

726 456

805 595

187 167

-20 BICICI*

Côte d'Ivoire

861 771

65 637

583 340

723 007

Kenya

860 672

49 037

260 291

554 465

Ghana

844 107

101 011

415 684

433 911

188

-

-

189 183

- Bank of Africa – Côte d'Ivoire

- Citibank Kenya -6 CAL Bank

190 168

-22 Société Comm. de Banque Cameroun

Cameroon

832 876

71 205

470 949

656 480

191 171

-20 Banco Comercial do Atlântico

Cape Verde

824 307

20 182

416 612

692 788

Cameroon

813 441

68 118

498 093

658 654

Mali

811 638

57 166

337 403

486 225

192 192 193 188

0 Ecobank Cameroon -5 Ecobank Mali

194

-

- First Gulf Libyan Bank

Libya

788 854

35 333

31 067

532 446

195

-

- Kenya Commercial Bank Sudan

South Sudan

778 128

21 960

79 398

85 634

40 746

515 330

474 259

196 174

-22 Orabank Togo

Togo

774 231

197 176

-21 Mercantile Bank

South Africa

754 808

30 078

535 823

498 651

Tunisia

744 980

20 965

705 050

576 333

South Africa

703 197

76 493

334 974

233 009

698 052

46 043

330 075

559 013

198

-

199 196 200 179

- Al Baraka Bank Tunisia -3 Sasfin Bank -21 Exim Bank Tanzania*

Tanzania

2014 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2013 RESULTS

THE AFRIC A REPORT

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93

TOP 200 BANKS

GHANA WAITING FOR THE SKIES TO CLEAR The nimbler banks have braved the country’s recent economic trouble but worries about bad loans linger throughout the sector, while assets remain small in proportion to the size of the economy

W

eary are the economic helmsmen in Accra. Despite the International Monetary Fund’s late June assessment that Ghana is meeting the terms of its $918m bailout, pessimism abounds about the economy, which is expected to achieve just 3.5% growth this year. High levels of government debt, recurring expenditure and inflation, the unstable cedi and unreliable electric power provision present significant challenges for policy makers and a host of economic actors.

These include Ghana’s banks, even though the Bank of Ghana, the central bank, maintains the banking sector is in better shape than this time last year.

While the central bank noted reduced

BANK NAME

PROFITS ($m)

TOTAL ASSETS ($bn)

Top 10 Ghana Banks RANK IN TOP 200

94

123 Ecobank Ghana

1.8

145 GCB Bank

1.3

88

152 Standard Chartered Bank Ghana*

1.2

87

109

159 Stanbic Bank Ghana

1.1

46

176 Zenith Bank Ghana

1.0

43 25

178 Fidelity Bank Ghana

0.9

180 Barclays Bank of Ghana

0.9

55

189 CAL Bank

0.8

45

Agricultural Development Bank*

0.7

34

UT Bank*

0.6

4

2014 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2013 RESULTS

credit growth at its May monetary policy committee meeting, during which it decided to raise the policy interest rate by 1% to 22%, banking sector assets have increased significantly, mostly driven by a rise in bank deposits as they attempt to access cheap local funding. Despite other challenges, the sector’s return on equity and slightly declining capital adequacy ratios remain at adequate levels.

Total banking sector assets of ₵55bn ($16.2bn) as of March, however, remain small in proportion to the size of Ghana’s economy and the scale required for infrastructure investment. The short tenor of much bank funding also mitigates against significantly increased participation in long-term financing, whether

in oil, telecoms or other sectors. Banks find it “hard to match [their] short-term funding to longer-term projects,” according to Sulemana Mohammed, a specialist financial researcher for Ecobank Capital in Accra.

SYNDICATED LOANS Syndication, where several banks participate in the same loan, is a method Ghanaian financial institutions use to participate in big-ticket projects.

One such project is the syndication of a $230m loan to overhaul Kotoka International Airport in Accra. The major players in the June airport deal include subsidiaries of foreign banks such as Ecobank (#123), Stanbic (#159),

PROFILE

First Capital Plus Bank A SMALL-TIME PLAYER JOINS THE BIG LEAGUE THE MOST RECENT ENTRANT INTO GHANA’S BANKING SECTOR, First Capital Plus Bank, was first a microfinance outfit and then became a savings and loan company prior to its 2013 receipt of a universal banking licence.

It was the first Ghanaian company to follow such a path. By the time it got its universal licence, First Capital had a 16% share of the savings and loan market and 15 branches.

In PwC’s 2014 Ghana banking survey, its analysts

observed not only that First Capital Plus produced strong returns on equity compared to its fourth-tier microfinance competitors, but its savings and loans background gave it improved access to Ghana’s otherwise unbanked population, a relatively high level of deposits, significant experience in Ghana’s informal sector and the accompanying ability to threaten the market share of its fourth-tier peers.

First Capital Plus is looking into how to develop more branchless-banking operations

and already operates a system where clients can make deposits using text messages and scratch cards.

Despite its recent progress, First Capital Plus replaced resigning managing director John Kofi Mensah with former Ecobank and Merchant Bank executive Fitzgerald Odonkor in late June. The new chief executive plans to capitalise on the bank’s momentum and boost its domestic profile.

In 2014, it began sponsoring the Ghana Premier League football competition as a THE AFRIC A REPORT

●

means to reach out to more potential customers. First Capital’s executives say that they will continue with their focus on small and mediumsized enterprises and cutting costs in order to make its loans more attractive. They have discussed an extremely ambitious plan to launch operations in another West African country within the next few years, but they will have to strengthen its domestic position to increase the chance that such a move would be successful. ● M.Y.

FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

Standard Chartered Bank (#152) and Barclays (#180), and local firms GCB Bank (formerly Ghana Commercial Bank, #145) and Fidelity Bank (#178).

GCB and Fidelity represent two different local stories. GCB, which was founded in 1953, remains majority owned by Ghana’s government through Social Security and National Insurance Trust and the finance ministry. The bank is also listed on the Ghana Stock Exchange (GSE) and has made progress in becoming a respected private-sector operator, rationing its workforce where it has found it necessary.

GCB appears on a high, says Lagosbased Renaissance Capital analyst Adesoji Solanke and his colleagues.

They predict that its 2015 net income will grow considerably, assisted by further significant cost reductions under chief executive Simon Dornoo. Others, such as Ecobank Capital’s Mohammed, point to GCB’s extensive branch network and focus on retail banking as both guaranteeing GCB’s cheap funding and making it less vulnerable to Ghana’s economic woes.

Unlike GCB, Edward Effah-led Fidelity Bank is neither GSE listed nor largely state owned. Its largest shareholders are foreign investment funds. This mainly offshore financing has assisted Fidelity’s rise through the ranks since its 2006 acquisition of a universal banking licence.

A combination of internal growth and acquisitions has also fuelled its expansion. Fidelity bought Merchant Bank (now Universal Merchant Bank) in 2013 and acquired savings and loan company ProCredit Savings and Loans from its German and Dutch owners in 2014. The ProCredit acquisition increased its customer base of small business and expanded its branch network.

FIDELITYBANK

95

worker discontent. The ADB’s approximately $100m initial public offering commenced in July and was scheduled to conclude in August.

Only three of the eight currently listed banks are local, with GCB joined

by HFC Bank and CAL Bank (#189), whose asset quality and focus on corporate banking has prompted analyst concern. Like local firm UT Bank, CAL Bank also has significant exposure to small and medium-sized enterprises (SMEs), which both Ecobank Capital and Renaissance Capital analysts argue could be a major source of non-performing loans (NPLs) in a tough macroeconomic and interest-rate environment.

ACQUISITION TARGETS Analysts note that banks may Banks are seeking to adjust their find savings and loan operexposure and funding sources by ations, microfinance instiexpanding their branch networks tutions and rural and community banks as attractive To stave off their problems, UT, CAL acquisition targets. The likelihood of new entrants in the market is also lower and other banks are seeking to adjust because the Bank of Ghana increased their exposure and funding sources by the capitalisation requirements for new expanding their retail branch networks. banks to ₵120m in 2013.

While, according to Ecobank’s MoThe government has had difficulties hammed, corporate-banking-focused with some of its banks. Its plans to list Ecobank Ghana and well-managed the state- and central bank-controlled GCB have deftly navigated Ghana’s Agricultural Development Bank (ADB) adverse economic environment, corwere delayed yet again this year by porate banking-focused Standard THE AFRIC A REPORT

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FINANCE SPECIAL

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A COMBINATION OF INTERNAL GROWTH AND ACQUISITIONS HAS FUELLED FIDELITY’S EXPANSION IN GHANA

Chartered has been unable to do so.

Standard Chartered Ghana’s 2014 earnings showed no improvement from 2013 as NPL losses persisted. Standard Chartered Ghana “needs to clean its books this year,” says Mohammed.

During the first quarter of 2015, the bank’s after-tax earnings were more than 40% lower than the first quarter of 2014, caused partly by the bank’s mediocre loan book. Another cause for its weak performance is Standard Chartered’s investment to expand its retail banking network, which should not only increase cheap, local funding but provide diversification away from the corporate sector.

Competitors Ecobank and GCB, meanwhile, achieved over-30% increases in after-tax profits in 2014 supported by operational improvements and reductions in NPLs. Due to their fear of NPLs, banks “might be careful in major projects”, says Mohammed, noting that much of Standard Chartered’s reduction in asset quality came from corporate clients. If banks become more reluctant to lend to viable projects, this could slow the country’s growth even further. ● By Martin Yeboah in Accra

TOP 200 BANKS

CAMEROON

Banks are readily lending to government and multinational firms, but neglecting the retail and small-business sectors. Critics say there is much to do to improve governance and pull in the unbanked

C

23

1.3

3

147 Société Générale Cameroun

1.3

9

153 BICEC

1.2

23

190 Soc. Comm. de Banque Cameroun

0.8

19

192 Ecobank Cameroon

0.8

12

Crédit Foncier du Cameroun

0.5

1

United Bank For Africa Cameroon

0.4

6

Standard Chartered Bank Cameroon*

0.4

6

BGFIBank Cameroun

0.4

5

2014 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2013 RESULTS

In February, the Cameroonian bank also opened a branch dedicated to Islamic finance, making it a pioneer in the field in Central Africa. Afriland estimates that it will issue 2bn CFA francs in loans and collect 3bn CFA francs in deposits through its Islamic finance window in the first year of its operation. Muslims make up about 20% of Cameroon’s estimated population of 20 million people.

Société Générale Cameroun is one of Afriland’s direct competitors and held the spot as top bank in Cameroon until last year. Deputy general manager Georges Wega tells The Africa Report that the bank “recorded a good performance in 2014, allowing us to maintain our position as leader in terms of financing to the Cameroonian economy.

Our net interest income grew by almost 10% as compared to 2013 and is around 50bn CFA francs.”

2 902.5

(#65)

AFRILAND FIRST BANK

(#144)

1 070.9

SOCIÉTÉ GÉNÉRALE CAMEROUN

1 009.9

(#147) BICEC

STATE REFINERY LOAN Wega says that his bank is making a push for corporate clients and government projects. “We are one of the few banks that offers a national cash pooling service today – which will be regional shortly – to respond to the need for central treasury management on a country or monetary-zone level,” he says. In February, Société Générale Cameroun and three other banks – BGFIBank Cameroun, Ecobank Cameroun (#192) and Afriland First Bank – signed an agreement with the government to supply a 143.5bn CFA loan for the Société Nationale de Raffinage du Cameroun, the largest state enterprise and a company going through financial difficulties.

Cameroon’sthird-largestbank,BICEC, is becoming more active in the field of agriculture. In March, BICEC and ● ● ●

ECOBANK CAMEROON

(#192)

658.7

SOCIÉTÉ COMMERCIALE DE BANQUE CAMEROUN

656.5

(#190)

STANDARD CHARTERED BANK CAMEROON

333.8

CAMEROON’S BIGGEST BANKS BY DEPOSITS

UNITED BANK FOR AFRICA CAMEROON

305.9

TOTAL

274.5

8 250.5

BGFIBANK CAMEROUN

40.3

US$m

SOURCE: JEUNE AFRIQUE TOP 200 BANKS

997.5

(#153)

PROFITS ($m)

3 .7

144 Afriland First Bank

Afriland First Bank has grown more rapidly than its peers and became Cameroon’s largest bank in 2014. Its deposits grew 1.4% to 578.8bn CFA francs ($963m), which is much slower than the 23.4% annual growth rate recorded in 2013. Its assets grew at an annual rate of 2.1% in 2014.

Afriland is offering new services and boosting its growth with the help of foreign banks. On 18 June, it signed a deal with the China Development Bank worth 26.2bn CFA francs to finance local small and medium-sized enterprises.

The agreement was negotiated through Afriland’s representative office in Beijing.

AFRILAND FIRST GROUP

CRÉDIT FONCIER DU CAMEROUN

BANK NAME

65 Afriland First Group*

BANKING’S UNEVEN DEVELOPMENT

ameroon’s banks are growing steadily, but they have been slow to introduce services to bring in the country’s large unbanked population.

The banking sector remains highly concentrated, with three banks controlling 50.1% of the loan market and 52.2% of deposits, according to the finance ministry. Of the three, only Afriland First Bank (#144), owned by Afriland First Group (#65), is a local bank. The othertwo– SociétéGénéraleCameroun (#147) and the Banque Internationale du Cameroun pour l’Epargne et le Crédit (BICEC, #153) – are owned by French banks.

TOTAL ASSETS ($bn)

Top 10 Cameroon Banks RANK IN TOP 200

96

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TOP 200 BANKS

the International Finance Corand reduce the risk of non-performing poration, the private-sector arm of the loans, which should encourage them to lend more.

World Bank, signed a risk-sharing deal worth 2.5bn CFA francs to help farmers The share of the population using through the government’s Projet d’Inbanks has certainly been rising, but it vestissement et de Développement des stood at just 13.8% in 2011 according Marchés Agricoles. to the Association Professionnelle des Robert Tangakou, an economics proEtablissements de Crédit du Cameroun. fessor and former banker, explains: “The Société Générale’s Wega says the high banking sector is globally performing percentage of unbanked people is “due well because deposits and loans are to several factors, including the average growing regularly and most of the banks salary of Cameroonians, the number of are earning sizeable annual profits.” Last year, the InternaAround 1.5 million customers use tional Monetary Fund (IMF) microfinance institutions while reported that the total assets one million use the big banks of the financial sector rose by about 31% between 2010 and 2014. It said that the Cameroonian bankbank branches across the country, the ing sector was “under-capitalised, but level of education and the structure of profitable and liquid.” The IMF report the economy, which needs to speed up said “access to finance and financial its modernisation.” depth have improved but are hitting He calls on banks to innovate “in the structural bottlenecks.” It says that the rapid development of simple methods principal obstacles are a lack of informfor opening bank accounts that are techation, a weak judicial system and poorly nologically adapted to Africa’s current developed laws on property and loans. realities.” He adds: “The government and the central bank also have a role to play To address the first problem, the in the creation of an environment and Banque des Etats de l’Afrique Centrale and the World Bank have been working a regulatory framework that promotes together to develop a credit bureau since these innovations.”

January. It will help banks to determAccording to financial auditor Pierre ine the creditworthiness of their clients Numkam, the current requirements

for opening an account do not encourage poor people to join the formal economy. Numkam says banks routinely overcharge their clients and describes a system that “finances the rich to the detriment of the poor”.

Excluded from the traditional banking sector, many Cameroonians are using microfinance institutions. There are more than 400 of them in the country.

They have about 1.5 million customers, which is higher than the one million clients at the big banks according to the finance ministry.

Critics complain that there is a lack of transparency in Cameroon’s banking sector and that this encourages corruption. A 2011 report by the Commission Nationale Anti-Corruption said that the government found transactions worth 395bn CFA francs linked to money laundering between 2006 and 2011.

Despite the financial sector’s governance problems, it holds a lot of promise for the years ahead. The government has launched major construction projects across the country and is turning to financial institutions for funds. Foreign firms are also interested in Cameroon, and Kenya’s Equity Bank announced in March that it would expand into 10 countries including Cameroon. ●

●●●

Reinnier Kazé in Yaoundé

PROFILE

Banque Camerounaise des Petites et Moyennes Entreprises SMALL BECOMES A BIT MORE BEAUTIFUL THE BANQUE CAMEROUNAISE des Petites et Moyennes Entreprises (BC-PME), which targets the country’s small businesses, finally opened in July after its creation in June 2011 by President Paul Biya.

The state-owned bank has an initial capital base of 10bn CFA francs. The launch had been delayed for more than a year, with the management team appointed in June 2014.

Agnès Ndoumbè Mandeng, a former director in the finance ministry, leads the new bank.

Its headquarters is in Yaoundé, Cameroon’s political capital,

and it will open an office in Douala, the economic capital.

The bank has an initial staff of about 60 employees.

Société Commerciale de Banque Cameroun (#190) provided technical assistance to the government in the setting up of BC-PME. The new bank will take deposits, issue loans at preferential rates to small companies and have special services for local artisans.

According to the Institut National de la Statistique, small businesses make up 90% of Cameroon’s companies and

account for 35% of gross domestic product. They struggle to get finance because banks prefer to lend to multinational corporations and the government. Professor Jean-Pierre Fouda Owoundi says: “Small enterprises are often tiny units that are poorly organised. They do not always have the financial information that banks need.” Another problem is that “the judicial environment is uncertain.

Banks cannot count on the competent institutions to help them recoup their funds.” The idea of the BC-PME has been THE AFRIC A REPORT

●

well received locally, but the International Monetary Fund (IMF) has warned that the project could have many pitfalls. It argues that government programmes that try to help operators by offering lower interest rates often do a bad job in sharing out resources. The IMF says that creating a mechanism to evaluate the quality of borrowers should be the bank’s first priority. Budgetary discipline poses another problem, and several state-run banks set up in the past ran into insolvency. ● R.K.

FINANCE SPECIAL

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TOP 200 BANKS

KENYA BANKERS WITHOUT BORDERS Kenya's banks have an ambitious programme to explore new markets outside of East Africa.

They must be careful that the lure of new customers and contracts does not become overreach

BANK NAME

PROFITS ($m)

TOTAL ASSETS ($bn)

RANK IN TOP 200

Top 10 Kenya Banks

49 Kenya Commercial Banking Group

5.3

183

61 Kenya Commercial Bank

4.1

173

66 Equity Bank Group

3.7

186

81 Co-operative Bank of Kenya

3.1

87

91 Equity Bank Kenya*

2.7

-

97 Barclays Bank of Kenya

2.4

91

98 Standard Chartered Bank Kenya

2.4

113

100 Diamond Trust Bank Kenya

2.3

62

117 CfCStanbic Bank

2.0

62

129 Investment & Mortgages Bank

1.7

57

2014 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2013 RESULTS

A

recurrent agenda topic among executives of Kenya’s top commercial banks in recent months has become that of bolstering market shares in neighbouring East African economies. But while the East African Community (EAC) has become a key source of revenue for Kenya’s largest banks, they have set their sights well beyond the five-member economic bloc.

Kenya’s top banks want a slice of the Democratic Republic of Congo's market, to set up operations in Mozambique and to go into Ethiopia as they hunt for new frontiers to grow earnings. The International Monetary Fund (IMF) warned the Kenyan authorities this year about the banking sector's rapid expansion, saying in February that it is “creating pockets of vulnerabilities”.

Ethiopia’s banking sector is expected to open up to competition if the country joins the World Trade Organisation (WTO), which might happen in the last quarter of this year. Ethiopia, with a population of 85 million, is Africa’s second-most-populous country. The country's government has wanted to be a member of the WTO since 2003 but joining has stalled as the country haggles with the trade body over sensitive areas of the economy that could harm national interests if such sectors were liberalised.

ADDIS ADVENTURE Kenyan bankers say they are raring to go into Ethiopia. Kenya’s largest commercial bank by assets, Kenya Commercial Bank (KCB, #49), has a $250m war chest to finance an ambitious regional expansion programme, which also targets Ethiopia, says KCB group chief executive Joshua Oigara.

SVEN TORFINN/PANOS-REA

100

EQUITY BANK'S DOWN TO EARTH APPROACH TO CUSTOMERS HAS REAPED DIVIDENDS FOR SHAREHOLDERS

where it has a 51% stake in a banking joint venture with the government in Juba. Co-operative Bank South Sudan registered a profit before tax of KSh133m in the first half of 2015, and earnings are expected to double by the end of 2015 and grow by 30% from 2016 onwards, group chief executive Gideon Muriuki told the media.

Co-operative Bank could replicate its South Sudan model elsewhere. Muriuki says that the bank is looking for opportunities in Rwanda, Uganda, Tanzania and Ethiopia. The bank's regional expansion programme is set to take place over the next five years. Muriuki says Co-operative Bank prefers to work with local investors or the government in those target markets.

KCB already operates in all EAC member states and South Sudan. “We are looking at $250m for regional expansion up to 2017, depending on opportunities, of course, in Mozambique and the Democratic Republic of Congo,” adds Oigara. KCB grew its 2015 halfyear profit after tax by 13% to KSh9.2bn ($88.7m) and is targeting annual profit growth of 15%.

Co-operative Bank of Kenya (#81), the country’s third-largest bank in terms of assets, has set aside $50m to hunt for opportunities in Uganda, Tanzania and Ethiopia in addition to South Sudan, THE AFRIC A REPORT

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FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

TOP 200 BANKS

The bank has reported steady growth so far this year. Co-operative Bank’s half-year profit rose 32% to KSh6.2.bn.

The bank also grew its deposits by 24% to Ksh252bn. To boost its liquidity position, it is negotiating a $120m loan from the International Finance Corporation, the private sector arm of the World Bank.

Subsidiaries of international banking institutions, such as Barclays Bank Kenya (#97), are among the banks that posted healthy gains in the six months to June of this year.

Barclays Bank Kenya grew its profits after tax by 8% to KSh8.5bn in the six months to June.

Barclays is seeking to make new forays into the competitive Kenyan market by increasing loans to small and medium-sized enterprises (SMEs). The bank has set aside KSh30bn for lending to SMEs and is offering KSh15m in unsecured loans to small business operators as it seeks to increase market share. Customer deposits rose by 10% to KSh163bn during the period.

PROFILE

Equity Bank EXPANDING INTERNATIONAL AMBITIONS EQUITY BANK GROUP (#66) is Kenya's biggest lender by market capitalisation and is expanding rapidly into East, Central and Southern Africa. For Equity Bank, the East African region is becoming equally important to its Kenyan operations. The bank, which began operations as a mortgage lender in 1984, now generates about 50% of its income in markets outside of Kenya. Non-Kenyan operations now account for 20% of the bank’s loan book.

Equity's expansion is continuing apace.

The bank registered 32% growth in its balance sheet in the first half of 2015 to KSh401bn ($3.9bn). It grew its total deposits by 40% to

KSh301bn and also increased its loan book by 27% to KSh237bn during the six months to June.

The banking group is present in Uganda, Rwanda, South Sudan and Tanzania and aims at expanding to as many as 10 new markets – including Mozambique, Ethiopia and Zambia – over the coming years.

“Ethiopia doesn’t allow foreign banks, but it's the desire of every banker to be in Ethiopia. We are hoping that Ethiopia signs [up to] the World Trade Organisation this year,” says James Mwangi, chief executive of Equity Bank.

Equity is set to start operations in the Democratic Republic of Congo this September as it expands its footprint.

The group bought a 79% stake in ProCredit for

STABILITY DESPITE INSECURITY Kenyan banks have benefited from the stable macroeconomic environment in spite of the threats of terrorism and its impact on the tourism sector. With the benefit of innovation in banking products, profitability levels are fairly spread, even among the smaller institutions. In the first half of this year, Chase Bank Kenya (#158) posted a KSh1.5bn profit, NIC Bank (#132) recorded a profit 10% this year to help fight against the of KSh2.2bn and I&M Bank (#129) reshilling's depreciation against the United States dollar, thus making loans gistered a KSh3.4bn profit.

Kenya has 43 commercial banks, and more expensive. Kenya's banks are the government plans for that number not too worried about the currency's to drop to around 22 if parliament backs depreciation because most funds are its budget proposals to raise the minraised through local customer deposimum capital requirement from KSh1bn its, which grew 20% in 2014. to KSh5bn. If the measures are approved, banks would There have been warnings have until 2018 to raise the sounded over non-performing funds. The move is likely to lead smaller operators either loans in real-estate to consolidate or be swallowed by much larger banks.

Standard Chartered Kenya (#98) Central bank governor Patrick has been one of the worst-hit banks Njoroge told a parliamentary hearin terms of bad loans, and its profits ing, however, that bank consolidafor the first half of 2015 dropped by tion should not be rushed. That is an 36% to Ksh3.9bn due to its provisioning non-performing. The sectors most indication that the government might affected by bad loans have been consoften its stance.

One worry going ahead is the level of struction and real estate. non-performing loans. The central bank The IMF warned at the beginning of raised its benchmark rate from 8.5% to the year that banks were not making THE AFRIC A REPORT

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FINANCE SPECIAL

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OC TOBER-DECEMBER 2015

$34m in May of this year.

It plans to invest about $36m in growing the DRC operation's balance sheet once it secures regulatory approval from the authorities.

The group is focused on growing its market position in Kenya through its new mobile-banking platform, Equitel, which since its launch early this year, has increased Equity's number of mobile-banking transactions by 30.5%.

Equitel is a joint venture with Kenya's mobile telecommunications services provider, Airtel, a subsidiary of India's Bharti Airtel. Equitel had 1.2 million active mobile customers as of June, and the company plans to raise this number to 5 million by December. ● M.M.

adequate provisions for bad loans. The central bank reported that the value of non-performing loans rose by 5.7% between the first and second quarters of the year to a value of $1.2bn but that they only accounted for about 5.5% of total loans in early 2015.

Nonetheless, the central bank's opinion is that the banking sector is “foreseen to remain stable and maintain an upward growth trend in the remainder of 2015. Their growth momentum will be underpinned by ongoing efforts by the central bank and the national treasury to ensure a stable macroeconomic environment.”

Kenya’s banking sector grew its aggregate balance sheet by 6.8% to KSh3.6trn in the six months to June, the central bank said in an assessment of the sector in August. The sector registered KSh39.6bn in pre-tax profits over the same period, a 6.2% increase. ● MCR Musekwa in Nairobi

101

TOP 200 BANKS

EGYPT THE CHALLENGE OF THE UNBANKED Banks have navigated political turmoil but they have yet to find a way to get large swathes of the population to use their services, even as government initiatives aim to stimulate lending

D

espite the political turmoil of recent years and the financial devastation across the Mediterranean in Greece, Cairo remains sanguine about the state of its banking sector. Indeed, banks are showing flickers of life.

In June, Commercial International Bank (CIB, #17) announced it will acquire Citibank’s local retail portfolio, more than a year after the United Statesbased financial institution announced its intention to exit its Egyptian consumer operations as well as similar businesses in 10 other countries. Although the acquisition further solid-

BANK NAME

PROFITS ($m)

TOTAL ASSETS ($bn)

Top 10 Egypt Banks RANK IN TOP 200

102

6 National Bank of Egypt

65.6

324

8 Banque Misr

38.3

351

17 Commercial International Bank

20.1

522

24 Qatar National Bank Al Ahli*

11.6

58

27 Arab African International Bank

11.0

167

34 Banque du Caire*

9.3

149

39 Faisal Islamic Bank of Egypt

7.0

87

43 Bank of Alexandria

6.2

101

47 African Export-Import Bank

5.5

105

58 Crédit Agricole Egypt

4.3

94

2014 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2013 RESULTS

most Egyptian banks recently and would be the main cost driver of banking operations.” CIB’s move has not indicated a return of the consolidation seen in the banking sector in the early 2000s. The number of banks went from 57 in 2004 to 39 in 2008. The government sold 80% of Bank of Alexandria to Italy’s Intesa Sanpaolo in 2006, but no similar transactions have occurred since then.

A package of reforms during that period also ensured that banks were and still are highly liquid, making the financial sector one of the most resilient to both the Western financial crisis of

ifies CIB’s position as Egypt’s largest privately owned bank, the impact of the acquisition may be insignificant given Citibank’s “relatively small portfolio size of E£1.3bn ($166m), which is not more than 2% of CIB’s total portfolio,” says Monsef Morsy, a senior banking analyst at Cairo-based investment bank CI Capital, a subsidiary of CIB. But while it may not swell CIB’s loan book, it gains around 900 employees, eight branches and a cashpoint network.

Morsy describes the move as “a step in the right direction in terms of increasing retail penetration, which is the focus of

PROFILE

Karim Helal Chairman, ADIB Capital

CASHING IN ON MEGA-PROJECTS KARIM HELAL, chairman of ADIB Capital, the investment banking arm of Abu Dhabi Islamic Bank – Egypt (#90), argues that the country’s well-capitalised and relatively liquid banking system is poised for growth led by retail and consumer banking. Helal predicts that project financing will be another growth driver for the banking sector.

“With the flurry of megaand not-so-mega projects announced and being planned, there will be an increasingly important role to play in structuring and funding such

projects,” he says. He also expects more acquisitions of marginal players by larger and well-established banks.

Helal is a man of many hats.

He served as group chief executive of CI Capital in the early 2000s. Since leaving in 2011, he alternated between his role at ADIB Capital and serving as managing director of corporate finance at Carbon Holdings while also acting as special adviser to a tourism private equity fund under Cairo Financial Holdings, as chairman of the Asia-Egypt Business Association and as

a member of the Egyptian Exchange index committee. He also recently became a member of a government committee for managing state assets.

His experience has shown him that there are several challenges to be tackled.

Egypt’s high interest rates, for example, “make financing costs remarkably higher than most markets”. He also points to the absence of sufficient long-term financing, namely when it comes to mortgage finance. While rates on deposit instruments are also high, he adds, “it barely THE AFRIC A REPORT

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catches up with inflation – and I don’t mean the distorted official figures – which in turn may to a large extent explain the paltry level of savings to gross domestic product.”

ADIB Capital’s outlook for merger activity, advisory, foreign direct investment and private and public equity offerings is very promising, he says. “I expect the investment banking sector – including ADIB Capital – to take full advantage of this buoyant mood and reach record levels of activities across the investment banking spectrum.” ● A.S.A.

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TOP 200 BANKS

BANQUE MISR

1 242.9

(#8)

NATIONAL BANK OF EGYPT

1 171.4

(#6)

COMMERCIAL INTERNATIONAL BANK

872.3

(#17)

BANQUE DU CAIRE

488.6

(#34)

BANK OF ALEXANDRIA

317.4

(#43)

ARAB AFRICAN INTERNATIONAL BANK

253.6

(#27)

FAISAL ISLAMIC BANK OF EGYPT

240.8

(#39)

AFRICAN EXPORTIMPORT BANK

(#47)

BANK AUDI EGYPT

(#60)

QATAR NATIONAL BANK AL AHLI

(#24)

204.0 143.8 116.5

argue that this has created a crowdingout effect for local businesses. “The government’s relatively unambitious fiscal consolidation plans mean that banks will continue to be heavily leant to buy up government debt, meaning that lending to the private sector will be squeezed out,” says Jason Turvey, Middle East economist at Capital Economics.

On the other hand, Elena SanchezCabezudo,headofMiddleEastandNorth AfricabanksatinvestmentbankEFGHermes, says that since there was not much corporate investment in the past four years, banks had few avenues through which to expand their loan books. “Yields

SLOW CREDIT GROWTH Lending had suffered since 2011, as the government tapped banks to finance its widening deficit, which reached 10.8% of gross domestic product as of the fiscal year ending 30 June.

According to London-based Egypt’s banked population research consultancy Capital is small at around 10%, where Economics, credit growth has been sluggish since 2011 beit has lingered for several years cause the sector suffered the and government securities were much strains of stagnating macroeconomic conditions. While official numbers show higher, so this is where banks invested that lending to the private sector has their liquidity,” she says. “It was a function of the macroeconomic environment.” risen by an average of 6% year-on-year CI Capital’s Morsy says he sees signs of over the past three years, Capital Ecorecovery in long-term corporate credit, nomics explained in a note that given which started in late 2014 and early 2015, inflation rates of around 9%, annual real credit growth is in fact around -3%. specifically with more borrowing from In the aftermath of 2011, banks have the oil and energy sectors. focused on financing the budget deficit State-run Banque Misr (#8) has beby holding government securities and come a major player in the governproviding credit to government. Some ment’s efforts to spur a recovery by inTHE AFRIC A REPORT

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EGYPT’S BIGGEST BANKS

BY NET INTEREST INCOME TOTAL 5 051.4

US$m

SOURCE: JEUNE AFRIQUE TOP 200 BANKS

2008 as well as to the ongoing political and economic upheaval set off by the 2011 Egyptian uprising. Other measures taken decreased the number of non-performing loans, which have been on a declining trend and now stand at around 9%.

Growing the customer base is an overall goal for banks since the percentage of Egypt’s banked population is still considerably small at around 10%, where it has lingered for the past several years. That is staggeringly low for a population of around 90 million, and it has been a goal of successive governments to increase participation in the formal economy.

Earlier this year, public banks sold investment certificates to citizens to finance the expansion of the Suez Canal, raising more than E£64bn. According to Morsy, around E£27bn came from outside the banking sector, suggesting that citizens who purchased these certificates did not have bank accounts. It is a stark reflection of the amount of money outside of the banking sector.

To increase bank activity, the government plans to pay its employees electronically. Currently, “out of the six million public employees, less than two million have bank accounts,” says Morsy.

Egypt’s loan-to-deposit (LTD) ratio has traditionally been lower than in comparative markets. Egypt’s LTD ratio is currently hovering around 43%, but with better economic conditions a recovery in corporate and retail credit could push this up.

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creasing spending on infrastructure.

Bloomberg data suggests that more than 90% of Banque Misr’s loans this year have been directed towards the Suez Canal overhaul.

In its own efforts to stimulate lending, the central bank launched a mortgage finance initiative in early 2014 whereby it committed a total of E£10bn to participating banks at interest rates of 2-3%.

Banks then distribute the funds at interest rates of 7-8%, targeting middleand low-income citizens with a ceiling of E£300,000 per housing unit. According to Morsy, the main obstacle for this initiative is the regulatory framework related to registrations and foreclosures.

In April, ratings agency Moody’s upgraded Egypt’s sovereign credit rating to B3 from Caa1, citing healthier growth and reduced external vulnerabilities as well as a commitment to reform.

The agency also upgraded to the same level the local currency deposit ratings of National Bank of Egypt (#6), Banque Misr, Banque du Caire (#34) and CIB. Moody’s foresees better macroeconomic conditions to spur lending and translate into double-digit loan growth in 2015.

For Morsy, “the next wave would be for banks to be more aggressive in terms of expanding retail lending, which is the main driver for growth.” ● Amira Salah-Ahmed in Cairo

TOP 200 BANKS

SOUTH AFRICA

Low credit appetite, inadequate power supplies and tough labour talks are likely to limit banking revenue growth this year. Greater regulation is expected to squeeze margins as lenders adapt business models

PROFITS ($m)

163.8

1 908

2 Standard Bank of South Africa

97.4

1 005

3 Barclays Africa Group

85.4

1 218

4 FirstRand Group

81.4

1 703

5 Nedbank Group

69.7

877

10 Rand Merchant Bank

33.6

460

16 First National Bank South Africa

23.4

748

45 African Bank

5.5

-390

55 Capitec Bank

4.6

221

70 Land and Ag. Dev. Bank of SA*

3.5

35

2014 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2013 RESULTS

warned that “future profitability is likely to be lower” for South African banks.

The sector will see a raft of regulatory changes this year that are likely to subdue growth and dampen investor appetite. As part of the government’s reaction to the 2008 Western financial crisis and South Africa’s own troubles in the banking sector, the authorities are implementing reforms to create a ‘twin peaks’ regulation system. In that model, the South African Reserve Bank will oversee the financial institutions and the Financial Services Board will look out for the interests of customers in the

financial services industry. These and other reforms could lead to an increase in demand for long-term debt issuance and securitisation to help banks restructure their funding profiles and provide capital relief, according to Matthew Pirnie, an S&P credit analyst. “The number of regulatory changes means that there will be a need for a restructuring of the way funding is done,” says Pirnie, “and restructuring the assets on the balance sheet and more securitisation and debt issuance are likely at a time when debt pricing is quite difficult because of concerns regarding resolution brought up

by African Bank’s default”. Resolution is the process in which the government smoothes the collapse of a failing bank.

African Bank (#45) continues to crumble under the weight of bad debt as the extent of its losses is larger than the bank first stated. It reported an annual loss of R9.3bn ($730m) in the year ending September 2014, much higher than the previously reported loss of R5.9bn.

African Bank said there was more bad news in store as it continues to rein in risky lending. External administrators will salvage the besieged lender to form a new ‘good bank’ by October, with estimated assets of R26bn, and a ‘bad bank’ will be stockpiled with assets of R17bn.

THE COLLAPSE OF AFRICAN BANK HAS PROMPTED THE BANKING REGULATOR TO REVIEW OVERSIGHT PROCEDURES

MIKE HUTCHINGS / REUTERS

T

BANK NAME

1 Standard Bank Group

WEAK GROWTH, SMALLER APPETITES

hese are tougher times for bankers. South Africa’s economy continues to be weakened by policy uncertainty as well as the ongoing energy crisis that has hampered industrial activity. The electricity crunch will shave 0.3% off growth this year according to ratings agency Standard and Poor’s (S&P). Ratings firms have stressed the need for the government to focus on fiscal consolidation and debt stabilisation. If the investment climate deteriorates further, the country could be hit by credit downgrades. It is already teetering close to junk status. Despite these economic headwinds, S&P rated South African banks with a stable outlook in its February report, the first time in three years. In July, Fitch, however,

TOTAL ASSETS ($bn)

Top 10 South Africa Banks RANK IN TOP 200

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AMENDMENTS TO CREDIT ACT “The African Bank story is significant.

It tells us about future resolution and the bailing and liquidity of certain instruments,” says Pirnie. “It has also raised questions about how easy it is to resolve an institution – African Bank is an incredibly simple bank and it has taken all this time to get the final amendment change in law in order to resolve this institution. Now imagine FINANCE SPECIAL

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TOP 200 BANKS

a bank that has a derivatives position Africa, which represents “a longer-term but lenders will be watching for the which is 30% of gross domestic product regional growth business”. The bank is impact on economic growth.

– how are you going to resolve that in expected to expand into a wider range Diversifying the earnings’ contribu12 or 18 months to two years?” of financial goods and services. tions from operations outside South African Bank’s demise prompted the FirstRand (#4) said in September Africa will continue to be a strategic banking regulator to review its overthat it was finding the domestic ecofocus for all the banks, says Johannes Grosskopf, head of banking and capital nomy “tough”, bracing itself for increassight procedures. Amendments to the ing economic headwinds. The lender’s National Credit Act in March should support more responsHouseholds are feeling the pinch, conservatism has restricted its acquisiible lending and will make it tion growth in Africa, but through Rand and lower spending is likely to Merchant Bank (#10) it continues to harder to borrow, although there is still a lot of bad debt. hit the growth potential of banks operate extensively across the continent.

Facing new regulations and limited New unsecured loans nearly trebled from R30bn in 2008 to R86bn in markets for Africa at PwC. Barclays revenue growth, banks are focusing on 2013. “The big credit providers pulled Africa Group (#3) struck a deal in June streamlining processes by investing in back on their lending, but the gap was to acquire a 63.3% stake in Kenya’s First technology. “Banks are looking at how Assurance, the tenth-largest general inthey can make it easier and cheaper for bridged by a lot of smaller credit prosurer in Kenya, in a bid to boost revenue clients to interact. The more clients you viders,” says Ian Wason, chief execand extend its footprint. Barclays Africa have interacting digitally, the more costutive of debt management company said in its full-year results that it would effective you can be,” says Grosskopf. ● DebtBusters. “People borrowed so much unsecured debt. They have been Gillian Anderson in Johannesburg reallocate more capital to the rest of borrowing more just to keep their heads above water,” he explains.

PROFILE Households are feeling the pinch, and consumer spending is likely to retract, hitting the growth potential of South Africa’s banks. South Africa is likely to raise interest rates in anticipation of monetary tightening in the US, adding to rand/dollar weakness and inflationary pressures. Inflation accelerated slightly to 4.6% year-on-year in “Crucially, Nedbank will NEDBANK (#5) is its rest-of-Africa division May from 4.5% in April and is likely to be focusing on cementing breach the top end of its 3-6% target by expected to continue its out of a total of R13bn. the Ecobank relationship next year, according to some estimates. expansion outside South Nedbank is eyeing two

Nedbank

A SOUTH AFRICAN BANK BUILDING A CONTINENTAL FOOTPRINT

STRAIN ON HOUSEHOLDS Bank profitability will be impacted as even a modest increase in interest rates will place further strain on households already struggling to service their debts. Wason says clients seeking counselling from his company have on average 10 credit agreements and spend 109% of their net monthly income on debt repayments.

Labour unions were going for gold as wage negotiations with major miners began at the end of June. The National Union of Mineworkers, representing more than half of the workers in the sector, was asking for a 15% increase and for severance packages to be increased by 50%. The rival Association of Mineworkers and Construction Union is demanding doubled wages for entrylevel workers. Rising operating costs and intermittent electricity supplies have compounded problems at mines, which were already ailing due to falling gold prices. Banks may not have direct exposure to wage negotiations, THE AFRIC A REPORT

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Africa, both organically and through acquisitions, in the next couple of years. Nedbank also looks to grow its South African business, but may find this a challenge because the country’s economic growth rate hovers around 2-3%.

Nedbank has about 10% of its capital base invested in Africa outside of South Africa. The banking group made R357m ($28m) in 2014 headline earnings from the “rest-of-Africa” division out of total earnings of R9.9bn.

Its larger competitors are better established in markets outside South Africa, generating higher revenues. Barclays Africa (#3) recorded R1.9bn in headline earnings from

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or three acquisitions in East and Southern Africa, says Matthew Pirnie of ratings agency Standard and Poor’s. Nedbank’s medium-term strategy is to have operations in 10 countries in East and Southern Africa, and it currently has six.

In 2013, Nedbank bought an initial 36.4% of Mozambique’s Banco Unico for $24m with the option of acquiring a majority stake in the next year or so. In October 2014, Nedbank took a 20% interest in Togo’s Ecobank (#14) for 493m, converting $285m debt into an equity stake.

Nedbank’s shareholding is near equal pegging with Qatar National Bank, which acquired a stake in Ecobank last September.

and making sure that they are controlling that relationship well,” says Pirnie.

Partnering with Ecobank, which operates in 36 African countries, has expanded Nedbank’s reach beyond its Southern African base. A hostile dispute over Ecobank’s governance had fractured the bank’s leadership, delaying the deal with Nedbank. The crisis drew to a close after the board named Albert Essien as its chief executive in March of last year. Essien retired at the end of June, and Ade Ayeyemi, the current head of Citigroup’s sub-Saharan African operations, took over as the bank’s new chief executive in September. ● G.A.

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LAST WORD

BY CHARLES RUKUNI IN BULAWAYO

Bailouts and begging in Harare and Athens

I

have been watching developments in Greece with keen interest because the way the Greek bailout was handled reminded me of what Tanzania’s former President Julius Nyerere once said at a function in Japan: “It is very expensive to be poor.” Greece and Zimbabwe both missed payments to their international creditors. Zimbabwe has been facing an economic crisis for the past 15 years, but it has not received a bailout. The International Monetary Fund insists that it must first pay its arrears of $150m.

Looking at the amounts doled out to Greece, $150m looks like a very small amount. But it is a lot for Zimbabwe, which has been living from hand to mouth for more than a decade, at one time printing money resulting in record inflation where one United States (US) dollar fetched Z$35 quadrillion.

In Greece and Zimbabwe, politics cannot be separated from economics. The government of Zimbabwe’s president, Robert Mugabe, insists that the US and European Union (EU) exacerbated the crisis by imposing sanctions on the country’s leadership.

He says the West is against his regime because of its stripping of land from many white farmers and its other indigenisation policies. The West argues that the Zimbabwe crisis is due to Mugabe’s bad management and autocratic government.

Some critics of Germany said that regime change – getting rid of a radical and anti-austerity leftist government – was its ultimate goal in negotiating with Athens. Likewise, there was great hope when Zimbabwe formed an inclusive government in 2009 following the disputed 2008 elections. The opposition held the key posts of prime minister and finance minister, but finance minister Tendai Biti failed to secure a bailout even though he was voted the best finance minister in Africa that year.

Biti was not even trusted to handle aid money from the West, as it channeled funds through nongovernmental and United Nations organisations.

Zimbabwe needed $10bn, which was quite a lot considering the size of its gross domestic product, but it did not get the money – most probably because the West believed that the change in government was cosmetic. Mugabe was still in control. Greece, on the other hand, was granted a bailout of €110bn ($126) on 2 May 2010, only nine days after it asked for one. The rescue package

was supposed to be for three years but things did not work out like that. The Greek government received another €130bn less than two years later. In August of this year, it negotiated a third bailout worth €86bn.

The biggest difference between Greece and Zimbabwe, however, is no one seems to care if Zimbabwe collapses, except perhaps South Africa and Botswana, which would see an influx of Zimbabweans looking for jobs. But no one wants Greece to collapse. The Greek crisis rocked the entire world. Markets in Hong Kong, Tokyo, New York, London and Johannesburg yo-yoed on news about the Greek bailout. The world’s richest countries put the Greek rescue on their agenda at their June G7 meeting in Germany.

Greece is too important for the EU to ignore, but the financial markets ultimately priced in a Greek exit from the eurozone and shrugged that Berlin was able to force such harsh terms on Athens.

The rescue came at a high cost. Finance minister Yanis Varoufakis, who was against more austerity and had already hatched a plan for a Greek exit, lost his job. Prime Minister Alexis Tsipras lost the support of his party and resigned, calling a snap election for 30 September after accepting a bailout deal that will see Greece mortgaging its national assets, despite a referendum result that gave him a mandate to reject the EU’s tough austerity deal.

If Tsipras had been from Zimbabwe, people would have labelled him a sellout – a curse that was a death sentence during the liberation struggle.

But he had very little choice. The message was clear and simple: You cannot do what you want with other people’s money.

This is a stark lesson for Zimbabwe. It will have to accept the bitter medicine prescribed by the West if it wants a bailout. And there is no ‘Plan B’ because even China – Harare’s all-weather friend – now insists that there are no more free lunches.

Business is business. Like Nyerere said, Zimbabwe will have to accept that it is too expensive to be poor. Beggars cannot be choosers. ●

The biggest difference between Greece and Zimbabwe is no one seems to care if Zimbabwe collapses. But no one wants Greece to collapse

Charles Rukuni is a journalism training consultant and editor of The Insider, a Zimbabwean online news magazine.

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