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• South Africa Standard Bank​’s new Africa boss • Kenya Equity Bank seeks fresh growth in the DRC • Nigeria Nest eggs and the promise of pensions

N ° 9 3 • S E P T E M B E R 2 017

w w w.t he a f r ic a r ep o r t .c om

Big Data

The hunt begins Banks and companies race to capture the next source of wealth and innovation

INTERNATIONAL EDITION

Algeria 550 DA • Belgium €5.90 • Canada CA$ 7.95 • DR Congo US$ 9 • Denmark 60 DK • DOM 8 € • Ethiopia 90 Birr • France €5.90 Germany €5.90 • Ghana GH¢ 10 • Italy €5.90 • Kenya KES 410 • Morocco 40 DH • Netherlands €5.90 • Nigeria 800 NGN • Norway NK 70 Por tugal €5.90 • Rwanda RWF 6,000 • Sierra Leone LE 15,000 • South Africa R40 (tax incl.) • Spain €5.90 • Sweden SEK 70 Switzerland 9.90 FS • Tanzania TZS 10,000 • Tunisia 5.4 DT • Uganda UGX 10,000 • UK £4.50 • United States US$ 6.95 • Zambia 48 ZMW Zimbabwe US$ 4 • CFA Countries 3,500 F CFA • Euro Zone €5.90

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TOP 200 BANKS EXCLUSIVE RANKING

• South Africa Standard Bank’s new Africa boss • Kenya Equity Bank seeks fresh growth in the DRC • Nigeria Nest eggs and the promise of pensions

N ° 9 3 • SE P T E M B E R 2 017

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CONTENTS

• Big Data The hunt begins • Kenya Equity Bank seeks fresh growth in the DRC • Nigeria Nest eggs and the promise of pensions

N ° 9 3 • SE P T E M B E R 20 17

w w w.t h ea f r ic a r ep o r t .c om

Big Data

The hunt begins Banks and companies race to capture the next source of wealth and innovation

THE AFRICA REPORT | FINANCE SPECIAL SEPTEMBER 2017 L-R: Sola David-Borha of Standard Bank, Clare Akamanzi of the Rwanda Development Board, Ken Ofori-Atta Ghanaian minister of finance, Richard Arlove of ABAX, Anthony Okpanachi of the Nigeria Development Bank

INTERNATIONAL EDITION

Algeria 550 DA • Belgium €5.90 • Canada CA$ 7.95 • DR Congo US$ 9 • Denmark 60 DK • DOM 8 € • Ethiopia 90 Birr • France €5.90 Germany €5.90 • Ghana GH¢ 10 • Italy €5.90 • Kenya KES 410 • Morocco 40 DH • Netherlands €5.9 0 • Nigeria 800 NGN • Norway NK 70 Por tugal €5.90 • Rwanda RWF 6,0 00 • Sierra Leone LE 15,000 • South Africa R40 (tax incl.) • Spain €5.90 • Sweden SEK 70 Switzerland 9.90 FS • Tanzania TZS 10,000 • Tunisia 5.4 DT • Uganda UGX 10,000 • UK £4.50 • United States US$ 6.95 • Zambia 48 ZMW Zimbabwe US$ 4 • CFA Countries 3,500 F CFA • Euro Zone €5.90

Faces of Finance Getting the cash to where it counts

JEUNE AFRIQUE MEDIA GROUP

JEUNE AFRIQUE MEDIA GROUP AFRICA EDITION

Algeria 550 DA • Belgium €5.90 • Canada CA$ 7.95 • DR Congo US$ 9 • Denmark 60 DK • DOM 8 € • Ethiopia 90 Birr • France €5.90 Germany €5.90 • Ghana GH¢ 10 • Italy €5.90 • Kenya KES 410 • Morocco 40 DH • Netherlands €5.90 • Nigeria 800 NGN • Norway NK 70 Portugal €5.90 • Rwanda RWF 6,000 • Sierra Leone LE 15,000 • South Africa R40 (tax incl.) • Spain €5.90 • Sweden SEK 70 Switzerland 9.90 FS • Tanzania TZS 10,000 • Tunisia 5.4 DT • Uganda UGX 10,000 • UK £4.50 • United States US$ 6.95 • Zambia 48 ZMW Zimbabwe US$ 4 • CFA Countries 3,500 F CFA • Euro Zone €5.90

SHOULD GOVERNMENTS CAP INTEREST RATES?

20

Debate rages in East Africa after Kenya’s experiment with interestrate capping hurt banks’ profits and reduced privatesector lending

46

THE HUNT BEGINS Big Data: everyone wants to get their hands on it, and so far the telecoms have the upper hand

COVER CREDITS: INTERNATIONAL EDITION: ANTOINE MOREAU-DUSAULT FOR TAR - AFRICA EDITION: ALL RIGHTS RESERVED; PAUL KAGAME/FLICKR

FACES OF FINANCE

76

After the commodity crunch African finance is seeking a new vision. Five leaders in banking, government, development finance and consulting who aim to steer their countries and companies to future wealth.

TOP 200 BANKS NKS

31

6 EDITORIAL Plug the leaks to fund the roads TRENDING 8 12 14 16

Briefing Dealbook Calendar Opinion The Great Naira Debate

Our exclusive ranking of the continent’s financial institutions shows assets are down but profits are easing their way up

38 RWANDA’s Clare Akamanzi Development at the grassroots 40 NIGERIA’s Anthony Okpanachi Opening the door to SMEs BANKING

20 Big data: The hunt begins

42 DRC Equity Bank’s long bet 45 Interview Banking Association South Africa MD Cas Coovadia 46 Debate Should governments cap interest rates?

PEOPLE

MARKETS & MONEY

32 NIGERIA’s Sola David-Borha Steering continental strategy 34 GHANA’s Ken Ofori-Atta Banker in the engine room 35 MAURITIUS’s Richard Arlove Governance matters

48 Agriculture Financing the farmers 54 Interview The African Guarantee Fund chief executive Felix A. Bikpo 56 Stock exchanges Where investors fear to tread 58 Nigeria Pension Reform 2.0

FRONTLINE

COUNTRY FOCUS — CÔTE D’IVOIRE 65 Overview Soro, the enigma 68 Business The Lebanese diaspora is looking for deals 70 Agriculture The CCC and the cocoa crisis 72 Finance Diagou, the deal-maker 74 People Young guns and top guns TOP 200 BANKS 76 Overview Out of the gloom 80 Rankings Our exclusive ranking of Africa’s Top 200 banks 86 South Africa Downgrade doldrums 88 Nigeria Waiting for a rebound 92 Kenya Unnerving uncertainty 94 Gabon Live by oil, die by oil 96 Egypt Liberalisation roller coaster 98 Last Word Collateral or bust

ADVERTISERS’ INDEX AIR FRANCE p 2; LIQUID TELECOM p 4-5; TURKISH AIRLINES p 7; UNITED BANK FOR AFRICA p 11; OLAM p 13; MCB GROUP p 15; ECOBANK NIGERIA p 18-19; SAHAM FINANCE p 25; REP. OF SENEGAL p 27-30; REP. OF TOGO p 36-37; MO IBRAHIM FOUND. p 41; PROPARCO p 41; ABAX CORPORATE SERV. p 51; CAIF 2017 p 53; BSCA BANK p 59; TAR SUBS. MONTS NIMBA p 59, 91; REP. OF COTE D’IVOIRE p 61-64; ORANGE CI p 69, 71; JAGUAR p 73; AHIF p 85; AOW 2017 - ITE GROUP p 85; DSTV MEDIA p 89; CNN EMEA p 99; STANDARD BANK p 100

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

•

N° 93

•

S E P T E M B E R 2 017

3

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THE AFRICA REPORT A Jeune Afrique Media Group publication

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

Plug the leaks to fund the roads

CHA I R M A N A ND F O UND E R BÉCHIR BEN YAHMED P UB L I S HE R DANIELLE BEN YAHMED publisher@theafricareport.com

M

arkets are frothy. One minute, blind optimism. The next, gloom and doom. Setting aside the temptations of pessimism and optimism, what do clear-eyed observers of the continent see? They would no doubt first flip through our exclusive ranking of Africa's Top 200 banks. It reveals the havoc wreaked by tanking commodity prices on the financial sector. While it makes sobering reading, it also suggests that the bottom may have been reached, and the investor community seems to agree.

The recovery theory is supported by a tripod of trends. The first leg is the prevailing winds of the global economy. Europe and the US are recovering after the financial crisis of 2007. That has helped stop the slide in Asia, slowly reigniting demand for the oil, minerals and agricultural produce that remain mainstays of Africa's economies. Global gross domestic product should expand 2.7% in 2017, with Africa's own growth hitting 3.2% in 2018.

The second leg is that Africa's businesses are also growing. Continentwide sales of Dangote Cement — an ersatz proxy for African growth — were up 12.6% in the first six months of 2017. Another measure, the gross written premium from the continental re-insurer Africa Re, was up 11.8% in the year ending June 2017.

The final strut supporting African economies now is the keener understanding among policy-makers that there is a desperate need for capital, as continental infrastructure requirements suffer from a $40bnper-year deficit. Those officials both need to conserve precious capital and find new sources of finance.

The $50bn the continent loses to capital flight each year is more than enough to meet the need

E X E CUT I VE P UB L I S HE R JÉRÔME MILLAN

for new roads, power stations and hospitals. The most glaring example in recent times is the Mozambican debt scandal, which started in 2013 with collusion between international banks and political elites.

For all those concerned with African development — including fascist-leaning Europeans terrified of an immigrant 'invasion' — useful pressure could be applied to the international banks that made $200m in fees from more than $2bn in opaque loans: Credit Suisse and Russia's VTB. Norwegians might be surprised to learn that their pension fund is the third largest investor in Credit Suisse.

How disappointing that the $662m in aid Norway gave to Africa in 2016 is dwarfed by this opaque deal. A spokesperson for Norges Bank told The Africa Report that no case for disinvestment had yet been brought against Credit Suisse.

African countries also want to attract fresh capital. The search for yield among global investors saw Nigeria, Egypt, Senegal and Côte d'Ivoire all successfully tap the market this year. But heavier investment will require more sustained and serious diversification of African economies.

African banks may fight off perceptions that they are just sitting on piles of liquidity by getting their hands dirty in financing the businesses that will furnish jobs to the millions of youth about to hit the job market. To avoid the demographic dividend turning into a time bomb, they should not delay.

The $50bn lost to capital flight each year is more than enough to cover the infrastructure deficit

THE AFRICA REPORT

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N° 93

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S E P T E M B E R 2 017

M A R K E T I NG & D E VE L O P M E NT ALISON KINGSLEY‑HALL E D I T O R I N CHI E F PATRICK SMITH M A NA G I NG E D I T O R NICHOLAS NORBROOK editorial@theafricareport.com A S S O CI AT E E D I T O R MARSHALL VAN VALEN B US I NE S S E D I T O R MARK ANDERSON E D I T O R I A L A S S I S TA NT OHENEBA AMA NTI OSEI R E G I O NA L E D I T O R S CRYSTAL ORDERSON (SOUTHERN AFRICA) BILLIE ADWOA MCTERNAN (GHANA) S UB - E D I T O R ALISON CULLIFORD P R O O F R E A D I NG KATHLEEN GRAY A RT DI R E CT O R MARC TRENSON DESIGN VALÉRIE OLIVIER (LEAD DESIGNER) SYDONIE GHAYEB VALENTIN EVERARD CHRISTOPHE CHAUVIN (INFOGRAPHICS) CAMILLE CHAUVIN R E S E A R CH SYLVIE FOURNIER P HO T O G R A P HY SAMUEL BOUAROUA PIERANGÉLIQUE SCHOULER 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 4 College Road Business Park College Road North Aston Clinton HP22 5EZ United Kingdom Tel: + 44 (0) 1442 820580 Fax: + 44 (0) 1442 827912 Email: subs@webscribe.co.uk ExpressMag 8275 Avenue Marco Polo Montréal, QC H1E 7K1, Canada T : +1 514 355 3333 1 year subscription (10 issues): All destinations: €39 ‑ $60 ‑ £35 TO ORDER ONLINE: www.theafricareportstore.com A D VE RT I S I NG D I F 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 PRINTER: SIEP 77 ‑ FRANCE N° DE COMMISSION PARITAIRE : 0720 I 86885 Dépôt légal à parution / ISSN 1950‑4810 THE AFRICA REPORT is published by GROUPE JEUNE AFRIQUE

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MOROCCO Protesters in Al Hoceima called for jailed Hirak movement members to be released in July after months of calls for development in the Rif region.

NIGERIA After an initial float of the naira in late 2016, it became easier to get foreign exchange this year.

INDIA The AfDB held its annual meeting in India for the first time in May. AfDB president Adesina and Premier Modi talked agriculture and investment.

DEBT

$1

.5 b

TARGETING OPPORTUNITY

W

ith low yields in US government securities, many otherwise Africa-light investors started buying new issuances of debt on the continent. But, as the shine came off the ‘Africa Rising’ narrative the rate of issuance has slowed dramatically.

The behaviour of bond investors offers a key test of economic recovery, and here the market is improving spectacularly. Sovereigns issued debt of $11.6bn in the first half of the year, rivalling the issuances of 2014.

While this is largely down to a bumper $7bn from Egypt, there is also appetite from investors looking to Africa for their ageing populations.

n

BRICS SOUTH AFRICA’S BUILDING BLOCKS The BRICS countries’ New Development Bank launched its Africa Regional Centre in August and announced plans to lend South Africa some $1.5bn for infrastructure projects over the next 18 months. The bank has an authorised capital of $100bn and says it will back projects outside of its member states.

Danish shipping giant A.P. MollerMaersk is raising $1bn to invest in African infrastructure via its foundation.

Norway’s pension fund is already invested in Africa, though perhaps in not such a healthy way (see page 6).

For Ziyad Bundhun, who has just launched New Africa Advisors in Mauritius, this is a clear sign that the long-term dynamics are again shining through: “We have people moving into new urban areas, with new needs, new appetites, alongside African companies looking to expand across borders”. Hold tight for a fresh dose of optimism, preferably with a sharp pinch of reality this time.

Bond issuance in Africa by sector ($bn) Financial corporate

MOZAMBIQUE DEBT MELTDOWN SOURCES: DEALOGIC ANALYTICS, MOODY’S INVESTORS SERVICE

SOURCE: KROLL/FINANCIAL TIMES

Maputo is struggling to pay its debts created through a series of opaque loans, including one for a tuna-fishing company. A recent audit shows that $500m of the $2bn loaned is missing.

Non-financial

Sovereign

Issuance % (rhs) 1.2%

25

1%

20

0.8% 15 0.6% 10

0.4%

5

0

0.2%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 THE AFRICA REPORT

•

N° 93

•

0%

S E P T E M B E R 2 017

TRENDING

ANGOLA The ruling MPLA party stormed to

victory in August polls as President Dos Santos prepared to hand the reins to João Lourenço.

KENYA Uhuru Kenyatta again beat

FRANCE France’s President Macron (c.) mediated a round

Raila Odinga in the August presidential polls amidst isolated cases of violence.

of talks with Libya’s Prime Minister Al-Sarraj (l.) and General Khalifa Haftar (r.) to bring peace to the battered country.

GUILLAUME PINON/NURPHOTO; JOE PENNEY/REUTERS; AMIT DAVE/REUTERS; STEPHEN EISENHAMMER/REUTERS; LV SHUAI/CHINE NOUVELLE/SIPA; PHILIPPE WOJAZER/REUTERS

“We cannot borrow any more,

Nigeria’s finance minister Kemi Adeosun n

63% 25%

Gambia Guinea-B

19%

7%

24% Senegal

Niger

Mali

Guinea Benin 21% 5% 2% Cameroon Sierra Leone 15% Nigeria Côte Togo 23% d’Ivoire Ghana Liberia Eq. Guinea Congo Gabon 0% 41%

BANKS WHERE LOCALS ARE TOPS

THE AFRICA REPORT

•

N° 93

•

(2020)

FINTECH GROWING GAINS

63%

26%

21%

Angola

28%

Tanzania

40%

Comoros

76% Zambia

29%

Namibia South Africa

24%

Malawi

Zimbabwe Madagascar 3% Mozambique

Botswana

S E P T E M B E R 2 017

BLOCKCHAIN SENEGAL ROLLS OUT DIGITAL MONEY

South Sudan 17% 28% Ethiopia 48% 32% Uganda Kenya 59% Rwanda 31% Burundi 11%

Côte d’Ivoire, Nigeria and South Africa are the champions when it comes to banking sector assets controlled by banks that are majority owned by domestic private interests (see map). In Ethiopia, for example, state-owned banks predominate.

In Mozambique and the Republic of Congo, foreign-owned subsidiaries hold the most assets.

$3bn

The value of the fintech market in Africa is small but growing quickly.

Its growth rate is the highest of all the world’s regions over the past decade, according to research from the corporate services firm PwC.

Swaziland Lesotho

Mauritius

SOURCE: IMF

Cabo Verde

SOURCE: PWC

100% 80%

$0.2bn (2014)

WORLD BANK

we just have to generate erate funds und ds domestically, enough to fund our budget ”

As government regulators pant in the wake of maverick currency Bitcoin, Senegal joins Tunisia as the second country in the world to launch its own national digital currency. Known as the eCFA, the blockchain-based currency will operate alongside CFA francs and is designed to work with existing mobile-money platforms such as M-Pesa. South Africa is considering going the same route.

9

10 TRENDING

CENTRAL AFRICA

MOBILE BANKING

3.5

IN THE IMF'S COLD EMBRACE Central African oil exporters have been feeling the crunch as oil prices remain stubbornly low, leading several of them to seek the help of the International Monetary Fund (IMF). Gabon got a $642m bailout in June and Equatorial Guinea could be next in the line for a stringent IMF programme. The austerity measures underway are politically painful but economically necessary. The region was ill-prepared for the oil downturn, and the countries of the Communauté Economique et Monétaire de l'Afrique Centrale had an average budget deficit of 5.1% in 2016.

Egypt

Algeria

14.6%

KHALED DESOUKI/AFP

16.3%

THE EGYPTIAN STOCK EXCHANGE HAS BENEFITED FROM AUSTERITY

SOURCE: EUROMONITOR INT.

18.9%

EGYPT

CAIRO CASH SPLASH

Egypt’s decision to go for a huge $12bn loan from the International Monetary Fund (IMF) in November 2016 has been accompanied by cuts to subsidies and the floating of the pound, which has been great for financiers but rough on the population.

The central bank said in August that Egypt had received some $40bn in transfers and investments, not including things like the IMF deal, since November. Despite higher interest rates, the main stock market index was up 12% since January.

President Abdel Fattah al-Sisi’s government went to the IMF due to weak growth levels, the pains caused by the fixed exchange rate and high government deficits and debt. But one threat in the newfound burst of investor confidence in Cairo is that debt levels are continuing to increase rapidly, with foreign debt rising last year by more than 40% to $67.3bn.

Sisi hopes his strongman reputation will insulate him from the pain caused to normal citizens, who are not seeing any benefits from those headline numbers.

After cuts to fuel and other subsidies, the annual inflation rate hit 33% in June for Egypt’s major urban areas, according to official statistics. Banks have also warned that the high interest rates are hurting lending at a time when companies should be making productive investments.

Nigeria

MORTGAGES Research firm Euromonitor International predicts that the three fastest-growing markets for mortgages this year are all in Africa.

From low bases, these three big economies are set to record double-digit increases in the number of mortgaged households in 2017.

BARCLAYS AFRICA

A NEW BEGINNING

“Recent South African

developments have had a negative g knock-on effect in Africa ” KAREN KAY BARNARD

Barclays has finally cut the cord from its subsidiary Barclays Africa after a more-aggressive-thanexpected sell-down of its stake this year. London-based Barclays steps back from Africa after a century of presence, now owning just less than 15% of Barclays Africa — which will move to rebrand and reposition the bank.

For Maria Ramos, Barclays Africa’s chief executive, this is a chance to create a strong, African-owned bank. The new entity has three years to find its own branding.

million

PesaLink, Kenyan banks’ rival to Safaricom’s M-Pesa, hit 3.5m users in three months after its launch in February 2017. The mobilemoney platform allows users to make real-time interbank cash transfers of up to KSh1m ($9,675) per transaction.

Managing partner of Baker McKenzie in Johannesburg Morné van der Merwe points out that with almost half of African M&A activity flowing through South Africa, its political and economic crises are bad news for deal-makers across the continent.

THE AFRICA REPORT

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N° 93

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S E P T E M B E R 2 017

12 TRENDING

TOP AFRICAN BONDS H1 2017

343

deals 2015

2016

The total value of the 343 completed M&A deals in sub-Saharan Africa in 2016 was $19.6bn, a significant drop from the $38.4bn in 2015. Top deals on the continent last year included the $5bn sale of food company Bidcorp, and the $3.5bn merger of Rockcastle Global Real Estate and New Europe Property Investments.

FUNDRAISING GETTING MONEY TO MAKE MONEY In July, South Africa’s utility Eskom secured a $1.5bn loan from China Development Bank to partly finance its Medupi coal power plant. The loan is the second tranche of a $5bn credit facility agreed with the bank in 2016.

MONTH PRICED

AMOUNT (US$m)

YIELD/ COUPON

EGYPT

January

4,000 1,750 1,000 1,250

6.125 7.5 8.5

2022 2027 2047

EGYPT

May

3,000 750 1,000 1,250

5.45 6.65 7.95

2022 2027 2047

FIRST QUANTUM MINERALS

March

1,600 1,100 500

7.25 7.5

2023 2025

CÔTE D'IVOIRE

June

1,250

6.25

SENEGAL

May

1,100

NIGERIA

February

SIBANYE GOLD

MATURITY COUNTRY

S&P RATING

Egypt

B-

Egypt

B-

Zambia

B-

2033

Côte d'Ivoire

B+ (Fitch)

6.25

2033

Senegal

B-

1,000

7.8

2032

Nigeria

B

June

1,050 500 550

6.125 7.125

2022 2025

South Africa

B+

COTE D'IVOIRE

June

€625 (734)

5.125

2025

Côte d'Ivoire

B+ (Fitch)

PETRA DIAMONDS

April

650

7.25

2022

South Africa

B+

NIGERIA

March

500

7.5

2032

Nigeria

B

ZENITH BANK

June

500

7.375

2022

Nigeria

B/B+

UNITED BANK OF AFRICA

June

500

7.75

2022

Nigeria

B

SOURCE: THE AFRICA REPORT, DEBTWIRE

442

deals

SOURCE: REUTERS

$19.6bn

ISSUER

TOP AFRICAN LOANS H1 2017 BORROWER

MONTH SIGNED

AMOUNT (US$m)

NIGERIA

February

7,500

N/A

MATURITY

SECTOR

Rail construction project

NIGERIA

April

4,500

2037

Egypt’s Raya Contact Center (RCC) raised $49m in its initial public offering in April after receiving permission to list its shares in February 2015. RCC provides outsourcing services to Europe and the Middle East.

It offered 44.1m shares and total purchase orders amounted to 50.7m.

ZIMBABWE

May

1,700

N/A

To pay off debts

DANGOTE INDUSTRIES NIGERIA

June

1,000

N/A

Cement factory expansion

KENYA

March

Kenyan beer-maker East African Breweries listed the second tranche of a corporate bond on the Nairobi Securities Exchange in May, offering investors a fixed return of 14.2% until maturity in 2022. The bond was oversubscribed by 141%, with the brewer raising more than the KSh6bn ($58m) initially targeted.

Agricultural machinery

800

2020

Infrastructure projects Infrastructure projects

KENYA

March

500

$200m – 2027 $300m – 2022

TUNISIA

June

500

N/A

NIGERIA

May

500

2020

TANZANIA

January

305

N/A

AFRICAN DEVELOPMENT BANK

June

300

2057

Private sector growth

LAND BANK, SOUTH AFRICA

June

300

2027

Agricultural infrastructure

EXPORT TRADING GROUP, KENYA

May

100

N/A

THE AFRICA REPORT

Economic reform projects Education projects Port expansion

Agriculture projects and programmes

•

N° 93

•

S E P T E M B E R 2 017

SOURCE: THE AFRICA REPORT

$38.4bn

Completed M&A deals in sub-Saharan Africa

Transforming agriculture from grass roots to ingredients

From rice farming in Nigeria to cocoa and cashews in Côte d’Ivoire, Olam has been committed to Africa for nearly 30 years. We have invested S$1.89 billion and built a network of 2.5 million smallholders across 25 countries who supply us with products like cotton, sesame and coffee.

Our 31 processing sites are spread across the continent and allow us to transform our crops into key ingredients used in both local and international products. We provide commercial bakers with flour and have our own well-known food brands such as Tasty Tom, Royal Aroma rice, King Crackers, Mama Gold, BUA pasta and Dona palm oil.

21,000 full-time employees and 26,000 seasonal, contract or temporary workers help us to deliver our goals.

They are the catalyst for our success and keep us believing in Africa’s potential.

Olam – born in Africa, believing in Africa. @Olam @olam_international olamgroup.com

14

SEPTEMBER

AFRICAN GREEN REVOLUTION FORUM 4-8 September ABIDJAN | CÔTE D’IVOIRE With $30bn committed to agriculture last year, now’s the time to ensure it drives economic growth. agrf.org

AFRICAN PORTS EVOLUTION WEST AFRICA 5-6 September ACCRA | GHANA With participants from Ghana, Equatorial Guinea, Conakry, Nigeria and Sierra Leone. west.portsevolution.com

SEAMLESS EAST AFRICA 6-7 September NAIROBI | KENYA Payments, banking and fintech event with CEOs from major banks on the programme. terrapinn.com/exhibition/ seamless-east-africa

SOUTH AFRICAN BOOK FAIR 8-10 September JOHANNESBURG | SOUTH AFRICA southafricanbookfair.co.za

UN GENERAL ASSEMBLY OPENS 72ND SESSION 12 September NEW YORK | US

FORUM AFRIQUE–MONDE ARABE–FRANCE 19 September

NAIROBI INTERNATIONAL BOOK FAIR 27 Sept. — 1 Oct.

PARIS | FRANCE Three-way forum on economic cooperation. africafrance.org

NAIROBI | KENYA kenyapublishers.org OCTOBER

LES RENCONTRES AFRICA 2017 2-6 October

NIGERIA COM 20-21 September LAGOS | NIGERIA tmt.knect365.com/ nigeria-com

eLEARNING AFRICA 27-29 September BALACLAVA | MAURITIUS elearning-africa.com

ABIDJAN, NAIROBI, TUNIS French-organised business convention covering West, North and East Africa. rencontresafrica.org

WORK 2.0 AFRICA 3-4 October JOHANNESBURG | SOUTH AFRICA HR specialists from top companies look at maximising the interaction of people, technology and workspaces. terrapinn.com/exhibition/ work2-africa

FIBRE TO THE HOME CONFERENCE 3-5 October

PANELISTS AT THE SPRING MEETINGS DEBATE GROWTH PROSPECTS AND STRATEGIES IN SUB-SAHARAN AFRICA

IMF & WORLD BANK ANNUAL MEETINGS 13-15 October WASHINGTON DC | US The annual meeting of the Bretton Woods institutions will gather together ministers, officials and bankers in the US capital to discuss economic issues of international concern.

On the agenda will be global growth trends, fighting poverty, dealing with low commodity prices and the current lurch towards protectionionism in the United States and elsewhere.

Of particular interest for the authorities in Harare will be discussions about its plans to pay off its arrears to international financial institutions, perhaps by the end of 2018. imf.org and worldbank.org

RYAN RAYBURN/IMF PHOTO

CAPE TOWN | SOUTH AFRICA ftthcouncilafrica-conference. com

POWERING AFRICA NIGERIA 4-5 October ABUJA | NIGERIA energynet.co.uk

AFRICA WOMEN INNOVATION & ENTREPRENEURSHIP FORUM 5-6 October CAPE TOWN | SOUTH AFRICA Third edition of this forum bringing together women achievers to network, mentor and inspire new generations. awieforum.com

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16 TRENDING

F Funmi Adebayo Asssociate, Exotix Capital

THE GREAT NAIRA DEBATE – TO FIX OR FLOAT

T

he battle lines in the long-running naira wars are drawn by politics as much as by economics. In the right corner is the ‘float the naira’ lobby. Its strategists concede that to let the naira float is to take a leap of faith in market economics, but they insist it will be richly rewarded.

A more competitively-priced naira – that is, a devalued naira – will spur local production and push out all those unnecessary imports of foodstuffs and light manufactures into Africa’s biggest market. And then, the investors’ dollars will come sluicing into the financial system, cutting interest rates. Then the naira will find its level underpinned by market forces, not administrative fiat.

Both Ghana and Egypt, heavily encouraged by the International Monetary Fund (IMF), have taken that path with mixed results. So far, the inflationary effects of the devaluation have outweighed any boost to local producers. But the governments say the production boost is coming.

In the left corner, the anti-devaluation lobby reject their opponents’ economic and political arguments. They point out that floating and devaluing the naira will inevitably stoke runaway inflation because of Nigeria’s economic structure: heavily import-dependent with oil exports still generating 95% of foreign exchange. Cheap – that is, subsidised – fuel is every Nigerian’s birthright as the country is one of the world’s biggest oil and gas producers. Floating the naira is politically toxic because it will hit the poor hardest.

There is what we can call an uneasy truce in the naira wars. Both sides have given a little ground. Since mid-2016, Nigeria has had a multiple exchange-rate system. That means one rate for anxious parents paying school fees overseas, another rate for local manufacturers buying approved raw materials and spare parts, and presumably another rate for Hermès handbags.

Initially, the floating of the naira saw it depreciate by 30% in June 2016. After the Central Bank of Nigeria (CBN) intervened by introducing different rates

according to the end-use of the foreign exchange, we saw the parallel and official market converge.

Prior to the devaluation, investors were unwilling to bring dollars into Nigeria, through the formal financial system at least, due to the lack of naira convertibility.

Why risk bringing in dollars and converting to naira to make investments if you cannot convert the naira back into dollars and repatriate the funds? And what sort of liquidity premium should these investors add considering that many others were in a queue at the CBN for well over a year trying to convert their naira earnings into dollars? The CBN’s argument in support of currency controls was that they were protecting Nigeria from ‘hot money’ and forex speculators.

In the current state of affairs, investors, banks and the government have reached an impasse. Although the floating of the naira has made local-currency instruments more attractive and encouraged more positive sentiment towards Nigeria, again, hopes of a massive uptick in dollar inflows are largely unfulfilled.

That leaves many Nigerians asking what is holding up the foreign investors. This is where the distinction between free-floating and floating gets important.

Many investors want the CBN to step back from any intervention in the forex market. That, they say,

Trading in the Nafex window has increased, but investors are reluctant to bring in fresh dollars would allow an efficient and fair forex market to function, setting the real price of the naira.

Initially, investors were frustrated by the multiple exchange rate system and blamed its complexities for causing more confusion around the value of the naira. Such concerns have ebbed as investors are now using the price of the Nafex window – created in April 2017 for use by portfolio investors – to value their naira holdings.

The volume and liquidity of trading in the Nafex window has steadily increased, with hundreds of millions of dollars being sold each week. You would think these are welcome developments, but foreign investors are still reluctant to bring in fresh dollars.

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Context matters here. Nigeria and many other oil exporters have never had a free-floating currency.

Egypt, with the 48% devaluation of the pound last year, is the new belle of foreign investors. Some are advising Nigeria to follow its example. Yes, Egypt got a jumbo IMF loan of around $12bn and is attracting some fresh investor funds. But inflation is roaring, and living standards are facing ever heavier pressure.

However, Egypt’s position is very different from Nigeria’s. It is getting massive financial support from its allies in the Gulf, and President Abdel Fattah al-Sisi runs a far more authoritarian regime than President Muhammadu Buhari. Nigeria’s economic structure is also very different from Egypt’s.

Nigeria is much more import-dependent and its consumers would suffer even more than Egypt’s from a full-throated devaluation.

With foreign reserves of $30.8bn in April, the CBN may worry that it would not be able to manage a massive surge in demand for dollars. This has political implications, given that campaigning for the elections in 2019 will start next year. The government wants to avoid any policies that will hurt the electorate in the short term.

Nigeria’s government does not want an IMF programme. Given Nigeria’s success in tapping the eurobond market for billions of dollars, it could be THE AFRICA REPORT

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Follow Funmi Adebayo on Twitter @FumAde

argued that those calling for a free float are setting up a moral hazard: that is, investors are protecting themselves and leaving Nigeria to bear the entire risk.

With low oil prices and elections coming, calls for a free float are losing steam. We are seeing more investment in naira stocks and local-currency instruments. With stocks at unprecedented low prices and treasury bill yields in the double digits, it is hard to ignore Africa’s biggest markets when investors have stockpiles of cash.

So why haven’t we seen a surge of fresh dollars into the system? In one word: confidence. Investors have bitter memories of capital locked in Nigeria.

Some still cannot repatriate their funds. Policy stability and trust in the institutions that dictate policy are becoming more important to investors, particularly in emerging markets.

It will take a while before investors believe that Nigeria has demonstrated enough stability, consistency and transparency to justify a new wave of dollar investments.Fornow,theyseeotheremergingmarkets providing comparable returns and with lower risk.

The next few months will test the nerves of the CBN and the government. The convergence of the parallel and official market suggests there has been an effective clampdown on rent-seeking. By the end of the year, Nigeria’s authorities could see those elusive investor dollars start to return.

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20

BIG DATA

THE HUNT BEGINS

Streams of consumer data are showing banks where the money is. But, as the beneficiaries of the mobile boom, telecom companies have much more info about customers. Can the banks catch up?

By Mark Anderson in Nairobi and London

ANTOINE MOREAU-DUSAULT FOR TAR

S

hoppers walk past empty shelves in an aisle of a Nakumatt supermarket in an upscale neighbourhood of Nairobi. The retailer, which was once among the most promising on the continent, is now buckling under mounting debt – reported to be as much as $145m – while experiencing higher operating costs. Poor management decisions and a weak growth strategy are to blame.

It did not have to be this way for one of Kenya’s most recognisable brands. Experts say the company’s failure to utilise the data it has gathered from its more than 1 million customers is the main reason for its financial problems. “If they had been very data-driven, they would have seen the downward trend maybe two years ago – [and said] ‘We’re not doing well, what’s happening?’,” Francis Waithaka, chief executive officer of Digital4Africa, a Kenyan company that helps businesses use their customer data, tells The Africa Report.

Had Nakumatt managed its data effectively, following the trend in the global retail industry, it would have

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been able to mine the huge amounts of data being thrown off by every step in the process. From incremental price increases from suppliers, to customer preferences, to information about the management of warehouses, staff turnover and individual store performance, there are thousands of data points to track and analyse.

MOBILE REVOLUTION While the phrase ‘big data’ is often bandied about and is generally taken to mean the use of analytical tools and new datasets to improve productivity, it is not a new idea. Nakumatt, for example, could have learned lessons from US retail giant Walmart, which has tracked the sale of every single item through a system called Retail Link since 1991. In doing so, it cut down its supply-chain costs and revolutionised the US supermarket industry.

It is now easier to track consumer behaviour than ever before through Google, Facebook, Twitter and WhatsApp. So how does this apply to African businesses and banks? At the heart of Africa’s big-data phenomenon is the mobile revolution that has led to 960m mobile subscriptions on the continent. This has created mountains of new information about consumer spending habits.

Across the continent, both homegrown businesses and multinational companies are turning to big data to inform their growth strategies. Datafocused start-ups are also beginning to sprout up. Banks and financial firms have noted this trend and are scrambling to use the data generated by their customers. About 85% of African banks surveyed are using big data to improve security, while 77% are using it to improve customer service, according to a PwC African banking report from October 2016. The International Data Corporation, a market intelligence firm, predicts that revenue from big data and analytics operations will increase by 11% in Africa and the Middle East this year to reach $2bn. It forecasts that growth will remain at about that rate for the next few years.

Mohamed Dabbour, chief executive officer for Africa at Millicom – a telecoms provider that serves 12 million customers in five African countries – says: “It’s clear that the future – in terms of growth, in terms of serving your customers, in terms of understanding them – is going

to be understanding our own data […].

We sit on a tonne of data – even when you don’t do anything on your phone there is some data generated.”

Africa’s mobile revolution has done wonders for financial inclusion.

Between 2011 and 2014 the proportion of adults with a bank account in subSaharan Africa rose from 24% to 34% – a 41% rise – according to the World Bank. The idea that the continent’s commercial banks could further piggyback off this and dramatically increase the number of bank accounts is grabbing executive attention.

Pieter Vorster, chief data officer at Barclays Africa, says: “There are three, four or five times more cell phones than bank accounts, based on the population that exists in [African] countries, so there’s a really enabling technology and enabling relationship [between telcos and banks].”

Telecoms companies are beginning to see the value of this data and to anonymise it and then sell it on. Dabbour

of Millicom says he would consider selling data as a new revenue stream. “On an anonymised basis, if we find the right partner and see the value added for the customers and for us, we would probably consider [selling our data],” he says.

FRUITFUL PARTNERSHIPS Data from telcos offer valuable customer insights for banks. Already known as a breeding ground for financial technology, East Africa is home to many of the most advanced partnerships between banks and telcos. In Kenya, the massive success of Safaricom’s M-Pesa mobilemoney service has led to a deal with KCB, the region’s largest bank by assets, to roll out mobile-banking services in 2015. That partnership now has more than seven million customers. Next door, Tanzania’s largest mobile phone company, Tigo Tanzania, has partnered with CRDB Bank to launch mobilebanking services.

“The lines have blurred, particularly in Africa, between banks and

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277m

300M 250M 200M

178m

150M

50M

0.2m

0M Dec. 06

Jun. 08

Dec. Jun. 09 11

Dec. Jun. 12 14

SOURCE: AFDB

Number of bank accounts in 2015

100M

Dec. Dec. 15 16

WhatsApp messages sent on New Year's Eve 2016

SOURCE: PWC

77%

Kenyan start-up M-kopa uses the cloud to manage 480,000 daily measurements of rooftop sunshine exposure for solar panels

Smartphone adoption in Africa 75%

Global average

50% 25%

Africa

0% 2009

2011

2013

2015

2017

SOURCE: IDG CONNECT

More than two-thirds of African banks surveyed by PwC use big data in frontoffice functions to enhance the client service experience

SOURCE: FACEBOOK

63bn

SOURCE: GSMA INTELLIGENCE

telecommunications providers,” says Abdigani Diriye, research manager at IBM Research. “But how do you give a loan with a high expectation of payback, even for only a small value, to someone who has zero credit history and no assets? The answer lies in big data,” he says.

An obvious area of collaboration is determining creditworthiness. For that purpose, Millicom has partnered with JUMO, a South Africa-based, low-cost financial services platform that creates financial identities for small and medium-sized businesses using data from their mobile usage. “We are sharing our data with [JUMO]. […] We have the customer data. But on our platforms, they basically do credit scoring, they analyse the customers, they analyse their behaviours and they give them the credit scoring. And for each of them, they are able to give them a specific loan,” says Dabbour.

Mobile usage data, including airtime top-ups and calling behaviour, can be

CLOUDS OF DATA As the cost of data storage goes down, even more data will be created. A key change in the coming years will be the adoption of cloud computing, an option that allows companies to store their data remotely and access it through the internet. The continent’s biggest companies are already preparing for this. “The big transformation is going to be Safaricom,” says Corine Mbiaketcha Nana, managing director for East, Central and West Africa at tech firm Oracle. “We’re going to announce a partnership with Safaricom.

They’re starting to initiate their whole transformation into the cloud.”

And as cloud-computing capacity increases, so will data-rich financial transactions. Some mobile-money transfer outfits are relying on data provided by telecoms operators to function. Strict anti-money-laundering regulations mean companies that carry out cross-border transfers need lots of information about their customers.

But mobile-money accounts, which are linked to customers’ identity documents, have been key for the industry, says Rachel Balsham, deputy chief executive officer at mobile payments company MFS Africa. “Our business works because we leverage the ubiquity or the reach of the mobile-money agencies,” she says. “With mobile money, you have traceability, […] you can monitor transaction behaviour.”

Financial advisory companies are also using customer data to help inform investment decisions. “We

Growth of registered mobile money accounts in sub-Saharan Africa

2019

Unique mobile subscribers in Africa (million) Penetration – Global average Penetration – Africa 70% 65% 68% 60% 63%

71%

72%

52%

53%

54%

697

725

19

2020

44%

46%

513

557

2014

15

48%

589

16

50%

630

17

665

18

SOURCE: GSMA INTELLIGENCE

ANTOINE MOREAU-DUSAULT FOR TAR

used to determine credit scores. “Every transaction that your customer does on your network has a record somewhere,” says Dabbour. Using these data can provide insights into the prospective borrower’s financial stability, location, social networks and living circumstances.

Social media is another source of data that is increasingly used by financial institutions to determine creditworthiness.

Over the past three years, partnerships between banks and social media companies have grown significantly. But the rules of engagement are complex.

“Facebook won’t just sell you their data – it’s not their business model,” says Vorster of Barclays Africa. “But they will co-create with you a mechanism where people identify their information to you legally and you can then use that information appropriately.”

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Pieter Vorster Chief data officer at Barclays Africa

IT'S BEEN RELENTLESS, IT'S BEEN CONTINUOUS

L

ike many financial institutions, using data derived from non-traditional Barclays Africa has stepped sources such as social media. up the role of data in its The bank is also hiring an array operations. With total assets of new employees who would of $85bn it is one of the biggest banks have seemed out of place around operating on the continent. Its the office just a few years ago.

11.8 million customers in 12 African "In terms of the analytics modelling countries are generating spending capability and so on, banks are starting data every day. The bank’s corporate to realise [data] are not something clients transact across its platforms, you just chuck out there and somebody giving it unique trading information. else can do for you,” says Vorster.

Barclays Africa is beginning “That's why a lot of different skills to embrace the mounds of data are coming to the bank that you wouldn't it has on its servers. Pieter Vorster, have seen before, from data scientists the company’s chief data officer, to designers to digital developers." is at the helm of this strategy.

In the past, the bank has been Barclays Africa is using data to reluctant to use the data they have drive costs down. The bank is training gathered. “Financial services bots to handle customer calls over companies have extremely rich, the phone. “We want to understand valuable information that has always what our call centre agents are doing, been kept somewhere because of and when a client speaks to them, the fear of not being able to answer to understand what they're actually a question when a client or regulator asking, and the quickest path to asks,” Vorster tells The Africa Report. a resolution,” says Vorster. “We’ve got “Unleashing that information has been the “A lot of different skills are transformation that I've coming to the bank, from data seen, specifically in Africa, over the past three years. scientists to digital developers” It's been relentless, it's been continuous.” human beings doing boring jobs Vorster is driving Barclays Africa’s they don’t want to do – robotics helps experimentation with data. He to solve quite a bit of that.” has signed two proof of concept deals The bank is looking for ways that would see the bank sell access to reduce the cost of regulatory to its data. “We have a flow of compliance. Plugging into streams information that shows economical of official government data can save activity and we can quite quickly time and boost efficiency. “We're determine that there are certain looking at partnering with some opportunities that somebody of the government institutions around would be able to exploit,” he says. identifying and validating information One of the bank’s core functions, for regulatory purposes,” Vorster says. issuing personal loans, has been The next frontier looks to be shaken up by the onset of big data. optical character recognition, known New partnerships with telcos as OCR — a technology that transmits and data-driven start-ups has caused images into text. This will help cut a dramatic rethinking of the way costs further. “A lot of the cost space creditworthiness is calculated (see that we have is because of article). In July, Barclays Africa signed inefficiencies in very poorly designed a deal with Hello Soda, a US-based processes,” Vorster says.

Interview by M.A. company that compiles credit scores

look more deeply in terms of the client’s behaviour […], more about their purchasing behaviour and that kind of thing,” says Kathryn O’Neill, a senior associate at South Africa-based Aspect Advisory. “For example, in the agriculture industry you can identify potential for loan defaults in terms of the area they are in, whether there is a drought, the types of loans that they have – these sorts of different indicators that you could have a look at. We’re doing a lot of research in that area.”

One problem is that in the rush to amass data companies can overlook the quality of the information. With SIM cards being changed frequently by mobile users, data does not always stay fresh for long. “Big data is going to be relevant only if we’re able to use it in a timely manner,” says Ahmed Rady, Coca-Cola’s general manager for East Africa. “What we’re finding today is data relevance expires much faster than it used to in the past. If it takes you too long to find what you need to find from the data, it stops being relevant.”

USE IT OR LOSE IT Quickly making data useful is a job for a new crowd: the financial technology (fintech) start-up brigade. At an old tobacco trading dock in east London, UK, hundreds of software developers, investors and executives have convened to attract investment for their business ideas. Dozens of the start-ups here feature the use of consumer data as a central component of their pitches.

Cashoff, a data-analysis company that helps banks to understand their customers’ data better, is trying to attract new business. The Russia-based start-up crunches spending data generated by banks’ customers. Cashoff sorts this data into different categories, making it easier for banks to identify offers and services that would be appealing to their clients. “Banks can sell their own banking products with a conversion of about 15% or 20%,” says Dmitry Gorkov, Cashoff’s chief executive officer. The company works with 15 banks in Russia and the UK and could soon enter the African market after beginning talks with a bank based in Côte d’Ivoire.

Another data-focused start-up with financial relevance present at the London confab is Cognitect, which builds databases. Cognitect works with traders on risk management and prospective modelling by tracking THE AFRICA REPORT

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ANTOINE MOREAU-DUSAULT FOR TAR

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metadata about transaction flows. “We work with a few hedge funds that use our technology to run simulations of potential market futures and then understand, if any of these scenarios happen or these 10,000 traders do this, what would our response be and then how we model all that based on historical data for future predictive analysis,” says Justin Gehtland, Cognitect’s chief executive officer.

But critics say a data-driven approach can exclude those in rural and lowincome areas from the attention of financial institutions. “What is often forgotten in this frenzy around big data is that the unseen in big data are often the same as the unseen in official data,” says Morten Jerven, author of Poor Numbers: How We Are Misled by African Development Statistics and What to do About it.

How to bank those populations remains a hard problem (see page 54), with the poorest 25% of Africans of little interest to lenders. “If you think about letting Barclays take the lead [in using big data] and that will somehow lead us towards financial inclusion […] you would not and should not expect Barclays to do that,” Jerven says.

The proponents of big data do not see it as a silver bullet for development problems. But technology is certainly part of the solution. For example, in 2013, IBM worked with call data released by

French telecom provider Orange in order to propose streamlined bus routes for the city of Abidjan. Elsewhere, in Pakistan, according to a report by the Brookings Institution, ‘the government implemented a biometric ID system to ensure that certain government payments could only be collected by women beneficiaries.’

The women with the new ID cards said that their social status improved and they were able to negotiate their family roles better. This then provides a new data set to authorities trying to reach the poorest groups.

Meanwhile at the corporate banking level, the excitement around big data has yet to transform into an item on a balance sheet, says Vorster of Barclays Africa. He sees that there is still a long way to go before data’s true value is fully understood.

“How serious are banks regarding the data that they have? I have yet to find a chief financial officer of a bank that will put the bank’s data as an asset on their balance sheet,” he says. “But people are realising more and more that data is an asset you can use.”

UBER: FROM TECHNOLOGY TO DATA COMPANY BETWEEN MAY AND AUGUST 2017 the ride-fixing service Uber had 350,000 active users and 5,000 active drivers in the Kenyan capital. “Nairobi has been the fastestgrowing city [for Uber] in subSaharan Africa,” Loic Amado, Uber’s general manager of East Africa, tells The Africa Report.

Uber stores all of the data it collects about traffic, pick-up locations and drop-off points to

improve its services.

“We're first of all a technology company; secondly, we're becoming more and more of a data company going forward,” he says.

The millions of trips taken by Uber users in Nairobi provide unique insights into the traffic flows of the city. Smartphones, which often have many sensors, can also provide telematics data about the quality of the roads. “You can see if

a driver swerves around a specific point, maybe there's a pothole at that point,” Amado says.

This data can be shared with governments to inform city planning decisions.

“We just launched a new tool called Uber Movement, and we're sharing that with local stakeholders in cities and city planners because it shows traffic patterns at different times of day,” says Amado. M.A.

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ADVERTORIAL

SENEGAL A strengthened democratic tradition

W

hile the majority of Senegal’s population is Muslim, the country is made up of different communities and does not appear to be experiencing any tensions that could destabilise it. Senegal’s renewed tradition of dialogue and democracy was welcomed in 2012 following the peaceful election of Macky Sall as its new president, replacing Abdoulaye Wade, who had immediately accepted his defeat.

“Today is a great victory for democracy in Senegal and Africa. Senegal is a very good example for Africa,” stressed Catherine Ashton, the European Union’s High Representative on Foreign Policy. “I congratulate the Senegalese people, their leaders, political parties and civil society for the democratic spirit they have shown.»

Even before his election, President Macky Sall had promised to strengthen Senegal’s democratic foundations, many of which had been won only after a long struggle. This is what he set out to achieve from the very beginning of his term, sometimes reaching out to respond to old civil society demands.

For this, he used the most direct route between state and citizens: the referendum.

Today, Senegal is a model of democracy in Africa and beyond.

Spared the political upheavals that befall its neighbours, there has not been a coup d’état since its independence in 1960. At the end of President Abdou Diouf’s terms in 2000, the country underwent a second political turnover when people voted for the various opposition parties in presidential elections.

I

Consolidating democracy: the people have the floor

Fifteen

constitutional reforms for a democratic governance charter

Hailed by Martin Shultz, President of the European Parliament, in 2015, as “a pillar of democracy in Africa and the world”, Macky Sall is the only African head of state to have been invited to the White House by Barack Obama.

He himself had hosted the US head of state during one of his rare visits to the continent.

He won the trust of his peers, as well as of his fellow citizens, by working, from the very beginning of his term, in March 2012, on a raft of democratic reforms in Senegal.

Macky Sall meets with civil society, heads of the opposition and religious leaders during the day of National Dialogue on 28 May 2016.

Macky Sall and Jean-Claude Juncker, President of the European Commission on 7 June 2017.

Reforms inspired by the presidential programme

Macky Sall at the White House.

The prospect of reforming Senegal’s institutions had been on the table for a long time, particularly since the national conferences held in 2008-2009 by civil society and the opposition at the time. Macky Sall, the founder of the new Alliance for the Republic party, had adopted most of the reform proposals contained in a “democratic governance charter”.

In 2013, the President commissioned a National Commission for Institutional Reform (NCRI) to organise “a broad national consultation on the reforms to be implemented [...] to provide the country with a modern institutional framework”.

The mandate of the NCRI, chaired by Amadou Makhtar Mbow, former Director-General of UNESCO and already working to this end since 2008, was structured around both the outcome of the conferences and Macky Sall’s “Yoonu Yokkute” (Pathway to Progress) electoral programme.

A High Council to promote decentralisation In September, 27,000 county and local councillors elected 80 of the 150 members of the newly created High Council of Territorial Authorities, while the other 70 were elected by President Macky Sall. This body, established at the request of the Head of State, is point 3 of the proposed constitutional reforms voted by referendum in March 2016 and will have an advisory role on all decentralisation projects. It also aims to promote local governance and territorial development.

Macky Sall and President of the HCCT Mr. Ousmane Tanor Dieng.

II

ADVERTORIAL

“Yes” vote prevails in “No” strongholds Fifteen reform proposals from the CNRI report were retained, some of which are general in scope, such as the recognition of new rights for citizens (healthy environment, land heritage and natural resources), while others had more political intentions (modernising the role of political parties, the rights of the opposition, length of presidential terms, etc.). On 20 March 2016, Senegalese voters largely voted in favour (62.7% of the vote), including in the electoral strongholds of the “No” vote, of consolidating Senegal’s democracy according to the proposals put forward.

During the March 2016 referendum.

THE 15 POINTS OF THE PROPOSED CONSTITUTIONAL REFORMS PUT TO THE VOTE IN THE MARCH 2016 REFERENDUM I. Modernisation of the role of political parties II. Participation of independent candidates in all types of elections III. Promotion of local governments and territorial development through the establishment of High Council of Territorial Authorities IV. Recognition of new rights for citizens: the right to a healthy environment, land heritage and natural resources V. Strengthening of civil responsibility by the establishment of civic duties VI. Reinstating the five-year presidential term VII. Strengthening the rights of the opposition and its leadership VIII. Representation of Senegalese people living outside the country IX. Broadening the scope of the powers of the National Assembly in terms of controlling government action and evaluating public policies

X. Submitting organic laws to the Constitutional Council to check their constitutionality before promulgation XI. Increasing the number of members of the Constitutional Council from five to seven XII. The selection of two members of the Constitutional Council by the President of the National Assembly XIII.The broadening of the Constitutional Council’s capacity to express its opinion and decide on accusations of unconstitutionality brought before the court of appeal XIV. Making the principles of decentralisation and deconcentration constitutional XV. The infrangible aspect of provisions relating to the republican form, the indivisible, democratic and decentralised character of the State, the method of election, the duration and the number of consecutive terms of the President of the Republic

Reduced presidential term The length of the presidential term will be reduced from seven to five years. The President of the Republic, the guarantor of the Constitution, abided by the position taken by the Constitutional Council which, in an opinion delivered on 16 February 2016, opposed the Head of State applying this reduction to the term underway. As Macky Sall was sworn in under the current Constitution, which sets the presidential term at seven years, the Council considered that the reform desired by the President should change the length of the following presidential term and not the term in progress. In order to avoid constitutional overlapping in the future, the President proposed in point 15 of the reforms that “the provisions relating to the number of consecutive terms of office of the President of the Republic are infrangible», i.e. a term is renewable only once.

Macky Sall announcing the referendum on national television.

III

ADVERTORIAL

Official inauguration ceremony of the High Commission of Territorial Authorities (HCCT) in Dakar, 31 October 2016.

Improving party activity

6.2 million registered voters

Numerous political parties have been formed in Senegal since the multiparty system, introduced in 1974, was fully incorporated in 1981, when Abdou Diouf was elected president.

However, there are perhaps too many parties.

Measures were taken early on to limit the proliferation of political formations, without complete success.

Several measures undertaken, following the success of the March 2016 referendum, are aimed precisely at improving the way political parties function and interact. This is certainly true of the first proposal: “Modernisation of political parties”, as all observers agreed

that the excessive fragmentation of the party system can undermine the effectiveness and legitimacy of political action. Political parties are organisations that bring democracy to life and, in addition to the issue of fragmentation, the government is committed to finding a solution to the weak institutional capacities of these formations and organisations.

The second point aims at ensuring “the participation of independent candidates in all types of elections” – presidential, parliamentary and local. This innovation marks a renewal in citizenship behaviour by offering citizens the opportunity of taking part in the development of their local community or their country, independent of political party affiliation.

The update of the electoral roll used for the 30 July legislative elections resulted in a total registration of 6.2 million voters, while the previous roll reached 5.5 million registered voters. For more transparency, long before the elections, provisional voter lists were available in the interior parts of the country, at town halls, sub-prefectures and prefectures, as well as at diplomatic representations abroad. This allowed any person left off the electoral roll or whose registration or request for modification had not been properly carried out, to request his or her inclusion on the voter roll or corrections to be made to the information pertaining to that person.

IV

DIFCOM - PICTURE: LIONEL MANDEIX

Electoral registration up 700,000 new voters

The day of National Dialogue in 2016.

THE MARCH 2016 REVISEDCONSTITUTION ALSO PROVIDES FOR THE RIGHTS OF THE OPPOSITION AND ITS LEADERSHIP IN ORDER TO FACILITATE AND BROADEN POLITICAL DIALOGUE. ■

ALL RIGHTS RESERVED; PAUL KAGAME/FLICKR

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(L-R) SOLA DAVID-BORHA, CLARE AKAMANZI, KEN OFORI-ATTA, RICHARD ARLOVE, ANTHONY OKPANACHI

FACES OF FINANCE As Africa emerges slowly from the wreckage of the commodity crunch it’s time to push for a new economic model in which sectoral diversity and financing for small businesses drives growth. Whether making policies, expanding a continental footprint or funding development is their field, good governance, integrity and confronting problems head-on are common themes for these leaders seeking to revolutionise finance at home and across Africa.

By Charles Idem in Kigali, Nicholas Norbrook and Patrick Smith

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Sola David-Borha STEERING A CONTINENTAL STRATEGY Now ‘entirely focused on Africa’, Standard Bank has put the next phase of its continental expansion in the calm and capable hands of a banker who has proved her mettle in difficult times

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tandard Bank, Africa’s largest bank by assets, continues its push out of its South African base and now has the fierce guidance of Nigeria’s Sola David-Borha to help it along the way. She left her post at Standard Bank’s Nigeria subsidiary in early 2017 to become the bank’s group chief executive for the rest of Africa.

While other banks with pan-African horizons have had trouble in governance and management as they expanded their operations, Standard Bank is confident that David-Borha will run a tight ship overseeing the 19 other countries in which the financial institution operates on the African continent.

A few key points give critical insight into the way David-Borha operates. In 1984, she was a fresh university graduate at NAL Merchant Bank when, in the course of work in the credit and marketing department, a senior colleague was rude to her. Indignant at the way she was treated, she politely enquired from him what she had done to deserve such conduct. Startled by her audacity, the offender instantly apologised and went on to engage with her respectfully. This encounter taught the young banker a valuable lesson: “Always have the courage to challenge or condemn inappropriate behaviour, irrespective of who, how, or where that behaviour is coming from.”

STELLAR CAREER In the more than 30 years since then, David-Borha picked up many other insights to chart a stellar career that has seen her rise to a position on the executive committee of Standard Bank.

After working at NAL Merchant Bank, she went on to IBTC and told reporters that she enjoyed the start-up environment: “In the early years, you had to prove yourself. You had to fight for every kind of business you could get but it was an experience you wouldn’t exchange.”

Prior to her Standard Bank appointment, David-Borha had served as chief executive of Nigeria’s Stanbic IBTC since 2011. That appointment came amidst

upheaval in the country’s banking sector, fuelled by the central bank’s move to sack and arrest the leaders of three banks for infractions that had threatened to plunge the sector into a crisis.

As the aftershocks of the regulatory action spread across the sector, DavidBorha assumed the helm of Stanbic IBTC and set out to change the bank’s ownership structure to a holding company model, as had been mandated by the central bank. Her main task was to sustain the growth trajectory that

“Always have the courage to challenge or condemn inappropriate behaviour, irrespective of who, how or where”

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had been set under the previous chief executive, Atedo Peterside. Despite the difficulties imposed by a volatile macroeconomic environment, David-Borha impressed as she implemented a retail banking strategy to facilitate long-term growth and diversify away from the competitive investment and corporate banking businesses. It also backed some deals for distribution companies in the country’s electricity privatisation.

Amidst the debates on the exchange rate

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for the naira, David-Borha argued the need for clarity, telling local media: “We need to ensure the financial markets are transparent and liquid while prices of goods and services are at optimal.

So, whether we are selling foreign exchange, or money or equity markets, it is at market rate.”

Charles Idem

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NAGUIB SAWIRIS The Egyptian billionaire is focusing on finance. He launched RiverBank, a Europe-focused SME lender in April. His Beltone Finance announced plans for a $1bn investment fund in August.

MALUSI GIGABA The new South African finance minister has a slew of crises to choice from: from claims of ‘state capture’ by the Gupta family to threats to the independence of the central bank.

BOB DIAMOND In July, the Atlas Mara co-founder sold a stake of the company to Canada's Fairfax Financial. The $200m it raised will partly be used to increase its shareholding in Union Bank of Nigeria.

ZAFRULLAH KHAN KOPANO TLAPE; ALL RIGHTS RESERVED

ARTHUR MATSAUDZA After being poached from Telecel

by Econet last year, Matsaudza heads up a new crack team for tech infrastructure at Steward Bank, the Zimbabwean bank purchased by Econet in 2012.

ADETOKUNBO ABIRU The chief executive of Nigeria's Skye Bank is still relying on central bank guarantees — renewed for another year in July — as the bank seeks approval for new plans to raise capital to right its ship.

ANTONIN BORGEAUD POUR JA; BLOOMBERG VIA GETTY IMAGES; ALL RIGHTS RESERVED

RIDING THE STORM Over the next three years, Stanbic IBTC recorded a 238% growth in net profits until oil prices collapsed in late 2014, triggering a recession in Nigeria’s economy. In 2015, a handful of banks, including some of the market leaders, declared losses as a result of the downturn. Stanbic IBTC rode the storm, recording a decline in profits of more than 80%. But by 2016, the bank returned to a better growth trajectory and recorded a 50% increase in net profits.

Clearly impressed by her performance and managerial style, which is said to be calm and meticulous, the board of Standard Bank tapped David-Borha to drive the next growth phase of its Africa businesses, which is central to the group’s strategy.

Standard Bank joint chief executives Sim Tshabalala and Ben Kruger restated this in the bank’s 2016 annual report, noting that the group had become ‘entirely focused on Africa‘’ since 2015.

As such, it is expected that non-South African Africa business will account for a higher share of revenue than the current 30% share. David-Borha’s job is to ensure that this goal is achieved and her experience as the head of the Nigeria unit means she comes to the job well-prepared.

Standard Bank is targeting major African markets that it sees as primed for banking growth. It opened a representative office in Ethiopia in 2015 in the hope that the government there will soften its regulations that bar foreign banks from owning Ethiopian financial institutions. David-Borha oversaw the appointment of a new chief executive, Amedeo Anniciello, for the bank’s operations in the Democratic Republic of Congo (DRC) in July. She told media: “The DRC represents a substantialopportunity for the Standard Bank Group. We are increasing our capital and investment locally,andintroducingthelatestversions of our Group information technology platforms to help reshape our 25-year-old business and drive growth.”

The former Chase Bank Kenya chairman was arrested in June and faces charges linked to the bank's entry into receivership in 2016. Prosecutors say he used bank funds to buy cars for his wife.

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Ken Ofori-Atta TECHNOCRAT IN THE ENGINE ROOM The former investment banker, now finance minister, started his mandate fire-fighting, but he is determined to turn crises into opportunities as Accra seeks to finish its IMF programme

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f President Nana Akufo-Addo and vice-president Mahamudu Bawumia are on the bridge of the good ship Ghana, finance minister Ken Ofori-Atta is running the engine room. And it has been a torrid first year in the job for the soft-spoken investment banker turned frontline politician as his team has tried to avoid the financial rocks.

Crashing cocoa prices and a weak oil market have cut back export revenue.

Much of Ofori-Atta’s early months in the job were spent scrutinising the books and finding technical fixes to cut budgetary pressures. So far growth is up, and inflation is down. But on a key measure – creating new jobs – it is too soon to tell.

The first crisis on the radar was the discovery of a 7bn ($1.6bn) hole in this year’s budget, bequeathed by the outgoing government. This gap re­ inforced other constraints: government debt running at more than 70% of gross domestic product, locked-in spending commitments and statutory payments to state enterprisesand regional authorities.

As Ofori-Atta’s team drew up a new budget, restructured the most pressing debt obligations, courted international investors and investigated the most egregiously damaging contractual

commitments, the spectre of a local banking crisis was looming.

It was one that Ofori-Atta, a founding director of Accra-based Databank, was absolutely prepared to turn into an opportunity. On 14 August, the central bank authorised Ghana Commercial Bank, in which the state retains a fifth of the equity, to take over UT Bank and Capital Bank, which were set to fall short of the regulator’s capital requirements.

March after just a year in the job. Insiders say that Issahaku had lost credibility after he signed off on a $4.7bn contract for mobile banking services with Sibton Switch Systems when rival bidders offered to do the work for less than $20m.

Investigating the Sibton Switch contract was one of the first acts of the new government in January. As Ofori-Atta told The Africa Report in March: “There are some things which are outrageous which I think most well-meaning people will know to move away from […]. There is moralcompassion,thereismoralshame.”

Yet the travails of the country’s banks are long-term and structural, Ofori-Atta

QUESTIONS OVER VIGILANCE Under the rules introduced in April by Ernest Addison, the new governor of the Bank of Ghana, all banks have to increase their capital adequacy ratios to 10% by September The sector would be improved by or show a convincing plan to “five well-capitalised indigenous achieve that level. Addison banks” replacing the existing 36 says that the central bank will investigate what went wrong at UT and Capital. The two banks had 53 told the Ghana Association of Bankers branches and 900 staff between them, on 11 August. With 36 banks, 19 of them locally owned, there are simply too many some of whom may lose their jobs. for the size of the economy, he said. It Both were weighed down by worsening non-performing loans. would be better to have “five well-capiThat raises questions about the vigtalised indigenous banks,” he said.

It all goes back to the government’s ilance of the previous governor of the industrial strategy and its plan to develop central bank, Abdul-Nashiru Issahaku, a regional financial centre, according who resigned for ‘personal reasons’ in THE AFRICA REPORT

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to Ofori-Atta. A few robust banks able to lend at single-digit interest rates are needed if companies are going to build up viable manufacturing and processing operations, he told his former colleagues.

That implies some radical consolidation and mergers. Another seven banks were warned about their capital adequacy and have now submitted plans to boost it by the end of September.

Patrick Smith

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The Mauritius-based business adviser works with clients from multinationals to family-run firms to build ‘financial integrity’ and navigate the challenges of investing on the continent

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auritiushastakenareputational beating in recent years, but the government is now making some strides in transparency and good governance. Documents leaked to the International Monetary Fund in 2014 revealed that diamond wealth was siphoned out of Zimbabwe and transferred through Mauritius before disappearing into the endless global maze of secrecy jurisdictions or tax havens. At the same time, the country regularly got bad press as a result of Indian concerns that investors were using a double taxation avoidance agreement (DTAA) with Mauritius to bypass paying taxes in India.

In May 2016 India and Mauritius signed a protocol to end the DTAA, and Mauritius has worked to up its transparency game. Richard Arlove, who says the Mauritius-based business services company he runs – ABAX – has been lobbying for reform, is “delighted that Mauritius has recently signed up to the Base Erosion

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FISCAL SOVEREIGNTY Some of the stronger institutions, such as CAL Bank, are calling for a steep upgrade in the capital requirements – perhaps to as much as 1bn – from the current levels of 60m. That would force a round of mergers.

A frustrated Ofori-Atta lamented the lack of room to manoeuvre in government. “We have our debt issue, wages and compensation, and the statutory funds [to the parastatals and regions] […] being the key funds that overspend our tax revenues.”

The best response, he told a hall packed with Ghanaian professionals in London in July, would be to reclaim “fiscal sovereignty”. It was clear, he added, that success in government would mean making some tough economic choices.

Although the audience loudly applauded Ofori-Atta’s determination to cut government patronage and target state spending on education, health and productive economic initiatives, the plan has big political risks. Unlike most of his colleagues in government, Ofori-Atta has never held public office before.

Eager to explain the complexities of his ministry’s plans, Ofori-Atta is more donnish banker than power politician. He wants the government to pursue clear economic imperatives.

“We couldn’t continue the way we were going,” he told The Africa Report in March. “The system works against Ghanaians” because the extractive structure of the economy has not changed since independence.

The government’s determination to change that structure has set off an intriguing dialogue with the International Monetary Fund (IMF), whose lending programme to Ghana is due to end next April. Although the IMF has suggested the programme should be extended until December, President Akufo-Addo has said definitively that it will end on schedule.

Richard Arlove GOVERNANCE MATTERS and Profit Shifting agreement” as well as the Common Reporting Standard treaty and all the European Union’s transparency legislation. “All these compliance and reporting rules are important if a financial centre wants to be considered as important.”

For Arlove, governance matters all the way down the chain, from financial centre to small companies. He argues it will be key to the next big driver in African economies, the transformation of the huge number of family-owned enterprises into entities with more productive capacity. In particular, he points to the need to bridge a “governance gap” – not reaching for a cousin to run a department or factory, instead putting in place internal controls and professional talent.

INTELLECTUAL PROPERTY ABAX helps clients manage their investments in Africa, with the added benefit of Mauritius’s hybrid legal system that incorporates both the Napoleonic code civil found in francophone African countries and the common law often found in anglophone ones. “We help bring financial integrity to the companies in which our clients invest,” says Arlove. “We can’t mitigate all the risks, but we help with the ones that we can, like foreign-exchange risk.”

He is also working to help African innovators protect their intellectual property. “There are Africans who are inventing plenty of things: methods for paying for water, mobile banking and so on. How do we structure companies to help the African entrepreneur protect his intellectual property? Often entrepreneurs don’t think about it,” says Arlove. “And how do you value it. If tomorrow, he wants to exit the company, can he take it with him? Or sell it?”

Nicholas Norbrook

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LomĂŠ is once again a financial capital and benefits from world-class facilities, including a unique deep water port essential to the sub-region and a new airport.

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➦ Global traffic through the Port of Lomé doubled in five years while container traffic tripled

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two million passengers a year

➦ 13 000 m 2, the size of the future Lomé Retail Park being built by French company Duval

➦ The first agri-food technology park, a PPP, financed

➦ 5%, the average growth rate of Togo’s GDP over the

by the African Development Bank, operational by late December in the north of the country

➦ 10,832 companies started in 2015, compared to

➦ 5,000 social housing units a year to be built by 2020

last three years

4,581 five years earlier

DIFCOM - © RD

Achievements in a competitive environment

PEOPLE

Clare Akamanzi BUSINESS DEVELOPMENT AT THE GRASSROOTS The chief executive of the Rwanda Development Board has far-reaching plans to build up the local business class and achieve the country’s ambition of middle-income status

A

s the woman steering the Rwanda Development Board (RDB), Clare Akamanzi has a big goal: “We want to be a middle-income country.

What that means is that we want our per capita income to grow from $740 to $1,240. What drives that? We hope it will be services in the future. We hope it will be manufacturing in the mid-term,” she says. Her institution is the fulcrum of Rwanda’s bootstrapping development, closely aligned to the presidency and wielding significant power and resources.

And it needs them, because it has to square a difficult circle: using an activist state to stimulate individual companies.

While the country’s economy has been growing at around 7-8% for a decade, it now has to manage a tricky economic transition. Created in 2009, the RDB cuts across various departments in government, a nod to the Economic Planning Board of General Park Chunghee’s South Korea or Japan’s ministry of international trade and industry.

BUILDING A DOMESTIC BASE To reach the goal of being a middleincome country Akamanzi wants more private sector involvement in the economy – something it is currently lacking.

Rwanda is dominated by one or two large conglomerates, such as the governmentlinked Crystal Ventures, and hosts large foreign multinationals. It lacks a solid base of domestic companies.

Akamanzi brings a deep understanding of President Paul Kagame’s development strategy to the job of boosting local economic actors. She was previously deputy director of the Rwanda Investment and Export Promotion Agency, and head of the strategy and planning unit in the presidency.

To build up local firms means starting from the grassroots. “We need to grow Rwandan small and medium-sized

PAUL KAGAME/FLICKR

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enterprises (SMEs) so that they can export more, they can sell more and they can become more productive.

How can we make it easy for them to operate?” she says.

At the top of the list is finance. “We created something called the Business Development Fund,” says Akamanzi, “which is a guarantee fund that supports SMEs to access financing from banks, but

which are guaranteed by the Business Development Fund, a government entity.” This gives the heft of a sovereign guarantee to the banks, while allowing cheaper funding rates for the companies.

There is also a lighter tax regime for SMEs, allowing them to avoid the 30% income tax bigger companies pay. The government has also issued new provisions for guaranteeing property rights.

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FOCUS ON THE FUTURE The Rwandan state has a two-pronged approach to supporting the kind of companies that it wants to help emerge.

First, it is trying to reduce the number of Rwandans who rely on agriculture for their livelihoods. The skills that farmers have would allow them to be absorbed into the manufacturing sector, says Akamanzi, who points to construction materials, textiles and agri-processing as the kind of manufacturing that will be prioritised.

“We believe that the market The second prong is a focus should produce more solutions, further into the future. The more […] equity financing” country is investing in telecoms, health services, logistics and aviation. “RwandAir today flies to nurses and police all having their own 23 destinations all over the world,” she SACCOs. “Our access to bank accounts by individuals is about 25% of the popadds. Tourism is a significant part of ulation. But if you factor in people who the strategy, with an effort to promote use banking through SACCOs, it comes to the country for medical tourism, as around 70%”, says Akamanzi. They have well as conference tourism. The Kigali worked as a bridging method until an Conference Centre was finally completed earlier this year and has hosted several individual is saving enough to warrant large events, which Akamanzi argues a bank account with its higher costs. will put the capital on the map for event planners globally.

CHINESE MANUFACTURING “And these are services that are alAnother factor that the Rwandan govready being built in the economy but in ernment hopes to exploit to speed up the future – once our people have skilled the boosting of their SMEs is China’s up and we have a lot more people that interest in setting up manufacturing can actually become information and facilities in the country. “We are looking at how Rwandans can learn from China,” communication technology engineers, says Akamanzi. “Particularly Chinese medical experts, oncologists – the future is going to be there,” she says. “But businesses in manufacturing that have you don’t wait for the future. You start been very successful and are beginning setting that up now.” to find it very expensive to do business in But the present remains the task at China because of very high rising costs.

We want to attract them to Rwanda.” hand. Moving farmers towards agroIn a special economic zone outside of processing is a challenging task across Kigali, there are currently two Chinese the continent (see Financing the Farmer, page 48). So how will Rwanda ensure manufacturing companies at work: that the necessary funds reach those one in making garments, the other in who can need it? electronics assembly. “We want to see more of those. We want them to become Partly this will happen through the not just two but 20, maybe 200 some Business Development Fund, which day!” she concludes. has branches in every district called Charles Idem in Kigali Business Development Centres. They THE AFRICA REPORT

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Abdullahi Ibrahim With nearly 30 years experience in banking in Nigeria, Ibrahim became FirstBank Nigeria's executive director for retail banking in the North. He served as the bank’s executive for technology and services from 2015 to 2016.

STANDARD BANK

work with the economic officers of every district to popularise the fund and to let banks know that this fund exists so that they advise businesses to apply for help.

“But obviously, that’s just one solution by government,” says Akamanzi. “We believe that the market should produce more solutions, more venture capital, more equity financing. And we think that as the country grows, we will begin to attract more of those to invest in the country and invest in these businesses.”

With local reports of more than 100,00 families hit by famine in the east of the country in 2016, there is concern that neither state nor market has yet been able to meet the challenge.

Akamanzisaysthatconventionalbanking is not necessarily the answer. “The way it’s designed, it doesn’t cover the ordinary person.” She points to savings and credit cooperatives (SACCOs) as a successful alternative in the country, with professional groups such as teachers,

Amedeo Anniciello Anniciello was named chief executive of Standard Bank's subsidiary in the Democratic Republic of Congo in July.

He previously worked at Société Générale and Citibank in several African markets.

UNIBANK

More revolutionary is the ability for SMEs to use new forms of collateral in their dealings with banks – traditionally a sticking point on the continent, where banks ask for huge guarantees before lending. “We’ve allowed SMEs to use immovable property and movable property for mortgages,” says Akamanzi.

“So they can use their crops, their motorcycle, they can use anything that’s movable. The law allows that to be used as collateral by banks.”

FIRST BANK OF NIGERIA

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Kwabena Duffuor II The former chief operating officer of uniBank Ghana became its new chief executive officer in June.

He brings a decade of banking experience to the task of expanding the local bank's footprint and customer base.

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Initially, the bank will concentrate its loans on agriculture and small industries – areas reckoned to generate jobs quickly.

Okpanachi has a good track record with small-scale companies and financing agencies. Previously, he was deputy managing director of Ecobank Nigeria and has worked in financial institutions around Africa for the past 26 years. His experience as managing director for Ecobank’s operations in East Africa may prove critical, given that region’s record of innovation on microfinance and building up small companies.

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Anthony Okpanachi OPENING THE DOOR TO SMEs Appointed to lead Nigeria’s new development bank in March, Okpanachi has the tough task of getting money into the hands of the small businesses that are the engines of Nigeria’s economy

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hould Anthony Okpanachi, the first chief executive of the Development Bank of Nigeria (DBN), live up to his promise to make 20,000 new loans to small businesses within the bank’s first year, he may trigger an economic revolution. At least he could lay claim to having helped solve one of the country’s most intractable conundrums: the lack of affordable finance for the small-scale companies that power the economy.

Although these small enterprises – in farming, services, mining and light manufacturing – produce some 60% of Nigeria’s national income, according to the World Bank, they get less than 6% of commercial bank lending. Most of their loans are short-term and demand usurious rates of interest.

Okpanachi says his bank will change that. “We are going to create financial inclusion,” he said at the DBN’s launch in Abuja in April. Firstly, its loans will have a 12-year maturity, specifically designed

INNOVATIVE THINKING As the government tries to steer Nigeria out of its first recession for two decades, Okpanachi faces a paradox. The crashing oil prices and production that triggered the chronic foreign-exchange shortage have pushed people into growing more food, both for local consumption and export. A new breed of investors, many of whom made money from trading oil and commodities, are investing in projects to grow rice and sugar locally.

But the recession has put new pressures on the big financial institutions, making them still more reluctant to lend to small companies without collateral – even when those companies have put together credible business plans. Some small businesses in the fast-growing agricultural sector are being crowded out of finance by oil barons trying to diversify.

The business model that had delivered mega-profits for the big banks – recycling oil naira, trading in treasury bonds and financing stratospheric property deals – does not work in the downturn.

Banks prefer to finance short-term trade deals and are chary of any long-term finance for small companies.

Inresponse,Okpanachipromisesmore innovative thinking to cut financial risk.

He plans a scheme under which the DBN

to fund projects that need a longer gestation period. And the cost of borrowing will be critical, Okpanachi says: “We talked about pricing […]. The kind of competition we are going to create within the participating finance institutions is to ensure that the eventual price they create is beneficial and it is going to be very competitive for the micro, small andmedium-scaleenterprises.”

The DBN is starting out with “The eventual price [of borrowing] a capital base of $1.3bn: $450m will be competitive for micro, small from the African Development and medium-scale enterprises” Bank, $500m from the World Bank, and $200m and $130m willguaranteeupto50%ofaloan,sharing respectivelyfromGermany’sandFrance’s aid agencies. Essentially, the DBN will the risk with the financial institution that is on-lending. Okpanachi may have the operate as a wholesale bank, on-lending to microfinance institutions and comcapital and fresh ideas to shake up the mercial banks. Aware of microfinance’s sector, but he will be critically dependent on finding kindred spirits in Nigeria’s chequered history in Nigeria, Okpanachi said the DBN will work closely with its highly conservative banks nervously partners to build capacity to operate watching their balance sheets.

Patrick Smith more effectively with small companies.

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JOHANNESBURG At Proparco, we strongly believe that the private sector holds a great responsibility in reducing poverty and inequalities. That is why we offer long-term financing tools in the form of debt, equity and quasi-equity to banks, private equity funds and companies that can demonstrate their positive impact on sustainable development.

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Denis Sireyjol, Regional Head for Proparco in Southern Africa and the Indian Ocean, based in Johannesburg.

Contact us:

Ballywoods Office Park Ironwood House, 1st Floor -29 Ballyclare Drive, Bryanston P.O. Box 130067, Bryanston 2021 - South Africa Tél: (27) 11 540 7100 - proparcojohannesbourg@afd.fr www.proparco.fr - Twitter: @Proparco

1994 O

659.4 M€

65

projects

21%

Investment funds

PRIORITY BUSINESS SECTORS

6%

Education, healthcare, planning

2%

Tourism

18%

34%

Agri-Business

Banking

5%

Telecoms

9% Renevable Energy 5% Conventional Power

SOUTH AFRICA ANGOLA BOTSWANA REUNION LESOTHO MADAGASCAR MALAWI MAURITIUS MOZAMBIQUE NAMIBIA SWAZILAND ZAMBIA ZIMBABWE

Ibrahim Leadership Fellowships Programme Identifying and supporting African leaders of the future.

Invitation for Applications The Ibrahim Fellowships offer the opportunity to work in the executive offices of either the African Development Bank (Abidjan), the UN Economic Commission for Africa (Addis Ababa) or the International Trade Centre (Geneva) with an annual stipend of $100,000.

The Executive Management office of each organisation will host an Ibrahim Leadership Fellow for a 12-month period. The Fellowships are open to young professionals, mid-career and new executives up to the age of 40 or 45 for women with children. The Fellows will be nationals of an African country with 7-10 years of relevant work experience and a Master’s Degree.

The application process opens on 14 August 2017 and closes on 15 October 2017 For more information about the Fellowship programme, eligibility and application process please visit: mo.ibrahim.foundation/fellowships

AFDB

ITC

UNECA

BANKING

DRC

EQUITY BANK’S LONG BET So far, so good for the Kenyan bank's first foray outside of its East African comfort zone, bringing its agency and mobile banking model to the DRC THE AFRICA REPORT

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JOHN BOMPENGO FOR TAR

PROCREDIT, EQUITY GROUP’S DRC OPERATION, HAS 35 BRANCHES BUT IS MAINLY RELIANT ON ITS 1,000 AGENTS

By William Clowes in Kinshasa

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enya’s Equity Bank made its first big move outside of East Africa by buying a majority stake in the Democratic Republic of Congo (DRC)’s ProCredit Bank in 2015, and the decision is continuing to pay off in spite of the country’s political and economic problems. Philip Sigwart, Equity’s head of small and medium-sized enterprises (SMEs) and a director at ProCredit, tells The Africa Report: “The bank now is the fifth-largest bank in the country and is going very strongly.

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Profit growth has been good. Our total ProCredit mainly as a development asset growth has been good.” vehicle to support SMEs rather than Sigwart says that the operating ento maximise profitability, but it has vironment in the DRC has many more always made money. “They left good obstacles than that of Kenya: “They are management, good processes, good actually quite different […]. The DRC training, a few branches across the has its unique set of challenges, let’s put country – especially in large cities,” it that way. First of all, the economy is says Michel Losembe, who was presinot doing that good right now.” dent of the Association Congolaise des Banques from 2008 to 2016. “It was a After years of galloping growth very good foundation for any financial driven by the mining sector, low institution to take up.” commodity prices, especially copper, cobalt and oil, have slashed government revenue these Success depends on ProCredit’s past two years and the central ability to innovate and tap its bank’s foreign reserves have main shareholder’s deep pockets been depleted to dangerously low levels. There is also Celestin Mukeba, ProCredit’s a political stalemate in the country, managing director since 2014, claims with President Joseph Kabila having that Equity’s arrival has helped his overstayed the end of his final term bank consolidate its reputation as the in office and politicians struggling DRC’s “bank of reference for SMEs and to agree on a road map for holding financial inclusion”, while enabling it elections and political transition. to grow its offering.

In terms of loans, ProCredit’s focus BANKING THE UNBANKED is on SMEs, says Equity’s Sigwart: “In Equity, Kenya’s largest bank in terms DRC we are at around a $200m loan of customer numbers, plans to use book […]. This is 100% SMEs in DRC, so its experience in mobile and agency banking in Kenya to turn ProCredit into it’s a bit different but it’s much smaller a dominant bank in the DRC. ProCredit’s than in Kenya.” He adds that ProCredit expects to increase its loan book this ability to deploy technology, innovate, and tap the deep pockets of its largest year despite the economic headwinds: shareholder will determine its success “The plan is to continue growing across the entire region.” in one of Africa’s least-banked countries.

ProCredit was the first Congolese “We launched agency banking in the DRC and one year after the launch bank to permit people to open accounts we now have 1,000 agents in the DRC, without an initial deposit or a sponsor, Mukeba says, as well as the first to inwhich is actually pretty good,” says Sigwart. “And the number of clients is troduce cash points and Visa cards. One Kinshasa-based SME owner explains increasing quite rapidly. We have also ProCredit’s popularity: “The fees are rolled out mobile banking in a similar way as we have in Kenya.” competitive, they have invested heavily In September 2015, Equity Bank, in training and, above all, their technology works. With Equity’s investment, Kenya’s largest bank by market value, it feels they are trying to better a good spent more than $40m acquiring 79% bank despite the hard environment.” of ProCredit, and 12 months later increased its stake to 86%. Equity’s takeover permitted ProCredit Holding THE KENYAN PROTOTYPE – a Germany-based financial institution Today, ProCredit is expanding into new owned by the International Finance terrain such as agribusiness, and looking Corporation and the development to attract corporate clients – business dominated by the established, politibanks of various European governments – to exit their investment. The cally connected, family-owned banks new owners gave the Congolese bank a such as Rawbank, Trust Merchant Bank (TMB) and Banque Commerciale du boost after several years of downsizing.

Following the purchase, Equity chief Congo. However, most of Equity’s cash executive James Mwangi said: “Our is destined for efforts to replicate the aim is to provide access to financial model which has brought such success in Kenya and other East African markets. services to the many people who are “Equity was a small bank and Mwangi still unbanked in this vast country.” has made it one of the strongest tools The European shareholders had run

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one of those East African countries, so Mwangi will have a hard time rolling out the same model without making serious adaptations to the Congolese environment,” says Losembe.

In Kenya, Losembe says, there were already high levels of banking peneWHAT ABOUT THE COMPETITION? tration and financial literacy, which ProCredit is not alone with its innovations, however, and other Congolese made it easier to convert customers into agents. “Adding banking products financial institutions are pursuing similarly agile visions. “Everyone will go to the distribution of goods and services towards banking agencies and digital that the agents were already selling banking,” says Losembe, happened overnight. […] It “because the traditional was just a small [amount of] education,” he says. Not so in way of growing in the DRC the DRC. Most traders – the is too expensive.” kind of businesses expected Trust Merchant Bank is to become agents – “are unalso building a large agent banked, essentially informal, network and last year beand distrust the financial came the first Congolese system,” he adds. bank to offer its clients The assets in the formal banking The US department of a mobile app. FINCA, a sector are a tiny state’smostrecentInvestment non-profit, multinational fraction of Climate Statement for the microfinance institution, the country’s DRC says that deposits held recently topped 1,000 agents 2016 gross around the country. by Congolese banks reached domestic product This competition need $3.6bn in 2016. The informal of $41.1bn economy continues to domnot b e a problem for inate, while the failure of two banks ProCredit due to the extremely low and one large cooperative has hurt rates of financial inclusion in the DRC. It is estimated that only around 4-5% confidence in the financial sector. of the economically active population A strong culture of cash has also in DRC have a bank account. prevented mobile money from takBut there are other challenges, and ing off in the DRC. “Most of the time chief among them is a glaring absence what people want to do is to reach a of financial education. “This is not cashpoint and to convert immediately that digital currency into banknotes,” Losembe says. He notes that it is still CASH IS STILL KING IN CONGO, MAKING too difficult for Congolese people to CHANGING PEOPLE’S PERCEPTIONS pay school fees and electricity bills via OF MOBILE MONEY A CHALLENGE mobile telephone.

These cultural challenges are compounded by the gloomy economic and political situation. “Lots of the actors in the SME sector are feeling these effects, in particular the depreciation of the franc”, says Mukeba.

ProCredit’s performance indicates that it is ably negotiating the numerous obstacles in its path. Mukeba says: “2016 was characterised by lots of Congolese banks which made losses, but we were fourth or fifth in terms of profitability.” The bank’s total assets grew from $213m in 2014 to $317m by the end of 2016. It also has a market share of 8%. Last year, ProCredit recorded a pre-tax profit of $4.9m. “We are being much more selective and prudent as concerns financing, but we are continuing with our expansion plan,” Mukeba says.

24/7 application in the DRC, which allows ProCredit customers to check their accounts and make withdrawals from their mobile telephones, as well as make certain payments.

$3.6bn

JOHN BOMPENGO FOR TAR

of market penetration thanks to mobile banking technology”, says Losembe.

Equity is active in six East African countries and has total assets of nearly $4.5bn. It recorded a pre-tax profit of about $230m as of the end of 2016. The DRC is its first francophone market.

ProCredit’s future will be largely branchless, says Mukeba, and reliant on a large network of agents located throughout the huge and poorly connected DRC. “Last year we had an injection of more than $20m [from Equity], and there is a firm engagement by the shareholders to inject another $40m to allow the deployment of this network,” Mukeba says. The objective is to for ProCredit to have branches in all of the DRC’s big towns that act as support hubs to the banking agents – typically small stores which offer the bank’s services. “We want to cover the whole country […]. We are getting there step by step,” he says.

Mukeba says that progress has been swift since Equity’s entry into the DRC. ProCredit now has 35 branches, up from 15 two years ago, while the number of agents has more than tripled recently.

Such a strategy is necessitated by the DRC’s dire infrastructure and the high cost of traditional banking. “Opening branches is enormously expensive – especially all the materials which are imported – which is why branchless banking is our solution,” Mukeba adds.

In addition to its agents, ProCredit is also pushing mobile banking, another concept pioneered by Equity in Kenya.

It recently launched Equity’s Eazzy

SOURCE: US DEPARTMENT OF STATE AND IMF

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Cas Coovadia Managing director, Banking Association South Africa

ALL RIGHTS RESERVED

BANKS ARE FEELING THE PINCH The head of the banking lobbying group discusses credit downgrades, finance's role in economic transformation and threats to the independence of the central bank

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olitical uncertainty and ratings downgrades have affected South African banks and they haven’t seen the worst of it yet, says Banking Association South Africa managing director Cas Coovadia: “When [banks] go out to raise money and fund investment and do lending, the cost of that money will be more and it also becomes scarcer. That has an impact on the cost of borrowing to consumers, and the banks may not raise enough to on-lend, and this in turn impacts economic growth.”

Official statistics released in June show South Africa entering its first recession since 2009. Under the economic circumstances bank performance has been reasonable, says Coovadia, “but on the back of relatively low volumes of business.”

Headds:“Wehaveaconstrained economy where unemployment is high, jobs are scarce, income is not keeping up with expenditure and people are not borrowing too much. Those that have borrowed are finding it more difficult to service debt, and banks are feeling the pinch.” He says banks are showing some signs of stress and that the ratio of non-performing loans to total loans is around 4% and rising.

Coovadia refuses to comment on the government’s criticisms of the industry. These include calls for banks to explain their refusal to do business with the politically connected Gupta family THE AFRICA REPORT

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and a recent decision by public protector Busisiwe Mkhwebane thatAbsapaybackR2.3bn($171m) its predecessor Bancorp received as part of an apartheid-era bailout.

He does say, however, that the latter is not in the public protector’s purview, and that banks that looked at Gupta-linked accounts and suspected irregular transactions were legally bound to report these and act accordingly.

BANKING UNDER ATTACK The independence of the Reserve Bank also came under threat when Mkhwebane said its mandate should be changed – a comment she has since rescinded. The association commented at the time on this, saying Mkhwebane had gone beyond her mandate.

“We will do everything to publicly protect the independence of the [South African] Reserve Bank”

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“We think it was, in our view, a nefarious attempt to impact on the independence of the Reserve Bank, and we will do everything to publicly protect the independence of the Reserve Bank,” Coovadia tells The Africa Report.

He links it to a “broader attack on the industry”, which he says is occuring“byforcesbentoncorruption and state capture”. Outlining his association’s position, he says:

“We have undoubtedly taken the view we need to be in the public space to position the debate and to get the facts out.”

Coovadiaemphasisesthatbanks are not under threat of collapse or failure. “They are well capitalised, liquid and well regulated, so there isnosystemicissuethere[…].What it does do is it forces us in some ways to switch focus from the business of banking to protecting the industry. We need to work in the national interest but remain sound, profitable institutions, and we will maintain that.”

African National Congress treasurer general Zweli Mkhize has called on the financial services sector to fast-track economic transformation, and this is an area where banks may be justifiably criticised. Coovadia says the association has made a submission to parliament, and, “if you look at banks’ performance against the financial sector charter [which prescribes transformation targets] they have not performed badly”.

Coovadia says it is difficult for banks to meet black ownership targets as shareholders need to have deep pockets, which is why banks globally are owned by institutions.

Admitting that transformation of the sector could be faster, he says it should be enabled in a way that facilitates growth in the industry.

Interview by Marcia Klein in Cape Town

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THE DEBATE

SHOULD GOVERNMENTS CAP INTEREST RATES? In East Africa, as across the continent, small companies and individuals are desperate for loans, but they often cannot afford the banks’ high interest rates. Economic leaders, however, are far from consensus on the wisdom of capping

I

n his 2008 book The Post-American World, CNN journalist Fareed Zakaria wrote that “low interest rates and cheap credit cause people to act foolishly or greedily, inflating bubbles in technology stocks, housing, subprime mortgages, or emerging market equities – bubbles that eventually pop.” As East Africa is far from enjoying low interest rates, you may strain your ears in vain for that popping sound. Zakaria’s lessons have little bearing in this region.

Interest rates among the three largest economies are relatively high, with Kenya’s commercial banks recording an average lending rate of 14% in 2016, Tanzania’s at 15% and Uganda’s at 22.5%, according to central bank data.

Muhammad Nsereko, a member of parliament for the central business district of Uganda’s capital, Kampala, has had enough. The second-term legislator, who sits on the house’s business committee, says he plans to introduce a private members bill to cap interest rates on bank loans.

SOURCE: CENTRAL BANK OF KENYA

in Uganda in June – they have to consider operational costs and risk profiles of borrowers.

They say that this explains the big difference between how much they pay for their money and how much they charge their customers.

Wilbrod Owor, the chief executive officer of the Uganda Bankers Association, an industry lobby group, cites high yields on the one-year benchmark treasury bill as a trend­ setter for the market, even as these dropped from as high as 17.4% in 2016 to 13.8% in April 2017 without attracting corresponding movement from commercial lenders.

Representatives of the big international financial institutions do not sound convinced

by Nsereko’s idea, which has already been implemented in Kenya. “The high spread between the CBR and lending rates is of concern,” says Clara Mira, the International Monetary Fund WE’RE GOING UNDER “We are at the drafting stage,” Nsereko representative in Uganda. “It is thus told The Africa Report by phone from important to address the underlying Kampala on 30 June. “We need to create causes, such as structural rigidities, an equilibrium or else we are all going high operating costs and high funding under.” At the moment, he explains, costs.” She concludes: “We do not believe that interest-rate caps are useful the commercial banks do not respond proportionately to the central bank rate to achieve their intended objective of (CBR), essentially fancy-banker talk for reducing lending rates.” the amount the central bank charges Meanwhile, firms with fewer than 20 commercial banks for their cash. employees and fewer than five years’ experience provide the Limiting rates seems most jobs in Africa’s forlike a no brainer: the banks appear to be mal sector, according to gouging consumers, just Akinwumi Adesina, the as when oil prices fall African Development The margin above Bank president. He says but the refineries keep the Kenyan central credit providers need charging the old rate for bank’s key rate petrol. Yet the banks into increase their lendthat commercial banks sist that beyond the CBR ing by at least $135bn can charge on loans under the new rate cap – which dropped to 10% in order to meet the

4%

demand of Africa’s micro, small and medium-sized enterprises.

But not much is happening. Private sector lending has slowed across the three East African nations, ironically falling furthest in Kenya, which introduced interest capping. Growth in lending to the private sector fell from 20.8% in 2015 to 6.4% in 2016, according to Kenya’s central bank. Uganda’s fell to 3.5% from 6.8% while Tanzania’s dropped to 3.7% in the period ending March 2017, compared to growth of 23.6% recorded in the same period in 2016.

LENDERS’ BOTTOM LINE Kenya’s credit growth was already in a slowdown due to various factors, but the lending-rate cap worsened the private sector’s access to credit, according to Standard Chartered’s Lamin Manjang, who chairs the Kenya Bankers Association. “The enactment of the Banking (Amendment) Act had a negative impact on micro, small and medium enterprises,” he says.

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down,” Uganda’s junior minister for finance and planning, David Bahati, says. Uganda passed the Financial Institutions (Amendment) Act 2016 to allow Islamic banking, “anticipating that this will engender greater inclusion, [from] greater access to bank credit by borrowers to finance investment,” according to a ministry of finance report.

Opinions vary about the reasons behind that move.“I think it’s a need to find easy money and capital, because the lending and money that used to come from traditional areas like Europe and the US have dried up,” says Teneo’s Salim. “You will see more and more countries in the region looking to the Gulf Cooperation Council as well as Asia […] for capital,” he says.

Kenya is using a similar strategy.

The country “will expand Islamic banking to gain comparative advantage,” treasury secretary Henry Rotich said in a budget speech.

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borrowing from 2% of gross domestic product to 1% in the short to medium term to minimise the crowding out of borrowers, according to finance minister Matia Kasaija.

Uganda is also implementing other measures. “We think Islamic finance will help bring interest rates

Kenyan interest rates trend (%) 35 30

Deposit Lending

25 20 SOURCE: CENTRAL BANK OF KENYA

Whereas capping helped reduce Kenya’s average lending rates – which had increased to 17.7% in August 2016 to decline to 14% – it hurt lenders’ profitability. Equity Bank, the largest bank by market value, recorded a 4% drop in profit, the first such drop since its founding in 2004.

There is talk that Tanzania could follow Kenya’s route, even though central bank governor Benno Ndulu has previously declined to support the policy, citing its likely impact on lending. Ahmed Salim, vice-president of the Dubai-based consultancy Teneo Strategy, says: “There seems to be an attraction to the interest rate capping, as I’ve also heard rumours that Tanzania is looking to follow suit. That would be catastrophic for the economy.”

Meanwhile, Uganda’s policy-makers continue to serve up a cocktail of interventions in their pursuit of favourable lending rates. The government says it will support the expansion of private sector credit by reducing domestic

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CHANGE OF MINDSET To give banks more room for manoeuvre, Tanzania has loosened its statutory minimum reserve requirement, cutting it by 2% to 8%, a move that released as much as TSh500bn ($233.6bn) to liquidity-starved banks.

Beyond finding new sources of finance, though, some are seeking a mindset change from the commercial banks. Nsereko, a trained lawyer whose constituents are mainly traders running import and export businesses, says the commercial banks’ stance has nothing to do with the profile of the borrower. “[What they are doing] is called cheating. There has not been consumer protection in the banking sector,” he says.

“The CBR keeps dropping, but it’s never reflected on the market, meaning the effect they want to achieve is never achieved. Now we want to peg it more to the central bank. We want to make monetary policy more effective,” says Nsereko. And he is confident the bill will garner support in the house, which is controlled by members of President Yoweri Museveni’s National Resistance Movement. “Any right-thinking member of society, without any other influence, knows this is the saviour for society,” he says. But it is unlikely to pass without a fight from those with different points of view.

Joseph Burite in Dar es Salaam

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AGRICULTURE

FINANCING THE FARMERS To unlock “the wealth of nations” agriculture must move beyond subsistence farming.

The Africa Report looks at schemes large and small to get productive investment into the sector

By Nicholas Norbrook

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s a young doctor in western Nigeria, Doctor Temitope Aroge recalls seeing cassava farms that stretched as far as the eye could see. And yet, his patients were still poor, still badly fed and without the money to send their children to school. “I could see the plants. But I could not understand why these crops were not being turned into wealth,” Aroge says.

His question burned to the point where Aroge, then only three years out of medical school, became a cassava farmer and processor. His company, Arog Bio Allied Agro Services, has made

him rich, but has also enabled many of Ekiti’s subsistence farmers to improve their businesses and standard of living – and therefore the health of themselves and their families.

Financing farmers to get beyond subsistence agriculture is a crucial challenge in Africa’s development. Get it right, and you unlock what African Development Bank (AfDB) president Akinwumi Adesina calls “the secret of the wealth of nations”. That includes a broad-based improvement in livelihoods, a rise in employment and a reduction of the large food import bills that are weighing down African treasuries. “There is no reason

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MANY FARMERS USE MOBILE MONEY TO TRANSFER AND RECEIVE CASH, BUT CANNOT AFFORD A BANK ACCOUNT

Africa should be a net food importing region, spending [in aggregate] $35bn annually on food imports”, says Adesina.

For many countries, most recently the giants of Asia, agriculture is the foundation on which industrialisation is built. And given the growth of domestic demand in Africa – which for agricultural produce should hit $100bn by 2025, according to a recent AfDB report – the opportunity is such that major investors should be interested.

Before all that, though, you still need to find finance for the farmers.

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of both market and state. Not only do most governments appear unable to fix the problem, but very few are meeting a shared commitment known as the Maputo Declaration to spend 10% of their national budgets on on agriculture.

TOO RISKY FOR BANKS In South Africa, for instance, “there has been a massive shrinkage in employment in agriculture over the past 15 years,” says Paul Boynton of Old Mutual Investment. “Government support for agriculture has been quite diffident in a way, especially if you compare it to somewhere like Europe,

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where the support for agriculture is much more fundamental.”

To make matters worse, commercial banks are also largely uninterested in financing small-scale farmers. That is “because of the perceived risk of lending to farmers”, says Atsuko Toda, the director for agricultural finance and rural development at the AfDB. Her appointment in December 2016 marked a new agricultural push at the organisation. “[Small-scale farmers] are often in remote locations, quite dispersed, so it makes the transaction costs [of banking them] quite heavy, with climate risks compounding that.”

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So how to get tender to the tillers?

One option is to focus right at the very base of the pyramid. Giving cash to the very poorest farmers allows them to then transfer savings into more productive areas, such as improved seeds or fertilisers. That was the intention behind Brazil’s successful conditional cash transfer scheme – and Nigeria recently announced it is launching a pilot version of a similar programme.

HARD-WORKING DOLLARS Cash transfers have already proved their worth in Africa. In 2010, a study in Gokwe North District in Zimbabwe

by Trinity College, Dublin, showed that each dollar in cash injected into rural areas travelled around the local economy 2.59 times, compared to a dollar’s worth of food aid that was simply consumed.

To kickstart agro-based industrialisation, serious agribusiness ventures will be required, too. And getting farmers to the next step of the ladder will require

bank accounts. That is still get a low-functioning aca tough nut to crack, even count with limited deposwith all the mobile phone it and credit facilities. And $110bn when a person is wealthy technology in the world. in 2025 The reason is simple: while enough to transition, they you can easily own a teleprovide more rigorous $35bn identification and get a phone to transfer or receive in 2015 cash, to get an actual bank fuller bank account. account requires a bank Once a farmer has a to wade through complex bank account, interestThe AfDB predicts that net food imports ‘know your customer’ reguing things can start to in Africa will skyrocket lations – and the associated happen. Governments on the back of charges are often too high can easily reach them for urbanisation and for the poorest to meet. input subsidy schemes, population growth for example. Some of But there are solutions here, too. India’s Prime Minister these can be focused on fixing the big infrastructure challenges faced by farmNarendra Modi decided to hand out ers, namely the lack of power and lack millions of free bank accounts and roll of water. India’s company Rotosol has out a biometric ID system to address created water pumps linked to solar the situation of the nearly 500 milpanels, a neat invention that solves lion Indians suffering from what he both problems at a stroke. calls “financial untouchability”. In the The pumps are flying off the shelves Americas, Mexico has pursued a twoin India because “it makes a farmer tiered approach to pull more people into the formal financial sector. It is easy to water-secure,” says Raghav Agarwal, a SOURCE: AfDB

Mercy Wakawa Founder, Confianza Global Resources

PROFITS IN PROCESSING MERCY WAKAWA, a university graduate, had hoped to get a job with Nigeria’s national immigration service.

“I was disqualified because of my height,” she says.

“I was depressed.” But the failure of that application was perhaps a blessing.

Instead, she won an internship through the International Institute of Tropical Agriculture (IITA) in Ibadan, getting three weeks training, machinery and cash.

Now chief executive of her own company, which employs six people, Wakawa is hailed by local villagers pleased to have a steady market for their groundnut crop. Wakawa now

MERCY WAKAWA’S COMPANY PROCESSES LOCALLY PRODUCED GROUNDNUTS

runs a small-scale nut processing industry, with an installed capacity of 2tn per day. “I can earn some income without begging and even pay workers’ salaries,” she says.

Beyond groundnut oil, Wakawa’s company, Confianza

Global Resources, is developing other markets.

The sludge created as a byproduct of groundnut oil can be used in soap production, while the groundnut cake is a popular animal feed and is being sold

to local poultry feed producers. Wakawa also qualified for a Youth Entrepreneurship Support Programme grant from Nigeria's Bank of Industry, which gave her a loan at a discounted rate.

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senoir adviser at Rotosol. “Then that farmer will look for nearby land to irrigate. Once he does that, he not only feeds himself and his family, but he gets surplus produce, which he sells into the market.”

While that may well be correct, another reason they are flying off the shelves is the generous subsidy involved. Though the kit costs $1,500, the federal government in India pays half and the state governments a third, leaving the farmer with a bill of a few hundred dollars.

The price is still steep for many, but if the farmer becomes more productive, it becomes easier to recoup the costs.

Subsidies are also common for inputs.

In Nigeria, more than 10 million farmers are signed up to a fertiliser distribution scheme that has been in part responsible for the rice production boom of recent years. Unmilled rice production was 7.9m tonnes in 2016, up from 4.5m tonnes in 2010 – nearly doubling output.

In a sign of the positive feedback loops that these policies can create, the new farmers entering the rice sector have helped to develop more interest from much bigger fish – Africa’s biggest, in fact. Aliko Dangote, the richest man on the continent, announced that his company will build a rice mill that will produce 225,000tn of parboiled rice annually. And Singaporean agribusiness giant Olam, which already has more than 4,000ha under rice cultivation in Nigeria, plans to increase that to 6,000ha over the next few years.

VALUE CHAINS It should be noted that the reason that the bigger industrial players have gravitated to the sector is also as a result of a sustained effort by Nigerian governments to de-risk agriculture for the commercial banks. This includes an insurance scheme for financiers called the Nigeria Incentive-based Risk-Sharing System for Agricultural Lending, and a government import ban for rice that has helped imports drop from 4m tonnes to around 700,000tn.

This wholesale transformation of Nigeria’s rice sector was achieved by focusing on the ‘value chain’ – from government support to farmers, up through the bigger industrial players and the banks. The AfDB’s Toda explains that the bank is going to work on strengthening 18 key value chains – including rice, cassava, maize, wheat and dairy – but the AfDB estimates this will cost THE AFRICA REPORT

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Bose Idowu ALL RIGHTS RESERVED

Founder, Gracevine Business Venture

REAP WHAT YOU SOW BOSE IDOWU came across one of the happiest things a wanna-be agribusiness entepreneur can stumble across: a market.

Specifically, a market in north-eastern Nigeria where she could buy cheaply and then sell on later – taking advantage of her ability to store.

“I tapped into the opportunity by purchasing 40 bags of beans at N480,000 ($1,300) with my personal savings, which were stored and sold back to the local market after five

BOSE IDOWU (CENTRE) WITH HER TWO EMPLOYEES AND THEIR RANGE OF PACKAGED BEAN FLOUR

months at a higher price, where I made a profit of N160,000.”

Having made some seed capital and armed with a small loan from the International Institute of Tropical Agriculture (IITA), Idowu then started to cultivate 5ha of cowpeas in Mokwa, Niger State. She sowed the crop with processing in mind.

Idowu says: “Bean flour is sold at a higher price as a result of high demand

$315bn-$400bn between 2015 and 2025, something that outstrips public resources and will require serious private-sector investment.

Given the limited ability of African states to administer such schemes, what other options are there to bring through a new generation of budding agribusinesses? The International Institute of Tropical Agriculture (IITA), based in Ibadan, Nigeria, embodies a hybrid state and market approach. It hopes to answer the question.

ENTREPRENEURIAL POWERHOUSE Leafy green, with beautiful lawns, the IITA was once a sleepy but dignified intellectual bastion of agricultural research. But over the past decade it has transformed itself into a powerhouse of entrepreneurial activity. “We have these demands for impact placed on us”, says IITA director general Nteranya Sanginga, “so we launched the business incubator platform.” One of its successes is the development and commercialisation of anti-fungal product Aflasafe, with a factory being built on the IITA site.

for ‘easy to prepare’ food, especially for those who spend long hours at work and in traffic.”

Her company – now known as Gracevine Business Venture – has two employees, and is now a subsidiary of Gracevine Foods, itself a processor of yam and bean flour.

It produces bean flour in 2kg, 5kg and 10kg sacks for hungry households in a new processing facility in Akinyele, Oyo State. N.N.

But the real development has been in training youth. “While recruiting for staff doing odd jobs at the centre, we realised some of them already had degrees in biotechnology, agriculture or were lawyers”, says Sanginga. Taking an initial cohort of 50, the IITA gave training, finance and equipment, launching the Agripreneur initiative (see case study boxes). More than 30 African countries

have applied for loans to replicate the programme in their countries.

The commercial agribusiness sector with its outgrower schemes – contractual partnerships betweens growers and producers – has a clear role to play, too.

Here, larger companies can finance the purchase of inputs for a farmer who pays back the balance at harvest time. These schemes can come unstuck if not properly regulated. In Zimbabwe in 2016, The Africa Report met with farmers who had burnt their tobacco-curing barns as a reminder never to re-enter into a relationship with Chinese tobacco giant Tian Ze. Despite droughts hitting the crop, the company pursued the farmers relentlessly for the debts incurred.

For Dr Aroge, part of the success of his own outgrower scheme is down to the fact that his cassava processing factory is based right in the middle of cassava country. “It cuts down on travel costs for everyone,” he says. The factory plans to expand its capacity to process 30,000tn of cassava per annum, which would require 1,500ha of cassava farms. “In terms of impact, it’s massive,” says the doctor.

But mostly, he says, the challenge is in organising farmers into minicooperatives. Today, he has helped structure 20 of these, each with around 10 farmers. With Aroge helping establish them as businesses and enabling them to access improved seeds and finance, both the factory and the farmers are reaping the benefits of higher productivity. “And because they surround the factory, they have some sense of belonging in the enterprise,” says Aroge. “We will be producing 6,000tn of cassava chips. And some people still think I was mad to drop out of medicine.”

Agriculture as a share of employment and GDP (2014)

61% 50%

47%

% of total employment % of GDP

42%

SOURCE: FAOSTAT, WORLD BANK AND IFPRI

52

25%

18%

18% 12%

15% 10% 6%

Africa

India

Thailand

Vietnam THE AFRICA REPORT

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N° 93

3% China

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MARKETS & MONEY

Felix Adahi Bikpo Chief executive, the African Guarantee Fund

THE CULTURAL ANGLE IS KEY The banker has made it his mission to improve the management of small companies and de-risk loans to them, saying that understanding the way they operate is essential for success

R

osemary Moyo, a smallholder outside the Zimbabwean town of Masvingo, knows that for just $300 she could kickstart her farm. “I have it all planned out. I already have the customers,” she says. She would like to build up her chicken breeding, buy two goats for milk, make some upgrades on the barn and purchase some feed. “But the banks are not interested,” she says.

There is a certain amount of wariness among bankers about funding small and medium-sized enterprises (SMEs). This is because SME lending is inherently risky. Globally, most new companies go out of business within three years. And smaller companies are more fragile than their larger counterparts and are quick to take on water in the heavy buffeting of African markets, with the lack of electricity, poor roads and chronic lack of finance.

But Felix Bikpo, the head of the African Guarantee Fund (AGF), does not see another way to go.

“We are not reinventing the wheel here. Look at every other region in the world – they started with SMEs. In Africa, 90% of our private sector is SMEs.” Access to finance is a key component in helping build these companies into the

job-creating industrial fabric the continent so desperately needs.

There is also a certain amount of wariness surrounding guarantee funds, whose job it is to provide comfort to banks lending to small companies and thus to ‘de-risk’ those loans. In the past, guarantee schemes have not been effective because, for instance, banks accepted the extra cash but still refused to lend. And with a continental institution, it can be hard to stoop to the corporate level to check the lending is still going ahead.

EDUCATING BANKERS Unsurprisingly, Bikpo is bullish here, too. “The monitoring is the most important. Although theAGF is big, it is structured to take care of small companies. We delegate. But frequently, we check the balance sheets of these partner banks.”

The AGF also helps partner banks – some 120 of them today – to develop skills to manage risk.

“And they like that because the SME of today is the Coca-Cola of tomorrow. It’s not philanthropy, it’s a business.” To date, the AGF has guaranteed loans to more than 4,300 SMEs since it launched in 2012 with the backing of some Western aid agencies and the African Development Bank.

LOOKING OUT FOR THE SMALL GUY 1965 Born in Côte d'Ivoire 1993 Joined Citibank, leaving in 1999 after serving as a regional director for Francophone Africa 2003 Named managing director of Ecobank Niger August 2011 Became chief executive of the African Guarantee Fund (AGF) June 2012 The AGF officially launches its operations

Nevertheless, there is still pause for thought. Quarterly reports from 4,300 SMEs would create more than 17,000 reports per year. That is some serious number crunching. “If you want to be efficient in this business, technology and people are key”, says Bikpo. “We have two departments looking at this. We have a very robust risk-management system, with people qualified to do it doing it on a daily basis. In addition, we have a quality and monitoring department, whose job is to check what the banks are doing.”

One of the challenges facing Africa’s smaller companies is what is sometimes called the ‘missing middle’ – a gap in the industrial ecosystem. In a healthy economy, large corporates normally subcontract work to intermediate-level companies. These in turn subcontract to smaller companies.

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MARKETS & MONEY

THE AFRICAN GUARANTEE FUND

no, we have someone you can hire. Out of the 30, over half hired their own. They saw the value, whereas before they thought they could just hire their brother with no skills to do the job because it would be less expensive.”

For Bikpo, this is the cultural part of SME lending that his organisation excels at. “A lot of these people are illiterate. Many good businessmen have not been to school. They hit a wall. They can make money, but not effectively.

They have constraints,” he says.

“So to get to that other level, they need people with particular skills – could be a CFO, but it could also be a marketing guy. This businessman can sell his product every day but doesn’t know anything about buying a nice bottle, attractive packaging. ‘Forget about it, it’s too expensive,’ he will say.”

“We don’t have that in Africa,” says Bikpo, “but we are trying to help the M of SMEs, the mediumsized company, in getting new sources of finance.” The AGF is pushing stock exchanges in East Africa to engage this segment. The Dar es Salaam exchange is piloting, for example, the Enterprise Growth Market to target these sorts of companies. “That then frees up the bank portfolios and allows us to focus on the S’s and work on their skills,” says Bikpo.

POOLING SKILLS… Bikpo argues that it is the ability to share skills with SMEs that helps the AGF stand apart from other guarantee funds. “It’s a management issue. So we say to our partner banks: ‘Instead of lending a small company 100, lend them 150. That extra 50 will be for improving management, and we THE AFRICA REPORT

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will share that cost. A good chief executive officer, good chief financial officer (CFO), a good system, that will transform a company.”

And the AGF is doing this in innovative ways. For example, in Nigeria the AGF has a trial to offer services to help SMEs become bigger companies. The idea is to have a CFO work for dozens of SMEs, not just one – like a group of farmerswhosharesatractor.Bikpo explains: “We have a portfolio of about 30 SMEs, and we are the ones doing all the finance part: talking to the bank, doing the business plan, doing the report – all of that – so that banks have someone to talk with in their language.”

And the early results are good.

The SMEs have benefited and started to get access to financing.

After a while, says Bikpo, they start to ask to get the AGF-supplied CFO full time, “and we say no,

S E P T E M B E R 2 017

4,300 SMEs financed in five years of existence SOURCE: AGF

… AND EQUITY Bikpo points to another place where cultural quirks can blind the eyes of normal bankers. In Niger, there are informal traders and companies who may appear illiterate and unstructured but are nevertheless “handling billions in CFA francs. But they can’t get bank finance. We decided to go to this segment and pulled many of them out of the informal sector.”

Another of these cultural issues concerns banding together to pool equity in projects. Bikpo recalls in his days as a banker being brought hundreds of dossiers of SMEs but not financing more than a handful because they were not well structured. “They would come with 1% equity and ask me to come up with the remaining 99%. When we have an idea, we don’t want to share it. We don’t want to pool resources. That comes from the fact that most businesses here are family businesses.”

Bikpo concludes: “The SME businesses in the Netherlands are not the same as in Niger. That’s why the cultural angle is key. That is why we are having success today. And as we are bankers, we understand the constraints of our partner banks […] so we discuss solutions with them, not ideas.”

Interview by Nicholas Norbrook

55

MARKETS & MONEY

56

Stock exchanges ring the changes

STOCK EXCHANGES

WHERE INVESTORS FEAR TO TREAD

3-year performance – total returns 120 110 100

The continent’s bourses have turned a corner, but still have a long way to go before they join the big league

I

(USD)

90

t’s been a challenging time for investors single regional stock exchange to further in African stock exchanges. Foreign boost liquidity and provide the large investors in particular have felt the number of companies in the sub-region with an easier access to local sources of double crunch of collapsing exchange funding. “We need to coalesce!” he says. rates and stuttering economic activity.

It would certainly provide a continenThe only sheltered ports have been in tal counterpoint to the Johannesburg francophone countries that use the CFA franc: the currency is pegged to the Stock Exchange (JSE), Africa’s largest euro, thus avoiding devaluation. The and oldest bourse, whose All Share BRVM – West Africa’s regional securities Index gained 7% in July – the highest monthly performance of 2017. exchange, which serves all eight member countries of the Union Economique et Stockbrokers say it is too early to Monétaire Ouest Africain – has ticked celebrate, however. Earlier this year the JSE lost an appeal to block the up consistently. country’s first alternative exchange, But a corner has been turned. The ZAR X, from receiving a licence. It reFTSE African Securities Exchanges cently announced restructuring that will Association (ASEA) Pan Africa Index (excluding South Africa), which groups cut its workforce by 14% by the end of the 22 stock exchanges and has a net mar2017, due in part to ratings downgrades and the difficult economic situation. ket value of $68.6bn, recorded a 16.9% year-to-date return in June 2017, ahead of FTSE’s Secondary Emerging Index LARGE COMPANIES DOMINATE (which includes China, Russia and With the drop in initial public offerings India) and FTSE’s Frontier 50.

(IPOs), weak liquidity remains a major While the return looks impressive, hurdle, and a few large companies convolumes remain tiny. According to the tinue to dominate trade volumes on World Federation of Exchanges the African exchanges. In Kenya, the top 10 value of all Africa’s stock exchanges put companiesontheNairobiStockExchange together is only about a third of that of controlover80%ofthetotalmarketshare.

London or Shanghai’s alone – $1.4trn According to the Baker McKenzie in June 2017 compared to $4trn and Cross-Border IPO Index, just five $4.5trn respectively. And the lion’s companies – three South African, one share – $1trn – was accounted for by Johannesburg.

In the first six months of 2017 Reforms are afoot. Share­ just five companies raised a total holders approved the start of of $512m from domestic listings the demutualisation process of the Nigerian Stock Exchange (NSE) in March 2017, which will see Egyptian and one Tanzanian – raised a total of $512m from domestic listings in its conversion from a non-profit, the first six months of 2017, down from member-owned mutual organisation to a for-profit, shareholder-owned public eight companies during the same period company. With this major move, the last year. But the number could rise as prospective IPOs come to fruition. In NSE will join seven other demutualised African stock exchanges – Johannesburg, June, telecoms giant MTN Nigeria said it Nairobi, Mauritius, Seychelles, Rwanda, is moving ahead with plans to list on the Casablanca and the BRVM. NSE, and both the Egyptian and Douala Edoh Kossi Aménounvé, managing exchanges announced they will have new listings before the end of 2017. director of the BRVM, wants to bring the Ghanaian and Nigerian bourses into a Oheneba Ama Nti Osei

80

FTSE ASEA Pan Africa Index excl. South Africa

70 June 2014

Dec. 2014

June 2015

Dec. 2015

Casablanca

Tunis

14.1

2.6

Nigerian

11.5

BRVM

4.7

THE AFRICA REPORT

Ghana

1.4

Botswana

1.9

Johannesburg

1,000

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Daily trades The value of daily trades on most African exchanges remains small, especially when compared to the most developed markets.

FTSE Secondary Emerging

FTSE Frontier 50

$45.2bn

57

Calling the shots In Africa’s largest IPO for the second

half of 2017, Vodacom Tanzania raised $214m in August after a government push to get local telecoms companies to list on the Dar es Salaam exchange.

The JSE’s sectoral shift Financials

80%

Industrials

REIT

Resources

70% 60%

June 2016

Dec. 2016

50%

June 2017

40% 30% 20%

Top 15 largest stock exchanges in Africa by market capitalisation (June 2017; $bn)

10% 0% 1999

2002

2003

2004

2008

2012

2014

2015

Jul.16

Oct.16

The fortunes of manufacturing companies like SABMiller and resource companies like Anglo American have shifted the balance of the sectors making up the Johannesburg Stock Exchange’s Top 40 Index in recent years.

Egyptian

13.2

Top three African stock exchange indices (10 July 2016 – 10 July 2017) Zimbabwe Industrial Index - 94.8% growth

Nairobi

7.9

Uganda

0.553

Rwanda

0.196

ZIMBABWE

Jul

Aug

Sep

Oct

Nov

Dec

Jan 2017

Feb

Mar

Apr

May

Jun Jul

Egypt EGX30 Index - 79.4% growth - Morocco All Share Index - 28.1% growth

Lusaka

Dar es Salaam

0.699

13,000

Mauritius

1.7

5.2

12,000 MOROCCO

11,000

Zimbabwe

10,000

3.1

9,000

Mauritius

5.2 $14.6m

EGYPT

8,000 7,000

$6.4m

Jul

Aug

Sep

Oct

Nov

Dec

Janv 2017

Feb

Mar

Apr

May

A good catch South African fishing company Nigerian Stock Exchange

Casablanca New York Stock Stock Exchange Exchange

10/07/17

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Jun Jul

Sea Harvest was the largest IPO on the Johannesburg Stock Exchange in the first half of 2017.

The company listed shares worth $149m in March.

SOURCES: FTSE ASEA JUNE 2017; JSE JUNE 2017; BAKER HUGHES; BAYHILL CAPITAL; AFRICAN MARKETS

190 180 170 160 150 140 130 120 110 100 90

MARKETS & MONEY

KATIE EDWARDS/IKON IMAGES/GETTY IMAGES

58

NIGERIA

PENSION REFORM 2.0 Following the 2004 reforms, the sector now has $20bn under management. But that’s just covering 11% of the population.

A micro-pension scheme soon to be launched seeks to target informal workers and the self-employed

Z

ipping nimbly between cars on the third mainland bridge in Lagos, Kayode Oluwole laments that he is still stuck behind the wheel.

Before he was a driver, he was a policeman. “I am retired. I am an old man.

Why am I here?” he says. “Because I have nothing. They stole all of it.”

Seven officials went before the Abuja High Court in October 2016, accused of looting the state police pension scheme of more than N24bn ($76.1m). Oluwole is not hopeful about the prospects for getting any of that money back.

Oluwole’s is but one in a plethora of complaints about the pension sector in Nigeria. For an economy of Nigeria’s size, pensions are poorly adopted, putting in jeopardy the retirement of millions of workers in the formal sector.

The government is rolling out new reforms to target the self-employed and the informal sector, which is much bigger than its formal counterpart, in order to bolster the number of Nigerians with retirement savings in the formal financial sector. The National Pension Commission (PenCom) is seeking to

introduce a micro-pension scheme to extend coverage to workers in the informal sector, who account for 70% of the country’s working population.

This follows a revision of the pension law in 2014 that expanded the scope of the Contributory Pension Scheme (CPS) to include self-employed people and those working in organisations with fewer than three employees. PenCom has also set the goal of increasing the number of subscribers to the CPS to 20 million by 2019. The new micropension scheme is expected to account for the bulk of that growth.

The plans are welcomed by those seeking to provide a measure of financial security for the most vulnerable in a country that lacks broad social welfare programmes. Abisola Onigbogi, head of business development at ARM Pensions, a leading pension operator with N521bn in funds under management, notes that social changes added justification for the micro-pension scheme. “You now find more people getting married in their 30s and 40s, etc. What this means is that by the time they retire from work, they still have school fees to pay, they still have house rents to pay. So this is why it is actually very important for everybody to be financially included so that their pensions can kick in at that later stage.”

TRUSTED CHANNELS Despite the benefits of the proposed micro-pension scheme, implementing it will pose considerable challenges.

Factors such as a lack of confidence in government and high levels of illiteracy among informal-sector workers and citizens in rural areas mean that the government has its work cut out in trying to convince people to sign up.

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This is why the regulator is consulting widely before the rollout, according to the former head of the pension department, Polycarp Anyanwu.

Speaking at a media workshop to explain the objectives of the new programme, Anyanwu highlighted that it will work through stakeholders such as worker’s and community associations, to ensure that the message reaches the intended beneficiaries through trusted channels.

For the potential beneficiaries, such as Godwin Obaro – a private security guard who is a contract worker – the idea of a micro-pension scheme is a good one but the only problem is if he will be required to set aside money from his income, which he deems to be barely sufficient to live off. “The problem is if I have to save from this my salary. Like

someone told me two months ago about an insurance plan: the person said I would have to be saving some money for the insurance. I said no because I am not earning enough yet, so I will not be able to save. Just like this pension also, they may also come and say I should be saving. If it’s that one, I will say no.

How much are they paying me here?”

There is also the challenge of coverage, given that the scheme will be operated by existing pension fund administrators.

There is a risk that the operators will pay more attention to the economically vibrant cities and towns, to the detriment of less financially attractive targets.

ARM Pensions’ Onigbogi disagrees, explaining that operators like ARM are already present in every state in the country based on their existing business

Funso Doherty Director general (subject to the approval of the Senate), National Pension Commission (PenCom)

CAUGHT IN THE CROSSFIRE TO FILL THE VACUUM created at the helm of the pension regulatory commission following the sacking of director general Chinelo Anohu-Amazu, acting president Yemi Osinbajo has picked Funso Doherty, a chartered accountant and former chief executive of ARM Pensions. Doherty led ARM Pensions from its inception in 2005 until 2011, when he left to set up an investment firm.

A graduate in accounting from the University of Lagos, Doherty began his career at Arthur Andersen (now KPMG Nigeria) where he was part of the audit group, and later moved to the ARM Group at its founding in 1994. From ARM, he proceeded to business school at Harvard University and then

to Goldman Sachs, where he took a position in the Investment management division. Thereafter, he joined PNC Capital Advisors, from where he was tapped to head the newly formed pension division of the ARM Group.

Doherty’s tenure at ARM Pensions coincided with the take-off of the industry following the enactment of broad reforms by the Olusegun Obasanjo administration.

Doherty steered the company to second place in the industry, growing its total contributions to approximately N37bn by the time of his departure in 2011.

However, his appointment at PenCom has not come without controversy, as it apparently violates a provision of the Pension Reform Law (2014), which

states that in the event of a vacancy in the position of director general, the president must appoint a replacement from the same geographical area as the previous head.

A civil society coalition has filed a lawsuit against the federal government contesting Doherty’s appointment and asking the court to set it aside.

This is despite a separate stand-off between the presidency and the Senate that places Doherty’s confirmation in jeopardy.

The Senate says it will not confirm certain presidential appointees until the appointment of Ibrahim Magu as chairman of the Economic and Financial Crimes Commission — which the Senate twice rejected — is withdrawn.

C.I. in Lagos

needs and client base. “The problem is not being present, but how to access the people. There are options available to the regulator to determine which way it is we roll out based on existing KYC [know-your-customer] data, so the issue ishowwewillaccessthecustomersrather than whether we can reach the entire country. We have the footprint to do it.”

REFORMS YIELD RESULTS The micro-pensions project is part of a wider trend of improved management of the pension sector. Regulators insist that since landmark reforms were implemented in 2004, Nigeria’s pension industry has recorded remarkable progress in establishing a pension system that has been broadly adopted by both the private and public sector.

Prior to the reforms, private companies were not required to operate pension schemes, and most chose not to. In the public sector, even without the grand larceny that affected the police pensions, the budget-funded ‘defined benefit’ scheme racked up a deficit of $15bn in liabilities. That fuelled a crisis that saw several cases of pensioners dying while camped outside the offices of their past employers.

Today, workers from both the private and public sector participate in mandatory ‘defined contribution’ pension schemes. With funding provided by both employers and employees, the funds under management by pension operators totalled $20bn in February of this year. The industry now counts more than seven million subscribers – around 11% of the working population – in the flagship CPS. Analysts had long complained that pension funds have been barred from investing in infrastructure, something that the Nigerian economy desperately needs to grow. PenCom is set to change that and to allow pension fund managers to put up to 20% of their funds into infrastructure bonds and funds. It published draft regulations on infrastructure investment in November 2016 and those regulations are due to be formalised soon. In late 2016, finance minister Kemi Adeosun told media: “That’s what will drive, for example, our social housing and our roads programme outside the budget.”

With the oil-backed economy still reeling from the recent doldrums for the price of crude, the move could be a welcome one to help kickstart the economy.

Charles Idem in Lagos

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CÔTE D’IVOIRE

© H.Sevi - OIF

ADVERTORIAL

-I-

The men and women of tomorrow A CHALLENGE TO BE MET

I

n hosting the 8th Francophone Games, from 21 to 30 July, Côte d’Ivoire honoured its young people, as over 4,000 people between the ages of 18 and 35 from 43 countries in the Frenchspeaking world gathered in Abidjan.

For Côte d’Ivoire, there was more to this week-long event than sports results, competitions, images and emotions. It was an opportunity for the country’s youth to put their energy into this big, annual event and fully express their confidence in the future. Hundreds of young Ivorian volunteers (men and women) exceeded themselves, thereby confirming that they are a force to be reckoned with.

© R. Dogninan - OIF

CÔTE D’IVOIRE

“Akwaba”, welcome

© R. Dogninan - OIF

hat better symbol of Côte d’Ivoire’s commitment to its youth, and the importance of their training and entry into the workforce, than these Games?

“Akwaba” said President Alassane Ouattara, using the twi word of welcome at the opening ceremony held at the fully renovated Felix Houphouet-Boigny Stadium.

After the traditional parade of participating country delegations, the atmosphere was electric as the group Magic System kicked off the

- II -

© OIF

W

festivities, which ended late that night with a spectacular fireworks display, watched over by Faro, the little elephant mascot of these 8th Francophone Games.

To make the Games “a great popular success,” the government invested nearly €20 million in building the Games Village at the National Institute of Youth and Sports (INJS) in Marcory.

In the Plateau district, the French Institute, the Museum of Civilisation and the National Library were also renovated and modernised.

ADVERTORIAL

Gender equality According to World Bank statistics, the enrolment rate for girls is still below 90%, when it is close to 100% for boys. Less than two out of th re e g i rl s c om p l ete th ei r primar y school education, when it is the exact opposite for boys. This imbalance observed in the educational system continues throughout the different stages of life, with an under-representation of women also observed in the economic and political spheres of the country. The government has therefore taken action to

promote gender equality in all areas. Several provisions of the Constitution adopted in 2017 emphasise the promotion and protection of women. In 2015, Côte d’Ivoire inaugurated the National Council for Women, chaired by the Head of State, in order to respect international standards in this area. In collaboration with the Gender Equality Observatory, established in 2014, the council’s mission is to guide and advise the government on all issues related to women’s rights.

Focusing on quality education

C

a Côte d’Ivoire is a young c o u n t r y, w i t h 4 0 % o f i t s population under the age of 15.

They are central to the country’s development because they will one day take over.

In 2015, the primary school completion rate in the country was still 63.1%, compared with 72.6% in Africa overall. There was thus the need to adopt a strategic plan to strengthen and reform education.

After investing heavily in infrastructure and improving production facilities to revive the country’s economy, the State is paying particular attention to training the men and women of tomorrow and preparing “the new Ivorian”.

To succeed in meeting this challenge, the country, bolstered by its average 8% annual growth, is tackling both universal access to education and improving its quality.

To this end, the government has spent over 700 billion CFA francs since 2012 on this sector. The first elements of the National Development Plan (NDP) focus on the modernisation and building of schools, as well as on the recruitment and training of teaching staff.

“93.6%, the gross enrolment ratio for children aged 6-16, in 2015”

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Since the start of the 2011 school year, more than 15,000 teachers have been employed, 30,000 classrooms have been renovated and almost 300 new schools have been built.

In 2015, the gross enrolment ratio for children aged 6-16 was close to 95%, compared to less than 75% in 2007. The government is also paying close attention to secondary and tertiary education. Around a hundred high schools (junior and senior) and four regional universities were built and equipped to strengthen the existing schooling network.

Equal opportunities To ensure that every child has access to shelter and basic education and to help poor women to sur vive e c o n o m i c a l l y, t h e C h i d re n fo r Africa Foundation, established by Dominique Ouattara in 1998, and the Côte d’Ivoire Women’s Support Fund (FAFCI), launched in 2012, are fighting

Due to the 110 billion CFA francs inves te d by th e e d u ca ti on department, public universities, which had been closed for two years, were able to re-open in 2012, including the AbidjanCocody, Abodo-Adjamé, Bouaké and Korhogo campuses and the Institut National Polytechnique Houphouët-Boigny (INPHB) in Yamoussoukro.

With the current population of 23 million set to double by 2050, Côte d’Ivoire is facing an immense challenge.

the same battle. Since its inception, the FAFCI has supported more than 100,000 professional projects initiated by women, facilitating their financial independence and strengthening their entrepreneurial capacity.

The First Lady is also personally involved in fighting child abuse and exploitation in the workplace, on a national and international level.

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SORO (L), WITH OUATTARA (R) APPLAUDS THE DRAFT NEW CONSTITUTION THROUGH CLENCHED TEETH

SORO, THE ENIGMA The former rebel leader is now speaker of parliament and a key and sometimes inscrutable figure in the battle to replace President Ouattara in 2020. The Africa Report talks to Guillaume Soro about his current alliances and political future

By Olivier Monnier in Abidjan

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ôte d’Ivoire’s next presidential election is more than three years from now, but the succession of Alassane Ouattara is at the centre of the political debate. Former rebel leader and current speaker of parliament Guillaume Soro looms large over discussions. And with recent army mutinies and economic troubles, Ouattara – who announced in 2015 that he will not seek a third term – is facing some of his most difficult times since taking office in 2011.

Ouattara’s troubles are mounting on many fronts. On the economic front,

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the price of cocoa – the country’s main agricultural export – fell more than 30% in the past year. And in terms of security, a series of mutinies by ex-rebels demanding the payment of bonuses – said to be promised for backing Ouattara in 2011 – has paralysed the country several times since January. In the political sphere, the governing Rassemblement des Houphouëtistes pour la Démocratie et la Paix (RHDP) coalition has been fracturing since disagreement spread around the 2016 parliamentary vote.

Doubts have emerged on whether the RHDP – which unites Ouattara’s Rassemblement des Républicains (RDR) and the former single party, the Parti Démocratique de Côte d’Ivoire (PDCI) – will survive until the next election.

BÉDIÉ’S PACT As 2020 gets closer, divisions are widening. The PDCI backed Ouattara in the run-off election in 2010, and five years later it called on supporters to vote for Ouattara in the first round. The pact, according to PDCI leader Henri Konan Bédié, was that in exchange for his support in 2015, a candidate from his party would represent the coalition in 2020.

That is a deal Bédié underlined recently, saying it will be time for a “change in power” within the alliance. “The PDCI will have a candidate in 2020. He will be the sole candidate of the RHDP,” Bédié told Jeune Afrique in June. The RDR’s political bureau reacted by saying the debate over the succession is “unhealthy and inappropriate”.

A leading member of the RDR tells The Africa Report that many within the party are getting irritated. “No sooner was Ouattara elected than the whole political debate has been spoiled by the question of succession.” The two parties seem to have different interpretations of the pact. “Ouattara never said that the next candidate will be from the ranks of the PDCI,” says the RDR official, who requested anonymity. “He just said that there will be for sure a changeover because he will not run himself. That’s it.”

But 2020 is not only putting the coalition at risk. It also jeopardises the unity of Ouattara’s own party. After months of tensions, Ouattara’s supporters and Soro’s allies are in open conflict. Until recently, the alliance between Soro and Ouattaraseemedstrong.Ouattarabacked Soro, even when Burkina Faso issued an arrest warrant against him last year for his supposed role in a coup attempt.

IN MAY, SOLDIERS IN A MILITARY CAMP IN BOUAKÉ SEIZED ARMS IN A FOURDAY MUTINY OVER UNPAID BONUSES THEY SAY WERE PROMISED FOR THEIR LOYALTY IN 2011. MANY WERE SORO’S FORMER REBEL TROOPS

Theformerrebelleader,whoserolewas keyduringthe2011post-electoralcrisisin helping Ouattara take power, has slowly been marginalised. Firstly, Soro lost his position of constitutional successor to the president with the creation of the post of vice-president as part of changes to the constitution last year. Ouattara has also removed all of Soro’s Forces Nouvelles allies from his cabinet.

The series of mutinies this year – led by soldiers once under Soro’s command – and the discovery of a cache of weapons in May in a house said to be owned by Soro’s director of protocol have raised tensions even more. While some suspect that Soro is behind the

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mutinies, his supporters say that such talk is proof of a conspiracy against Soro.

“I’m not a person who stabs others in the back,” Soro tells The Africa Report in a rare interview, given at his residence in north-east Abidjan. “I’m not someone who abnegates his responsibilities. In 2002, when I was 29, I took responsibility for the rebellion. I’ve always demonstrated my loyalty to President Ouattara and I decided I will stop justifying myself.”

The leadership of the RDR is at stake.

Behind the scenes, competition is underway between Soro, prime minister Amadou Gon Coulibaly and defence minister Hamed Bakayoko, says Arthur Banga, a political and military analyst at Université Félix Houphouët-Boigny. “It’s a muted fight,” he says. “No one has so far officially declared himself candidate for 2020, but they are all manoeuvring for it.”

Gon Coulibaly is seen to have Ouattara’s support, but Soro gets the most attention. A dominant figure in the political landscape for 15 years, Soro is the subject of passionate debates. Seen by some as a brilliant, courageous and intelligent politician, his opponents say he is a ruthless warlord ready to do anything to achieve his ambitions.

If many in Abidjan see his candidacy as an open secret, Soro does not say too

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much about it. “Becoming president, it’s a relationship between a man, a destiny and a population,” he says. “One must not express personal ambition but rather a collective ambition. And today I haven’t decided yet.”

But asked whether he is impatient, he quickly compares himself to France’s President Emmanuel Macron.

“When I’m being told I’m impatient, I’m shocked. Between Macron, who’s president of France at 39, and myself, who is 45 and not yet president, who is impatient? I started my political and trade union commitment in 1991.”

A REBEL REBRANDED In 1995, aged 23, Soro took the leadership of the influential student union FédérationEstudiantineetScolairedeCôte d’Ivoire (FESCI). He later surfaced as the head of a rebellion, which in 2002 seized the northern part of the country after failing to oust then-President Laurent Gbagbo – whom Soro once supported.

After holding several cabinet positions in unity governments, Soro became prime ministerin2007,followingapeaceaccord between Gbagbo and the rebels.

In 2010, Soro then played a major role in Ouattara’s taking power after Gbagbo refused to acknowledge his defeat. That THE AFRICA REPORT

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sparked a five-month standoff between of parts of the military, made up of many the rebels, who backed Ouattara, and former rebels, even though his real inforces loyal to Gbagbo. fluence on the army is largely unknown.

He’s also praised for “his ability to Reappointed prime minister by face adversity”, Koné says. The Abidjan Ouattara, Soro then became speaker diplomat adds: “Despite all the scandals of parliament in 2012. He has since around him, nothing sticks on him. He’s been working hard to rebrand himself moving forward.” as a statesman, through an intense The lack of support within the RDR is communication campaign on social likely his main weakness. “His priority is media and many trips abroad as part to impose himself at the head of the RDR. of his job as a parliamentarian.

But he’s also one of a few politicians “He’s absolutely concentrated on who could run without the support of 2020,” says a diplomat based in Abidjan.

“Ifhemanagestobethe[RDR]candidate, a major party,” argues Université Félix he really has strong chances of winning.

Houphouët-Boigny’s Banga.

As the head of parliament, he’s put himself above the daily political decisions NO FUTURE IN THE RDR and thus he won’t be accountable if A party official adds: “It’s clear that Soro is more than interested, but he hasn’t voters decide to sanction thegovernment found the way to do it yet. Because it’s in the next vote. […] He also has a very calculated approach to his image, which clear that he won’t be able to take control is pretty unusual among other Ivorian of the RDR […]. He doesn’t participate political leaders,” the diplomat says. in any meetings of the party, and many Soro is using social media as a way to militants see him as an opportunist who has used the RDR to get elected.” communicate and get new supporters, Soro has little patience for his critics especially among the youth. With more than 900,000 followers on Facebook in the RDR. “When I started my comand almost 400,000 on Twitter, he is mitment, when I went to prison in 1992, the RDR wasn’t even created. Those in the most-followed Ivorian politician.

Soro’s willingness to charm the youth, the party who consider themselves very in a country comprised mostly of young important, […] people need to know that and urban inhabitants, is also a clear I started my militant commitment well before them,” he says. “I’m not much sign that he represents a new generation of politicians, observers say. “Having interested in the tensions within the taken the noms de guerre Bogota and RDR. I don’t even know the times of Ché and often drawing inspiration from the meetings. They can do whatever a Maoist playbook, Soro is a generathey want with the RDR.” tion apart from an Ivorian Soro’s only way to the political class dominated 2020 election will be to by older men schooled uncreate his own party or der Houphouët-Boigny,” movement, observers says Nick Branson, a say. “My own party? I’m senior researcher at Africa not quite there yet,” Soro Research Institute. explains. A member of Soro’s1990sgenerationis his team adds: “He’s not looked down upon by “the obsessed by 2020 […].

Money promised bourgeoisie of the RHDP,” Everything will be decided by the government with Ouattara and Bédié.” says Ivorian sociologist to each of 8,400 former Soro’s past as a rebel Fahiraman Rodrigue Koné. rebels integrated into “He’s part of this generaleader may be another the army, following the tion who’s willing to play main handicap. “A willingmutiny of January 2017 ness to resort to arms in a a leading role but who’s country tired of conflict ultimately points constantly turned down by their elders. to the man’s weakness. Soro will forever In this situation, violence becomes a be regarded as a student leader turned resort through which to enter the system.”

Among Soro’s strengths are his conrebel commander, desperate to maintain nections.Hehassomesupportwithinthe a cult of personality,” Branson says. “The RDR, he is close to Konan Bédié of the willingness of Soro and his acolytes to PDCI and has some good contacts with do the unexpected – up to, and perhaps members of Gbagbo’s Front Populaire including, military insurrection – makes him an enigma. It also prevents many Ivoirien from his time at FESCI in the Ivorians from taking him seriously.”

1990s. He also still commands the loyalty

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revenue. The CCILCI helps members to be in contact with the authorities.

“Those exchanges allow us to be informed of regulatory changes and to alert companies about upcoming deadlines but also to defend their interests better,” says Michel Rustom, managing director of the CCILCI. Thanks to this lobby, Lebanese companies active in the plastics and retail sectors convinced the government to hold off for two years on its plans to ban plastic bags.

NETWORKS OF TRUST The Lebanese business community has the government’s ear because it was at the forefront of the country’s economic BUSINESS reboot after President Alassane Ouattara took power in 2011. Since then, thousands of foreign investors have gone to Côte d’Ivoire to scout for business prospects, and Lebanese business operators are aware that they need to up their game in the face of the seemingly unending ambitions of companies such as Carrefour and CFAO. Their management styles are very centralised and often community-based.

When Côte d’Ivoire needed investment after years of civil war the The head of a top Lebanese company Lebanese community dove straight in. In today’s more competitive says: “Sometimes, we trust someone environment, some are looking to foreign partners for expansion with merchandise, not because the person is qualified but because he is from sk a Lebanese businessman to the same village in southern Lebanon.

Technibat), agribusiness (Thunnus speak about his successes, and Overseas Group, Sipro-Chim, Carré It is a question of trust.” d’Or, Yoplait, Pepsi), the cocoa trade he will often play it down. “I have Some Lebanese entrepreneurs are no desire for the tax man to show up (Safco and S3C) and also small and meforming alliances with foreign partand make me penniless,” jokes Hassan dium-sizedmanufacturers(Sotici,Sotaci, ners to expand their investments. In Hyjazi, a leader of the Lebanese comCotiplast, Aciéries de Côte d’Ivoire).

2007, Yasser Ezzedine – the head of munity in Abidjan who is active in the Many Lebanese businessmen have retailer CDCI – opened up his capital real estate, retail, chemicals and textiles reinvested their profits in real estate. to Cauris Management. He welcomed more foreign backing in 2014 in the form sectors. He adds: “You should not make The Chambre de Commerce et d’Industrie Libanaise de Côte d’Ivoire (CCILCI) of Moroccan company Label’Vie and generalisations. Not all Lebanese have made a fortune. A lot of them live simestimates that Lebanese people own investment firm Amethis Finance. He ple lives and often extremely modest handed over a majority stake to them last 50-60% of the real estate in the Abidjan ones that are similar to hundreds of neighbourhoods of Marcory – also year in the hopes of pushing the comknown as Little Beirut – Yopougon, pany to another level of competition. thousands of Ivorians.”

But not all of Ezzedine’s counterparts Estimated at about 80,000 people, Adjamé and Treichville. the Lebanese diaspora in Côte d’Ivoire are ready to transition from entrepreneur In response to the prejudices they face is the largest Lebanese community in to investor. Hyjazi, whose company runs – like French competitors complaining shopping centres, says: “We do not want Africa and is almost exclusively based in that Lebanese traders are not bothered to open ourselves up to inAbidjan. Most Lebanese in the country by the authorities because of corrupt deals – a group vestors because we do not have Ivorian nationality and operate in a tight-knit business community. have enough experience of Lebanese businessmen in this field.” According At the end of the post-electoral crisis in founded the CCILCI in late 2010. It has 273 company 2011, Lebanese entrepreneurs estimated to one financier: “Maybe that they controlled some 40% of the members that have a comwe will have to wait for national economy. They are strongly bined annual turnover of the next generation, who have gone to university, to represented in retail (Prima Center, CDCI 1.6trn CFA francs ($2.8bn), and Prosuma), car dealerships (Rimco employ 300,000 permatake over to see a change Lebanon accounted for nent workers, account in mentalities.” and Kia), furniture and equipment (Orca, nearly a tenth of Côte Galeries Peyrissac and Nasco), tools Julien Clémençot for 8% of gross domestic d’Ivoire’s foreign direct and construction materials (Bernabé, in Abidjan product and 15% of tax investment in 2016.

ADRIA FRUITOS FOR TAR

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AGRICULTURE

THE CCC AND THE COCOA CRISIS Reforms put in place in 2012 were meant to protect cocoa producers and companies from the negative consequences of booms and busts, but they have not worked out that way

700FCFA

CALL IN THE AUDITORS The reforms still have their fans today.

An operator in the sector who requests anonymity argues: “There is no need to change them. The problem comes from their implementation. There has been a lot of carelessness.” But the CCC is still at the centre of the firestorm.

TheCCCissupposedtohaveacushion to deal with downturns, but its management has not been transparent. It has a reserve fund made up of the proceeds from the 20% of the harvest sold on the

allowed to buy tens of thousands of tonnes of cocoa.” Such moves allowed localcompaniestogetinvolvedinasector dominated by multinationals like Cargill, Barry Callebaut and Olam. But without adequate checks on the suitability of companies it caused problems instead.

Other complaints relate to communications. The CCC did not talk much with actors in the sector when prices started to crumble last July and issued systematic denials about the existence of fraudulent contracts. In January and September, the manager of the Ivorian cocoa sector repeatedly denied claims in the press that it was getting ready to cancel contracts of those who speculated and were unable to deliver on their obligations.

It was only in February that CCC boss Massandjé Touré-Litsé announced the breaking of those contracts and the selling – at a rock-bottom deal, after prices had already fallen by 40%. Signalling his dissatisfaction with Touré-Litsé’s management of the CCC, President Ouattara relaunchedtheinter-ministerialcommitteeonnatural resources.Morechangesto the oversight of the sector are likely with new CCC board appointments within the next few months.

Marion Douet and Baudelaire Mieu in Abidjan for Jeune Afrique

SMALL-TIME LOCAL EXPORTERS HOPED TO COMPETE WITH MULTINATIONALS BUT WERE CAUGHT OUT BY RISING PRICES THE AFRICA REPORT

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he Ivorian cocoa sector is in turspot market. The CCC has never revealed moil.Thegovernmentispreparing those figures, and there has not been an audit of the commercialisation system to name a series of new managers at the Conseil Café-Cacao (CCC) – the since the 2012/2013 season. KPMG is institution that manages the cocoa doing one now after the CCC cancelled contracts for 350,000tn of cocoa this year. trade – for the start of a new season as traders and producers pick up the pieces Companies had signed contracts without from a speculation fiasco and prices fixing a price in the hopes that prices would be favourable, show no signs of an uptick.

In a big blow to the counleading them to default try’s 800,000 cocoa farmers, as prices dropped. in late March the governThe CCC had watered ment drastically reduced down its policies to help out Ivorian exporters, and the minimum purchase price it guarantees for cocoa analysts say that has made the system more fragile. sales, from 1,100 CFA francs ($1.94) to 700 per kilogram.

Exporters were allowed to This was a first since major sign contracts for prices ‘to The minimum purchase reforms of the sector were be determined’ instead of price for a kilo of implemented in 2012 and fixed-price contracts. The Ivorian cocoa dropped is the most visible aspect of CCC also reduced deposit to $1.23 in March, the troubles in the world’s payments from 2.5% of the down from $1.94 the previous season top producer of cocoa. The totalcontractto1%inorder to allow small exporters downturn in price has hurt government finances and the CCC has and cooperatives to participate. Ivorian companies had access to 500,000tn in recorded a loss of more than 300bn the 2016/2017 season, up from 30,000tn CFA francs. To support the sector, the in 2015/2016. But they were only able to government has waived the payment honour contracts for 150,000tn. of some export taxes. It has also cut its Another source complains: “They spending and turned to the International Monetary Fund for help. allowed in weak parties. People – someAfter a decade of scandals, the country times just one person in an office – were put in place a stable and transparent system of forward sales – covering the year preceding a season – for 80% of the crop in 2012. Knowing in advance what the majority of the harvest would bring in terms of revenue, the CCC could guarantee farmers and other actors in the sector a fixed and sustainable price.

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FINANCE

DIAGOU, THE DEAL-MAKER A $112m investment pact signed in May between Jean Kacou Diagou and Swiss Re should help insurer NSIA to expand its operations in the banking sector

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he Ivorian-based bancassurance group NSIA is gearing up to make a big move into the banking sector, backed by three foreign investors who are looking to expand their operations in Africa. On 22 May a press release published in the Ivorian daily Fraternité Matin announced that Swiss Re had acquired an undisclosed minority stake be potential takeover targets include in Manzi Finances, Jean Kackou Diagou’s Nigeria’s Diamond Bank – which operholding company. Manzi owns just over 60% of NSIA Participations, the parent ates in five West African countries – and company of Abidjan-based Groupe Burkina Faso’s Coris Bank.

The details of the Swiss Re transacNSIA. Valued at €100m ($112m), the transaction, which took six months to tion have been shrouded in secrecy, conclude, is a sign of more deals to come. and the press release issued by Manzi Swiss Re has long been interested in Finances was quite brief. While it inthe leader of the insurance sector in dicated the value of the transaction, it did not specify the share of the capital francophone Africa and lost out on a acquired. According to information previous chance to buy a stake in NSIA. In March 2015, a consorobtained by Jeune Afrique Business+, Swiss Re now tium composed of French private-equity group controls a little under 30% Amethis Finance and of Manzi Finances.

National Bank of Canada (NBC) beat the Swiss giant FAMILY BUSINESS to acquire a 26.24% stake in The Diagou family says NSIA Participations from that this deal will enable Tunis-based investment its holding company to ensure “the continued defund manager Emerging Swiss Re now controls velopment of its interests, Capital Partners (ECP). a little less than including that of Groupe Having long sought to 30% of Manzi Finances NSIA”. According to Janine get into banking, insurafter purchasing a Diagou, who is also depance industry veteran minority stake in the uty managing director of Diagou warmly welcomed holding company the deal with Swiss Re. Manzi Finances and in line Speaking to Jeune Afrique at the time to one day succeed her father as the head of the financial services group, Swiss Re of the transaction, Janine Bénédicte negotiated an exit clause, as is often the Diagou, his daughter and now Groupe NSAI’s managing director, said that the case in this type of operation. “But it’s a transaction was “perfectly in line” with long-term partnership, expected to last for at least 15 years,” she says. her father’s ambitions. Diagou has had his eye on Togo-based Oragroup for On why Swiss Re did not acquire a a couple of years and said he would share of NSIA Participations’ capital be interested in buying a stake if ECP instead, Jean Kackou Diagou says it wants to exit its investment in the West was because he did not want to dilute African lender. Smaller banks that could his control of NSIA Participations. The SOURCE: JEUNE AFRIQUE BUSINESS+

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JEAN KACOU DIAGOU: THE IVORIAN BUSINESSMAN IS NOW EYEING BANKS IN TOGO, NIGERIA AND BURKINA FASO

acquisition by the Switzerland-based insurance company did not require the approval of NBC and Amethis, and it gives the Diagou family an important financial ally to help with the capital increases necessary to pursue its expansion strategy in the banking sector.

When it comes to NSIA Participations, the Ivorian businessman is dealing with a heavyweight co-shareholder, NBC, with a balance sheet of $150bn. With the modest capital increase recorded since partnering with the NBC-Amethis consortium – 15bn CFA francs ($26.1m) at the end of 2015 – it is obvious that having Swiss Re now gives the insurance veteran more weight.

NSIA and Swiss Re have made clear that the transaction announced in May was conducted “in agreement” with the different partners. Moreover, the leaders of the Swiss giant and the NBC-Amethis consortium met prior tothe signing of the deal. But the arrival of Swiss Re alongside the Diagou family is not necessarily good news for the Canadian banking group and its French partner. Tensions between the Diagou family and NBC-Amethis flared up on the choice of Swiss Re. But the tie up between Swiss Re and Manzi could enable NSIA, which has banking subsidiaries in Côte d’Ivoire and Guinea, to accelerate its growth in the sector.

Stéphane Ballong for Jeune Afrique

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PEOPLE TO WATCH

YOUNG GUNS AND TOP GUNS Ivorian talent is rampant, from a teenage footballer and a rap sensation to business and political leaders in and out of the limelight, not forgetting the man in the blue beret

MILITARY

Sékou Touré

ALL RIGHTS RESERVED

Man in a hot seat

FOOTBALL

Karamoko Dembélé Wing commander A new generation of Ivorian footballers is on the rise. At 13, the Ivorian winger made history in his debut for the Scottish club Celtic’s under-20 team last October. He signed a youth registration deal with the team this year, saying: “I think this is the right place for me to fulfil my potential,” and has played on Scotland’s and England’s national youth teams. There is a lot of hope resting on his young shoulders as he trains with the club and attends St Ninian’s High to continue his schooling.

Europe’s top clubs are scouting him out in the hopes that he could follow in the footsteps of greats like Didier Drogba.

Daniel Kablan Duncan

Designated successor

POLITICS

Yasmina Ouégnin Headstrong deputy Elected as the youngest parliamentarian in the previous legislature, Yasmina Ouegnin has a wilful streak. The daughter of former director of protocol Georges Ouegnin, she ran as an independent and won her seat in Cocody in December 2016 after the RHDP alliance refused to back her. Ouegnin is not afraid to criticise the political system for concentrating power in the presidency or to publicly disagree with her allies.

After a two-day army mutiny over pay and working conditions in January, General Sékou Touré was promoted to chief of staff of the armed forces, replacing General Soumaila Bakayoko. Touré had been deputy chief of staff since 2013, under the government of former president Laurent Gbagbo. Following another mutiny, soldiers accepted a deal in May, but the management of the security forces remains a major challenge as they are largely made up of former rebel forces from different sides.

POLITICS

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As a Christian from the south, former prime minister and PDCI member Daniel Kablan Duncan was a perfect political choice for President Alassane Ouattara, a Muslim northerner, when he chose the country’s first vice-president in January. Critics point out that the vice-president does not have much power, but some Kablan Duncan backers say that the position will offer great opportunities when the succession race opens up ahead of elections in 2020.

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BUSINESS

Adama Bictogo New shores

OLIVIER FOR JA

for the biometric baron

The government has liberalised ferry services on Abidjan’s Ebrié Lagoon, and two competitors have begun services in recent months. Adama Bictogo’s Société de Transport Lagunaire (STL) was first to launch, beginning operations in April.

He is an influential member of President Alassane Ouattara’s RDR party, member of parliament for Agboville, and heads the multi-sector SNEDAI Groupe. SNEDAI’s success rests on Bictogo’s foresight in 2007, when, at the end of a period of civil war, he invested in biometric software. The company now handles passport and visa contracts for several West African countries, and has branched out into renewal energy, transport and infrastructure. Rival company Citrans, owned by serial entrepreneur Zoumana Bakayoko, started its ferry service in June.

BUSINESS

KAMBOU SIA/AFP

The 56-year-old chairwoman of the Ivorian subsidiary of France’s Bolloré Transport & Logistics, Martine Coffi-Studer prefers the boardroom to the the limelight. She is one of the country’s most influential businesswomen. She founded the advertising firm Océan Ogilvy in 1988, an outfit that now operates in about 20 African countries, and served as minister of state for communications from 2005 to 2007. She sits on many boards, including those of the electricity, gas and petroleum companies, and is said to have the ear of Henri Konan Bédié, the leader of the PDCI party, and to be an ally to President Alassane Ouattara. Bolloré manages the port in Abidjan and is investing in its infrastructure. The company and the governments of Côte d’Ivoire and Burkina Faso signed a new concession agreement in August 2016 for the railway linking the Ivorian economic capital to Ouagadougou.

Bolloré is also expanding its electric-powered bus project, which currently serves several of Abidjan’s universities.

ALL RIGHTS RESERVED

Martine Hélène Coffi-Studer A discreet director

MUSIC

Kiff No Beat

Hip-hop to the top

Kiff No Beat, a group of five young rappers, have enjoyed a meteoric rise. They started out in 2009 and have just signed with Universal Music Africa, which backed their big-budget video for the hit ‘Pourquoi Tu Dab?’ Didi B (pictured) says the group’s connection with fans is key to their success: “When we make a new song, we send a little clip out on social media and we improve it based on their comments.” That has helped the group experiment in rap, dancehall R&B and Trap.

TOP 200 BANKS

FINANCE

OUT OF THE

77

The assets controlled by banks in our Top 200 ranking continue to fall, but financial institutions are strengthening their profitability and seeking ways they can innovate to broaden financial inclusion

By Nicholas Norbrook

GLOOM

GETTY IMAGES

T

here is light at the end of the tunnel after the commodity downturn. The figures for our 2017ranking,basedonbanks’ resultsfrom2016,showacontinued downward march. But the first half of 2017 shows stabilisation, pointing to improvements to come. And despite the drop in the Top 200 banks’ total assets from $1.491trn last year to $1.465trn this year, the profits of the top banks rose marginally, up 0.7% to $21.6bn.

The Top 200 banks also recorded drops in deposits (-3.7%) and loans (-1.5%).

Growth prospects for Africa’s big trading partners – the US, European Union and Asia – are improving, representing a tide that should lift African banks. There is no certainty that this is the bottom of the market but if another business cycle is about to take off, this is a good place to take stock of African finance.

The first item to note is the finance sector’s relatively small size compared to the rest of the continental economy. In Africa, total financial assets are roughly equal to the continent’s gross domestic product (GDP). The total stock of global financial assets is around four times global GDP. One reason for the dearth of African financial assets is that the continent’s banks are handicapped by not having sufficient long-term deposits to engage in one of the primary functions of finance around the world: funding the purchasing of housing.

The second item of note is that neither of the African powerhouses looks likely to generate serious growth over the medium term, which limits scope for banks. While South African inflation and drought conditions have eased – earning an interest-rate cut from the central bank – political conditions are anything

78

TOP 200 BANKS

but healthy for the banks. President Jacob Zuma’s preferred successor, Nkosazana Dlamini-Zuma, looks set to inherit the presidency, which will lock the Gupta family and their cronies into the country’s power networks. Adding to the dark clouds are high personal debt levels.

Nigeria also presents a difficult picture.

Declining oil production from 2019 will mean the country will need to find alternative sources of growth, according to a BMI Research note. It argues: ‘This will prove difficult in Nigeria’s challenging operating environment.’ BMI predicts average growth rates of 3.7% over the next decade, compared to 6.5% in the decade before the oil crash.

But Africa is not the sum of its powerhouses, and banks have a way of getting creative when it comes to making money. African banks themselves remain attractive propositions for investors.

Norway’s sovereign wealth fund Norfund says that African financial institutions represent the best returns during these tougher times, and it has set up the $1bn Arise fund to chase them.

PETROLEUM’S THE PAST “There are now places to raise longterm money. That’s a real change,” says Lionel Zinsou, a former prime minister of Benin who previously worked on Africafocused funds. He sees the interest of European and American funds in the continent’s growth potential as something only just getting going.

But business models will also have to change. China is slowly shifting away from manufacturing and has finished many major infrastructure projects.

Major oil companies are calling peak oil demand in under a decade.

So the old days of relying on the financing of commodity exports may be gone.

That may be a positive development, forcing banks to put their balance sheets to work in new areas, such as tourism, agriculture and manufacturing.

The downturn hurt countries that were not hugely indebted. The pain came through sovereign-risk profiles being readjusted – with downgrades for Angola, Mozambique, Nigeria and South Africa – not from full-scale interventions from donors. The Republic of Congo, which has debt levels of more than 120% of GDP, may be the exception that proves the rule.

Resilience was seen most often in francophone countries using the CFA franc, with the regional bourse BRVM, sitting in Abidjan, one of the best performing

The shape of Africa’s Top 200 banks Top 200 asset breakdown Southern Africa

West Africa

North Africa

Central Africa

East Africa

$1.448trn

$1.391trn

$1.508trn

$1.491trn

$1.465trn

2012

2013

2014

2015

2016

Top 5 for asset growth

64% 52%

11.7

1.1

US$bn

51%

51%

AFRICAN EXPORT- BANCO DE COMÉRCIO IMPORT BANK E INDUSTRIA (Egypt) (Angola)

%

43%

1.1

5.7

2.8

GRINDROD BANK (South Africa)

BANCO MILLENNIUM ATLANTICO (Angola)

BANK OF KHARTOUM (Sudan)

%

Top 5 for asset decline

US$bn

EXPORT DEVELOPMENT BANK OF EGYPT (Egypt)

BANQUE MISR (Egypt)

BANK OF ALEXANDRIA (Egypt)

HOUSING AND DEVELOPMENT BANK (Egypt)

FAISAL ISLAMIC BANK OF EGYPT (Egypt)

1.3

23.6

3.4

1.9

4.1

-44%

-43%

-42%

-42%

-53%

stock exchanges in Africa in recent times.

Countries whose currencies lacked the shelter of a euro peg were badly hit. The NairobiSecuritiesExchange,forexample, was the world’s worst-performing stock exchange by early January 2017, though it has bounced back since then.

Growing pools of domestic capital are certainly a priority for African regulators.

“We need our largest companies on the bourse, it would boost liquidity”, says BRVM boss Edoh Kossi Amenounve.

“If the two largest Algerian companies came onto the bourse it would double the capitalisation of Africa’s stock exchanges.”

Deepening the pools would be helped if Africa’s savings were kept in Africa.

“Africa is the only continent where offshore bank accounts receive more in savings than onshore”, says Cédric Achille Mbeng Mezui, coordinator of the African Financial Markets Initiative at the AfDB. Financial inclusion is the next horizon.

Technology is helping, although while mobile payments may be a leading-edge sector on the continent, savings products are still in their infancy.

Banks around the world worry about fintech, and Africa is no different (see page 20). Some 77 African fintech

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TOP 200 BANKS

500 400 300 200 100 0

METHODOLOGY

Total loans ($bn)

2012

North Africa West Africa

2013

2014

Central Africa East Africa

Southern Africa

2015

WE COMPILED OUR RANKING of Africa’s top 200 banks by sending out detailed questonnaires 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 2016 financial year. Where that information was unavailable we used 2015 figures, indicated in the rankings by italics. The data was converted to US$ using the exchange rates applicable on 31 December 2016 to ensure a consistent comparison.

Numbers in the ‘Rank 2016’ column refer to a bank’s position in The Africa Report’s ranking of September 2016.

2016

Number of banks 56

25

53

10

28

Total profits ($bn) 22.4

22

21.6

20 15

53

21.5

19.8 2012

2013

2014

2015

2016

Africa’s deposits ($bn)

500 400 300 200 100 0

2012

2013

2014

2015

2016

South Africa

Standard Bank Group

South Africa

Barclays Africa Group South Africa

Standard Bank of South Africa South Africa

First National Bank South Africa South Africa

$1.8bn

Nedbank Group South Africa $832.1m

$1.7bn

National Bank of Egypt $684.6m Egypt

$1.2bn

Attijariwafa Bank $555.5m Morocco Rand Merchant Bank $465m South Africa

$1bn

Guaranty Trust Bank $429.9m Nigeria

$924.3m

start-ups raised $367m in 2016, up 33% from the previous year. More than 180 million Africans have an e-wallet, and more than half of mobile payment accounts in the world are in Africa.

But no amount of technology will fix the cold facts of Africa’s economic challenges in the short term. Consider this: Kenya has much to boast about, with cash running through its world-famous mobile-money networks in the first half of 2017 representing nearly half of the country’s $75bn GDP. But while that is impressive, reports suggest that the formal sector creates just 15,000 jobs THE AFRICA REPORT

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annually for the more than half a million students enrolled in university each year.

IfAfricanfinancewereproperlyflowing into the private sector, one might expect muchbetterjobcreation. Instead, African banks stand accused of ignoring the private sector (see page 48). Credit to the private sector is still just 20%-25% of GDP, very low compared to other emerging regions in the world. In Latin America and Central and Eastern Europe these rateshavehit40%.“Africa’ssavingsarenot financingitsdebt”,saysZinsou,andbanks are traditionally the vehicle for mediating savings into productive lending.

S E P T E M B E R 2 017

SOURCE: THE AFRICA REPORT

Top 10 most profitable FirstRand Banking Group

Richard Arlove of Mauritius-based financial consultancy ABAX argues that there is a lack of good companies to lend to. Financiers need comfort, and family companies – a category that most African companies fall into – do not necessarily know how to give it. “There is a governance gap. Boards need to be more open and more proactive. We need better internalcontrols incompaniesandbetter information technology,” says Arlove.

That problem extends down to small and medium-sized enterprises (SMEs), which should be the backbone of the African economy but are often submerged by the continent’s famously poor business environment.

Kenya’s Equity Bank is one institution bucking the trend and has a strong lending portfolio to SMEs, though it has been slowed by recent regulatory changes that cap interest rates. “The total loan book [for SMEs] is around $1.5bn, and that is up 3% on last year […]. The growth rate is not as strong as it used to be,” says Philip Sigwart, SME director for Equity Bank.

If there is slow movement at the bottom of the pyramid, Africa needs to see more at the top too, says Cathia Lawson-Hall of France’s Société Générale.

She says alternative windows at Africa’s stock exchanges are critical to financing blue-chip clients, freeing up money for the middle of the finance ecosystem.

“Banks alone won’t be able to finance Africa’s growth,” she concludes.

79

TOP 200 BANKS

1

1

2

2

3

4

4

3

5

6

6

8

7

5

8

9

DIFF.

RANK ’16

RANKINGS 1-40 RANK ’17

80

W are using digital technology to [bring] millions more into formal financial systems, We and therefore improve lives across Africa.” Ade Ayeyemi Group CEO, Ecobank (#16) a

BANK NAME

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

0 Standard Bank Group

South Africa

112 045 956

1 601 260

66 907 147

89 200 312

0 Standard Bank of South Africa

South Africa

93 310 372

4 853 715

66 803 067

68 010 218

South Africa

83 418 081

5 299 284

61 794 975

66 768 519

South Africa

79 912 249

3 048 578

52 280 027

48 981 702

+1 Nedbank Group

South Africa

70 113 877

3 623 847

51 319 649

55 272 718

+2 Attijariwafa Bank

Morocco

42 130 554

1 933 101

26 690 087

28 128 352

Egypt

38 613 033

-

12 113 592

30 669 426

+1 Investec Group*

South Africa

36 891 006

-

14 136 756

18 149 125

+1 FirstRand Banking Group -1 Barclays Africa Group

-2 National Bank of Egypt

9

10

+1 Groupe Banque Centrale Populaire

Morocco

34 559 166

1 538 232

21 013 173

25 521 820

10

12

+2 Rand Merchant Bank

South Africa

31 581 953

-

-

-

11

11

0 BMCE Bank of Africa

Morocco

30 059 982

1 276 399

17 664 615

18 674 346

12

17

South Africa

27 778 689

-

-

-

13

13

0 Banque Nationale d'Algérie

Algeria

25 306 002

921 675

12 550 460

13 933 146

14

14

0 Banque Extérieure d'Algérie*

Algeria

24 304 000

650 000

23 701 000

18 507 000

15

7

-8 Banque Misr

Egypt

23 618 175

621 669

7 024 246

18 737 751

16

15

-1 Ecobank Transnational Inc.

Togo

20 510 974

1 972 263

9 259 374

13 496 720

17

20

+3 Libyan Foreign Bank*

Libya

18 865 277

212 950

1 463 288

13 387 833

18

27

+9 Commercial Bank of Ethiopia

Ethiopia

17 072 394

-

4 083 880

12 806 515

19

22

+3 Qatar National Bank Alahli*

Egypt

16 910 253

627 089

7 703 871

13 762 060

20

24

+4 Crédit Populaire d'Algérie*

Algeria

15 589 781

548 305

9 818 945

12 598 243

21

19

-2 Zenith Bank

Nigeria

15 404 431

780 582

7 440 436

9 696 768

22

16

-6 Commercial International Bank

Egypt

14 688 152

549 972

4 678 806

12 722 570

23

18

-5 First Bank of Nigeria

Nigeria

14 673 073

1 246 913

7 819 837

9 847 796

24

21

-3 Zenith Bank Nigeria

Nigeria

13 922 142

-

6 948 929

8 297 130

25

50

Egypt

11 726 105

305 364

10 148 202

3 778 493

26

25

Nigeria

11 389 528

925 850

4 892 287

8 078 233

27

28

Nigeria

11 322 563

452 230

5 880 742

6 789 891

28

23

Algeria

11 312 994

502 554

7 329 297

9 576 797

29

-

Angola

10 289 552

729 017

6 816 317

6 698 533

30

30

0 Guaranty Trust Bank

Nigeria

10 128 279

635 051

5 165 647

6 455 300

31

-

- Access Bank Nigeria

Nigeria

10 058 622

377 057

5 182 328

5 892 389

32

26

-6 Arab African International Bank

Egypt

9 986 949

-

3 528 531

6 948 900

33

31

-2 Crédit Agricole du Maroc

Morocco

8 968 803

363 016

6 620 750

6 512 076

34

35

+1 Société Générale Maroc

Morocco

8 337 459

394 416

6 558 462

5 804 120

35

39

+4 Groupe BOA

Senegal

8 275 201

497 501

4 031 714

5 308 302

36

29

Nigeria

8 253 651

353 561

3 543 654

5 521 292

37

37

0 Banco Angolano de Investimentos

Angola

8 194 110

555 862

2 279 184

6 823 821

38

38

0 HSBC Bank Egypt*

Egypt

8 049 703

457 318

2 570 445

6 542 903

39

32

Angola

7 877 277

597 430

1 411 865

6 478 212

40

43

7 666 823

333 011

4 088 213

6 367 697

+5 First National Bank South Africa

+25 African Export-Import Bank -1 United Bank for Africa Group +1 Access Bank Group -5 Banque de l'Agri. et du Développement Rural - Banco de Poupança e Crédito*

-7 United Bank for Africa Nigeria

-7 Banco de Fomento de Angola +3 The Mauritius Commercial Bank

Mauritius

2016 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2015 RESULTS

THE AFRICA REPORT

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TOP 200 BANKS

Kenya’s KCB Bank Group (#48) posted a KSh10.2bn profit for H1 2017, buoyed by its strong retail and corporate banking, and non-interest income.

41

41

0 Banque de Développement Local

Algeria

7 537 641

352 226

6 891 573

6 212 111

42

36

-6 Banco BIC*

Angola

7 185 424

250 694

2 464 150

2 739 661

43

34

-9 Diamond Bank

Nigeria

6 661 846

523 613

3 234 836

4 630 241

44

44

0 BMCI

Morocco

6 330 366

279 170

4 900 240

4 146 440

Angola

6 315 633

76 528

886 129

3 735 069

Nigeria

6 183 000

-

2 854 000

3 537 000

Nigeria

5 961 003

253 048

3 503 333

3 743 131

Kenya

5 950 000

290 900

3 850 000

4 480 000

Angola

5 690 726

505 285

2 682 247

4 451 946

South Africa

5 340 961

206 618

-

-

South Africa

5 324 316

775 106

2 845 497

4 034 161

DIFF.

RANK ’16

10.2bn

RANK ’17

RANKINGS 41-80

81

BANK NAME

COUNTRY

- Banco Económico (ex BESA)*

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

45

-

46

33

47

40

48

51

49

-

50

47

51

66

52

53

+1 Crédit du Maroc

Morocco

5 069 829

212 682

3 653 470

3 829 122

53

56

+3 Banque Internationale Arabe de Tunisie

Tunisia

4 857 490

254 397

3 290 529

3 890 417

54

61

+7 Kenya Commercial Bank

Kenya

4 835 749

557 411

3 390 362

3 703 735

55

59

+4 Al Barid Bank

Morocco

4 806 290

181 745

370 986

4 427 402

56

55

Gabon

4 725 646

355 116

3 072 609

3 232 044

57

60

+3 CIH Bank (Ex Crédit Immobilier et Hôtelier)

Morocco

4 708 570

181 506

3 608 726

2 795 212

58

64

+6 Equity Bank Group

Kenya

4 538 172

400 577

2 548 932

3 230 363

59

62

+3 Atlantic Business International*

Côte d’Ivoire

4 284 774

191 825

2 224 799

2 480 540

60

63

+3 Arab Bank for Economic Development in Africa* Sudan

4 269 110

-

-

-

61

65

+4 PTA Bank

Burundi

4 261 252

161 983

-

-

62

-

Tunisia

4 220 174

168 186

3 105 173

2 981 238

63

46

-17 Fidelity Bank

Nigeria

4 218 958

201 266

2 334 803

2 577 156

64

45

-19 Société Arabe Internationale de Banque

Egypt

4 203 582

165 094

1 289 561

3 340 565

65

42

-23 Faisal Islamic Bank of Egypt

Egypt

4 116 799

-

-

-

66

52

-14 Union Bank of Nigeria

Nigeria

4 071 217

211 377

1 648 368

2 139 943

67

49

-18 First City Monument Bank

Nigeria

3 811 529

225 984

2 144 796

2 137 232

68

73

+5 Banque de l'Habitat de Tunisie

Tunisia

3 775 436

136 973

2 698 474

2 217 942

69

86

+17 West African Development Bank

Togo

3 644 005

54 951

-

-

70

82

+12 Equity Bank Kenya

Kenya

3 637 995

335 872

2 048 257

2 656 291

71

77

Mauritius

3 582 901

164 234

1 901 345

2 893 840

72

69

-3 Société Tunisienne de Banque

Tunisia

3 547 982

132 668

2 381 408

2 332 642

73

70

-3 Amen Bank

Tunisia

3 532 420

125 932

2 525 680

2 192 813

74

48

-26 Bank of Alexandria

Egypt

3 448 389

182 763

1 647 002

2 833 971

75

84

+9 HSBC Mauritius

Mauritius

3 445 605

56 405

1 613 678

2 162 790

76

54

-22 Stanbic IBTC Bank

Nigeria

3 423 950

188 042

1 147 136

1 823 149

77

78

+1 Co-operative Bank of Kenya

Kenya

3 370 518

404 956

2 225 504

2 492 270

78

87

+9 Attijari Bank

Tunisia

3 186 761

147 499

2 123 031

2 343 871

79

96

Kenya

3 142 666

243 826

1 784 785

2 281 033

80

58

3 063 420

-

-

-

-13 Ecobank Nigeria -7 Skye Bank* +3 KCB Bank Group - Banco Millennium Atlântico (ex BPA) -3 Development Bank of Southern Africa* +15 Capitec Bank

-1 BGFIBank Group

- Banque Nationale Agricole

+6 SBM Bank Mauritius

+17 Diamond Trust Bank Kenya -22 Bank Audi Egypt

Egypt

2016 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2015 RESULTS

THE AFRICA REPORT

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TOP 200 BANKS

81

92

82

57

83

76

84 122

DIFF.

RANK ’16

RANKINGS 81-120 RANK ’17

82

Al Baraka Bank Egypt (#98)’s net income increased by 19% to reach $61m during the second quarter of 2017, compared to $52m registered in the first quarter of the year.

BANK NAME

+11 Banque Sahelo-Saharienne Invest. et Comm.

-25 National Bank of Kuwait — Egypt -7 Barclays Bank Mauritius +38 Bank of Khartoum

85

75

86

80

-10 Standard Chartered Bank Mauritius -6 African Bank

87

68

88

74

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

Libya

2 968 506

142 885

1 040 246

1 814 586

Egypt

2 965 822

99 045

1 370 500

2 091 695

Mauritius

2 886 919

112 495

1 178 660

2 252 712

Sudan

2 795 952

-

-

-

Mauritius

2 787 023

89 877

1 015 186

1 055 371

South Africa

2 737 064

-

-

-

-19 Sterling Bank

Nigeria

2 700 107

182 024

1 521 812

1 900 385

-14 Land and Agri. Dev. Bank of South Africa*

South Africa

2 683 346

73 310

2 357 883

-

89 104

+15 Société Générale Algérie

Algeria

2 644 518

156 228

1 732 425

2 153 575

90 106

+16 Oragroup SA

Togo

2 635 570

164 542

1 783 880

1 721 090

Egypt

2 534 413

116 126

957 891

2 148 253

91

67

-24 Crédit Agricole Egypt

92 124

+32 First National Bank of Namibia

Namibia

2 499 986

130 264

1 885 005

2 032 560

93 103

+10 Barclays Bank of Kenya

Kenya

2 487 849

303 534

1 614 321

1 706 962

Egypt

2 479 536

-

1 040 176

2 231 694

Tanzania

2 437 074

228 528

1 468 054

1 849 488

Kenya

2 399 618

262 447

1 175 572

1 787 611

94

91

95

99

96 108

-3 Egyptian Gulf Bank +4 CRDB Bank +12 Standard Chartered Bank Kenya

97 100

+3 Banco Sol

Angola

2 380 696

187 814

1 134 037

1 734 231

98

-26 Al Baraka Bank Egypt

Egypt

2 334 875

-

-

-

72

99 118 100

71

101 127 102

95

103 125

+19 AfrAsia Bank -29 Ahli United Bank Egypt +26 Bank Windhoek -7 Arab Tunisian Bank +22 Société Générale de Banques en Côte d’Ivoire

104 107

+3 Omdurman National Bank*

105 115

+10 National Microfinance Bank

106

93

107 101 108 110 109

-

-13 Banco de Desenvolvimento de Angola* -6 BNP Paribas El Djazair +2 Standard Bank de Angola - Development Bank of Ethiopia

Mauritius

2 327 900

49 806

585 168

2 137 600

Egypt

2 325 240

-

1 063 787

-

Namibia

2 323 204

157 944

1 945 113

1 745 065

Tunisia

2 322 687

90 850

1 688 448

1 749 729

Côte d’Ivoire

2 289 296

145 884

1 414 633

1 892 001

Sudan

2 274 146

194 440

-

-

Tanzania

2 227 984

256 473

1 257 510

1 681 832

Angola

2 218 423

(126 169)

-

-

Algeria

2 215 326

118 398

1 302 222

1 761 483

Angola

2 206 828

96 868

301 388

2 026 377

Ethiopia

2 196 237

-

1 193 611

35 588

110 113

+3 Commercial Bank of Africa

Kenya

2 170 201

98 410

111 615

1 669 568

111 119

+8 CBZ Bank

Zimbabwe

2 086 609

48 341

1 007 172

1 777 155

112 117

+5 CfC Stanbic Bank

Kenya

2 056 663

-

1 107 333

1 143 162

113 128

+15 African Banking Corporation Holdings

Botswana

2 040 297

169 498

1 125 795

1 567 082

114 116

+2 Faisal Islamic Bank Sudan*

Sudan

2 024 180

116 604

-

582 973

115 105

-10 Banque de Tunisie

Tunisia

2 021 869

100 933

1 565 095

1 351 252

Mauritius

2 020 964

39 711

913 995

1 202 181

116 137

+21 Investec Bank Mauritius

117 126

+9 First National Bank of Botswana

Botswana

2 013 685

172 166

1 323 300

1 569 524

118

-24 Banco Comercial e de Investimentos

Mozambique

2 002 210

26 007

1 155 598

43 423

2 000 228

26 005

1 138 530

11 389

1 997 365

106 171

1 770 166

1 569 031

94

119 112

-7 North Africa Bank*

Libya

120 114

-6 Union Internationale de Banques

Tunisia

2016 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2015 RESULTS

THE AFRICA REPORT

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S E P T E M B E R 2 017

TOP 200 BANKS

121 140

DIFF.

RANK ’16

RANK ’17

RANKINGS 121-160

Th direction for the bank […] is to target double-digit growth by aggressive The pursuit of new business opportunities.” Tomi Somefun MD/CEO of Unity Bank (#136)

BANK NAME

COUNTRY

+19 Standard Bank Namibia

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

Namibia

1 989 565

-

1 418 630

1 557 013

122 123

+1 BGFIBank Gabon

Gabon

1 962 943

127 351

1 266 259

1 512 196

123

-26 Banco Internacional de Moçambique

Mozambique

1 930 115

135 367

1 091 267

1 363 595

124 131

+7 Ecobank Ghana

Ghana

1 888 611

282 852

815 874

1 269 779

125 102

-23 Banco Caixa Geral Totta de Angola

Angola

1 879 515

157 462

593 742

1 461 131

126 129

+3 Banque Al Baraka d'Algérie

Algeria

1 872 062

75 997

985 328

1 514 219

127

-46 Housing and Development Bank

Egypt

1 869 385

94 523

544 254

738 300

97

81

128

-

Uganda

1 836 634

-

108 399

95 313

129

88

-41 Suez Canal Bank

- Housing Finance Bank

Egypt

1 833 727

44 408

473 875

1 324 231

130

85

-45 Abu Dhabi Islamic Bank — Egypt

Egypt

1 824 229

78 997

-

1 400 692

131 132

+1 Banque Atlantique — Côte d’Ivoire*

Côte d’Ivoire

1 808 834

76 920

881 272

1 212 313

132 141

+9 Ecobank Côte d’Ivoire*

Côte d’Ivoire

1 789 389

109 203

935 210

1 206 234

133 138

+5 I&M Bank

Kenya

1 745 069

168 379

1 156 276

1 241 914

134 121

-13 Banco de Negocios Internacional*

Angola

1 720 635

72 887

679 787

1 132 024

Algeria

1 685 503

92 590

1 049 048

1 212 678

136 109

-27 Unity Bank

Nigeria

1 601 215

160 797

900 947

858 638

137 136

-1 NIC Bank*

Kenya

1 591 567

93 528

1 100 713

1 078 701

Senegal

1 535 451

105 848

1 017 554

1 130 850

Mauritius

1 534 545

14 207

78 741

12 383 183

Cameroon

1 517 654

76 198

993 513

1 027 706

Benin

1 502 093

63 329

538 817

867 780

1 486 097

76 711

1 097 967

947 204

135 135

138 149 139 144 140 152 141 143 142 142

0 Gulf Bank Algeria

+11 CBAO Groupe Attijariwafa Bank +5 Standard Bank Mauritius +12 Afriland First Bank +2 Bank of Africa — Benin

0 Union Bancaire pour le Commerce et l'Industrie Tunisia

143 158

+15 Société Ivoirienne de Banque

Côte d’Ivoire

1 460 127

81 679

933 665

992 526

144 174

+30 Coris Bank International

Burkina Faso

1 424 847

54 046

675 562

665 052

Algeria

1 424 846

56 871

562 293

1 072 228

Ghana

1 423 931

251 066

331 216

998 571

Botswana

1 415 378

112 852

862 403

1 031 931

145 134 146 163 147 153

-11 Citibank NA Algeria +17 GCB Bank +6 Barclays Bank of Botswana

148 146

-2 Chase Bank Kenya*

Kenya

1 399 637

44 072

991 728

905 031

149 148

-1 CCEI Bank GE*

Equatorial Guinea

1 391 631

56 144

1 084 060

920 132

Ethiopia

1 382 646

90 654

675 396

1 013 514

151 120

-31 Wema Bank

Nigeria

1 368 968

60 711

737 778

920 817

152 157

+5 NSIA Banque Côte d’Ivoire

Côte d’Ivoire

1 357 594

94 491

956 665

956 773

153

150 165

+15 Awash International Bank

-64 Export Development Bank of Egypt

Egypt

1 341 011

-

525 670

1 165 427

154 133

-21 Union National Bank Egypt

Egypt

1 337 351

36 672

437 800

1 134 131

155 162

+7 Diamond Bank Bénin

Benin

1 305 003

46 538

553 907

944 711

-

704 566

1 037 063

89

156 167

+11 Standard Chartered Bank Botswana

Botswana

1 276 241

157 168

+11 Dashen Bank

Ethiopia

1 268 508

67 546

553 928

1 010 250

158 160

+2 BICEC*

Cameroon

1 247 059

82 592

758 315

961 252

159 139

-20 Natixis Algérie

Algeria

1 246 310

61 292

645 480

996 065

1 243 709

78 812

604 748

990 666

160 159

-1 Société Générale de Banques au Sénégal

Senegal

2016 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2015 RESULTS

THE AFRICA REPORT

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83

TOP 200 BANKS

DIFF.

RANK ’16

RANKINGS 161-200 RANK ’17

84

$1bn

Rawbank (#172) is the biggest lender in the Democratic Republic of Congo and the only bank in the country with more than $1bn in assets.

BANK NAME

COUNTRY

TOTAL ASSETS

NET INTEREST INCOME

LOANS

DEPOSITS

161 186

+25 Barclays Bank of Ghana

Ghana

1 239 752

167 599

490 775

668 845

162 175

+13 Stanbic Bank Uganda

Uganda

1 238 925

-

533 722

825 796

Cameroon

1 205 238

90 989

903 431

996 975

Namibia

1 172 854

70 719

820 911

539 553

163 155 164 187

-8 Société Générale Cameroun +23 Nedbank Namibia

165 166

+1 Ecobank Burkina Faso*

Burkina Faso

1 172 359

64 089

610 095

821 382

166 171

+5 Bank of Africa — Burkina Faso

Burkina Faso

1 149 744

54 233

599 591

692 802

167 147

-20 Standard Bank Mozambique

Mozambique

1 110 964

73 539

411 066

858 664

Angola

1 107 160

-

324 492

388 778

Kenya

1 104 501

105 715

568 470

928 939

168

-

169 164

- Banco de Comércio e Indústria -5 National Bank of Kenya

170

-

- Stanbic Bank Botswana

Botswana

1 103 653

-

814 624

875 794

171

-

- Grindrod Bank

South Africa

1 100 065

13 201

406 590

1 015 724

172 172 173 182 174 173

0 Rawbank +9 SBI Mauritius -1 Ecobank Senegal*

DRC

1 095 576

82 850

452 828

697 926

Mauritius

1 092 420

28 872

651 678

681 281

Senegal

1 082 941

63 777

529 280

838 106

175 156

-19 BGFIBank Congo

Rep. of Congo

1 082 245

72 357

793 516

743 899

176 179

+3 Central Africa Building Society

Zimbabwe

1 073 096

103 723

583 252

845 047

177 178

+1 Ecobank Benin*

Benin

1 066 868

60 983

447 538

652 841

178 183

+5 BICICI

Côte d’Ivoire

1 035 364

68 140

707 502

826 991

179 191

+12 Standard Chartered Bank Ghana

Ghana

1 025 207

107 884

295 975

749 567

180 180

0 Banque de Développement du Mali*

Mali

1 017 726

48 964

470 715

647 669

181 181

0 Bank of Africa — Côte d’Ivoire

Côte d’Ivoire

1 003 072

46 700

473 865

551 211

Ghana

996 847

67 387

644 069

709 890

Kenya

989 840

59 393

273 173

596 336

Ghana

978 334

108 112

308 201

726 815

-

731 400

834 626

182

-

183 194 184 177

- Unibank Ghana* +11 Citibank NA Kenya -7 Fidelity Bank Ghana

185 190

+5 Banque Zitouna

Tunisia

978 062

186 151

-35 Misr Iran Development Bank

Egypt

958 551

30 539

341 795

770 362

187 189

+2 Ecobank Mali*

Mali

887 249

59 557

338 870

504 170

188

-

- Mercantile Bank

South Africa

886 638

53 787

628 674

614 973

189

-

- United Bank for Africa Ghana

Ghana

881 459

-

435 000

700 850

190 193

+3 Ecobank Cameroon*

Cameroon

872 390

64 647

547 874

734 284

191 197

+6 Société Commerciale de Banque Cameroun

Cameroon

867 388

70 798

494 724

654 586

192 192

0 CAL Bank

Ghana

848 297

86 070

460 942

556 769

193 184

-9 Banco Regional do Keve

Angola

844 122

82 319

348 615

535 582

Senegal

839 979

35 396

378 975

513 263

Zambia

830 044

-

278 866

687 188

Mali

827 540

47 893

414 883

505 442

194

-

195 198 196 188

- Bank of Africa — Senegal +3 Standard Chartered Bank Zambia -8 Bank of Africa — Mali

197

-

- Zambia National Commercial Bank

Zambia

826 460

-

342 954

632 744

198

-

- Barclays Bank of Zambia*

Zambia

821 478

-

370 999

627 025

Cabo Verde

808 008

24 530

436 768

695 037

805 165

-

263 585

633 399

199 196 200

-

-3 Banco Comercial do Atlântico - Zenith Bank Ghana

Ghana

2016 RESULTS IN THOUSANDS OF US DOLLARS; *IN ITALICS 2015 RESULTS

THE AFRICA REPORT

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N° 93

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S E P T E M B E R 2 017

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TOP 200 BANKS

SOUTH AFRICA

The economy is in recession, and almost all of the country's major banks have been the subject of recent ratings downgrades amidst government criticism of the financial services sector

A

PROFITS ($m)

BANK NAME

1 Standard Bank Group

DOWNGRADE DOLDRUMS

fter experiencingstrongheadwinds last year, South African banks are now in the eye of the storm. In an economy that has officially entered recession they have struggled to grow deposits, loans, corporate finance and asset managementrevenue,andtocontainbad debt. These are not their only problems.

They have been downgraded by ratings agencies alongside the country’s slide to non-investment, or junk, status.

Banks have come under political attack, led by President Jacob Zuma. Many of them feature among the 17 financial

TOTAL ASSETS ($bn)

Top South African Banks RANK IN TOP 200

86

112.0

1 715.9

2 Standard Bank of South Africa

93.3

1 033.2

3 FirstRand Banking Group

83.4

1 768.0

4 Barclays Africa Group

79.9

1 150.2

5 Nedbank Group

70.1

832.1

8 Investec Group Limited*

36.9

-

10 Rand Merchant Bank

31.6

465.0

12 First National Bank South Africa

27.8

924.3

50 Develop. Bank of Southern Africa*

5.3

167.1

51 Capitec Bank

5.3

276.3

2016 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2015 RESULTS

institutions under investigation by the Competition Commission for manipulating the currency’s exchange rate.

Banks continue to be heavily criticised for their failure to contribute to economic transformation and for not offering financial services to the country’s poor and small business owners.

The government intends to take on this role and is moving ahead with licensing its own bank (see TAR 91).

Nevertheless, the banks have remained resilient. PwC’s recent Major Banks Analysis shows that, collectively,

banks recorded earnings growth of 11% in the second half of 2016 against 8.4% in 2015, underpinned by ‘solid operating drivers and well-diversified product sets across franchises.’

But even the banks’ relatively successful expansion into the rest of Africa is under strain as growth in operations outside South Africa was tempered by the appreciation of the rand. These operations accounted for 13.5% of combined headline earnings in the second half of 2016, down from 15.7% in 2015, according to PwC, as the effect of low

Mike Brown Chief executive, Nedbank (#5)

OLD MUTUAL'S DIPLOMATIC DIVORCE

T

he announcement of a “managed separation” of Old Mutual’s global and emerging-market assets finally brings some clarity for Nedbank, which has lived with uncertainty over the intentions of Old Mutual South Africa for several years.

Old Mutual, which owns 54% of Nedbank, will, after next year’s listing of a new South African holding company, distribute the majority of its Nedbank shares to Old Mutual shareholders. Nedbank is fully supportive of Old Mutual’s plans, chief executive Mike Brown tells The Africa Report.

“It is absolutely business as usual. There are no implications for strategy, operations, staff and customers. We have never integrated our systems, products or customers,” he says.

Nedbank’s 2016 results and a first-quarter 2017 update warn of tough times ahead.

Nevertheless, its financial results reflect Nedbank's ability to withstand the headwinds, with some cushion from its wholesale businesses.

In 2016, Nedbank lifted headline earnings by 5.9%, an increase that would have been 16.2% if one excluded the impact of the losses from

Ecobank Transnational Incorporated (ETI, #16).

Nedbank had taken a 20% stake in ETI to benefit from its local knowledge in Central and West African markets.

It is clear, Brown says, that the ETI investment has been disappointing, “driven predominantly by ETI’s Nigeria operations, which have been affected by the oil price and recession and weak credit risk management.”

Excluding the Ecobank drag, the group has fared well.

“I think the key thing in an environment like this is the way we have been managing in

the last three to four years in preparation for tougher times. We have been increasing capital and liquidity levels.

We have increased levels of high-quality liquid assets and the term and duration of our funding book, and applied appropriate disciplines in credit granting.”

Brown concludes: “Revenue growth is more challenging in a low-growth environment, but we continue to see better-thanexpected credit losses as a result of historic credit granting decisions, and this has stood us in good stead.”

Interview by M.K.

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commodity prices, foreign-exchange volatility and political uncertainty mirrored some problems back home.

The days of continental expansion, offshore acquisitions and interest from international investors are all but over.

Among the landmark deals of the past year was Barclays’ sale of the bulk of its shares in Barclays Africa (#4). It is reducing its stake from 62.3% to a minority shareholding, including two completed book builds which brought its interest to 23.4%, after which another 7% will be bought by the state-owned Public Investment Corporation. Unravelling Barclays Africa is nevertheless a complicated task, given that the Absa group rebranded to Barclays Africa and integrated Barclays’ systems.

Nedbank (#5) faces a separation from its major shareholder, Old Mutual, which is breaking up and listing its emergingmarket assets (see box). But there are no signs that the Industrial and Commercial Bank of China plans to sell its stake in Standard Bank (#1), which has problems of its own. Positive results from its core operations were offset by a 46% decline in headline earnings at insurance arm Liberty, whose chief executive Thabo Dloti resigned in May, prompting a management reshuffle at both Standard Bank and Liberty.

FirstRand (#3), owner of FNB, stayed largely out of the news and racked up an 11% increase in earnings for the six months to December 2016, with expectations that its growth strategies “both in broadeningitsfinancialservicesofferings and building its rest-of-Africa franchise will deliver outperformance over the medium to long term,” according to FirstRand chief executive Johan Burger.

CAPITEC BUCKS THE TREND Investec (#8), too, has been quietly getting on with it, apart from announcing its diversification into life insurance. The group, which is different from the other big banks due to its global diversification and predominance of wealth- and asset-management businesses, posted a 17% increase in adjusted earnings per share in the year ending March 2017.

Upstart Capitec (#51)continued to steal a march on competitors with the addition of 1.3 million new clients and an 18% increase in earnings in the year ending February 2017. It also made its first acquisition outside South Africa when it bought 40% of Latvian online lender Creamfinance for €21m ($23.9m).

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WALDO SWIEGERS/BLOOMBERG VIA GETTY IMAGES

TOP 200 BANKS

THE RAND’S APPRECIATION HAS TEMPERED BANKS’ EXPANSION INTO THE REST OF AFRICA IN THE SHORT TERM

“Moving deeper into sub-investment grade, we would begin to build in lower profitability for the sector, and the recent technical recession is certainly a sign of tough times ahead,” says Nkareng Mpobane, a fund manager at Ashburton Investments. “In such an environment, we would expect diminished economic growth as business confidence wanes, placing jobs at risk. The latest banking data released by the South African Reserve Bank pointed to a relatively benign impairment cycle ahead for the sector. This is understandable, given that

Apart from Capitec, all the banks have been hit by ratings downgrades. In the most recent review – mid-June – Moody’s downgraded the local- and foreigncurrency deposit rating of Standard Bank, FirstRand, Absa, Nedbank and Investec to Baa3 with a negative outlook.

It cited the economic slowdown and weakening institutional strength, and said the country’s banks need stronger loss-absorption and liquidity buffers to withstand the Banks continue to be criticised headwinds and avoid further for their failure to contribute to downgrades. It also mentioned economic transformation weaker investor confidence, volatility in asset prices and higher funding costs likely to ‘pressure the last few years have seen a much softer credit environment than in the past.” banks’ earnings and asset-quality metMpobane remains optimistic about rics going forward, and challenge their resilient financial performance so far’.

South African banks’ prospects in the Old Mutual’s banks analyst Neelash rest of Africa, however. “We like Standard Bank’s footprint in Africa,” she says. “It Hansjee says banks are being hit by the is the largest compared to its domestic “crisis in confidence”. “Business and consumer confidence are low, with gross peers, boasting the largest market share in some of the countries it operates in domestic product growth being weaker […]. The group stands to make meanthan expectations, resulting in soft loan growth at the banks.” He adds: “Possible ingful gains from this exposure as these economies grow.” downgrades will raise the cost of funding South African banks have their work for the banks, which also hampers loan growth.” In this challenging environcut out. Barring a seismic change in the economic and political environment, ment, Hansjee says, “risks of weaker revenue growth are rising, but could be banks will be hard pressed to ride out the somewhat alleviated by improving credit storm without incurring some damage. quality to support earnings.”

Marcia Klein in Cape Town

S E P T E M B E R 2 017

87

TOP 200 BANKS

NIGERIA WAITING FOR A REBOUND

A

midst cautious optimism regarding a rebound of Nigeria’s economy from recession, the country’s banks have shown remarkable resilience in responding to the worst turbulence encountered in the sector for almost a decade. Since the abrupt collapse of oil prices three years ago, the banking sector in Nigeria has faced significant pressure fuelled by a depressed economy and severe foreign-exchange shortages due to government currency controls.

However, most of the banks remain profitable even with the significant rise in bad loans from 3.6% in mid-2015 to 14% last December – almost three times the regulatory threshold.

The rate of non-performing loans is expected to rise further in 2017, although experts such as those at ratings agency

PROFITS ($m)

BANK NAME

21 Zenith Bank

15.4

23 First Bank of Nigeria

14.7

41.5

24 Zenith Bank Nigeria

13.9

387.7

26 United Bank for Africa Group

11.4

234.9

27 Access Bank Group

11.3

232.2

30 Guaranty Trust Bank

10.1

429.9

31 Access Bank Nigeria

10.1

208.1

36 United Bank for Africa Nigeria

8.3

154.5

43 Diamond Bank Nigeria

6.7

11.4

46 Ecobank Nigeria

6.2

23.0

421.4

2016 RESULTS FROM TOP 200 BANKS RANKING

AKINTUNDE AKINLEYE/REUTERS

Nigeria’s banks have been remarkably resilient through turbulent times, turning profits that will help them through further bad loans. The fall in the oil price suggests they are not out of the woods yet

TOTAL ASSETS ($bn)

Top Nigerian Banks RANK IN TOP 200

88

A CLEAR ROAD AHEAD REMAINS A DREAM FOR NIGERIA’S BANKS, THOUGH THEY ARE BOLSTERED BY PROFITABILITY

Moody’s do not foresee an increase of more than 2%. Banks that were badly hit by the crash – such as First Bank (#23), Skye Bank (#47), which had its management changed by the central bank last year, and Ecobank Nigeria (#46), which set up a proprietary vehicle to absorb its bad loans last year – have already taken impairment charges that are said to have taken care of most of the troubled assets. So while more bad loans are expected, the banks should be able to meet most, if not all, of their provisioning needs with profits from the current year, says Akin Majekodunmi, vice-president and senior analyst at Moody’s.

Capital held by the banks is expec­ ted to decline in 2017 due to their large foreign-currency exposures, as the naira remains susceptible to further devalu­ ation. “Fifty per cent of their loan books are in foreign currency, so that means roughly 50% of their risk-weighted assets are also in foreign currency,” says Majekodunmi, explaining that a further depreciation of the naira will result in a lower capital ratio. This is why most experts are of the view that the foreignexchangesituationwillremainapotential millstone on the banks’ performance in 2017,despitegovernmentassurancesthat it will allow the market to play a greater role in determining the naira’s value.

Nevertheless, the improvement in the supply of foreign exchange since the central bank stepped up its intervention in the market at the beginning of the year has brought a measure of stability. The wide gap between the exchange rates in the official market and parallel market has declined from around 70% earlier in the year when the rate at the parallel marketpeakedatN520:$1,toaround20% in June where it was N365:$1, compared to N305:$1 on the interbank market.

MORE TROUBLE AHEAD? This will be a boon to the banks, as debtors with foreign-currency obligations will be better placed to offset their liabilities, while the banks are also able to carry out and profit from more forex transactions.

However,ifvolatilityreturns,asispossible with the price of oil sliding below $50 in June, there could be more trouble.

A prime example of the impact of the foreign-exchange volatility from the past year was the case of Etisalat Nigeria, the country’sfourth-largesttelecomoperator.

Etisalatdefaulted on a $2.1bn loan

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TOP 200 BANKS

to a consortium of 13 banks in February(seeTAR92,July-Aug.2017)and wastaken over by thelenders in June after talks to restructure the loan failed. Etisalat cited the devaluation of the naira, as well as the scarcity of US dollars, as reasons for its inability to make its payments.

A number of businesses in the oil, gas and power sectors are in similar situations, with dollar loans being offset with naira income. But the good news for the banks is that most of the loans, particularly those in the oil and gas sector, have already been restructured. Thus, confidence has been gradually returning to the banking sector.

The June eurobond issue by two top lenders, Zenith Bank (#24) and United Bank for Africa (UBA, #26), buttresses that point of view. The two banks sold theirbondsatcouponratesthatwerelower than that of another top lender, Access Bank(#27),whichissuedaeurobondlast November. While the latter raised $300m at a coupon rate of 10.5%, Zenith Bank and UBA both raised $500m at a coupon rate of 7.35% and 7.75%, respectively.

Moody’s analyst Majekodunmi says that the lower coupon rates point to a shift in perception of the risk profile of Nigerian banks by international investors.

GOVERNMENT SECURITIES In terms of numbers, first-quarter results posted by 13 listed banks showed aggregate revenue growth of 33% year-on-year.

Loans grew by 23% year-on-year, but fell by 0.7% from the last quarter of 2016.

Banks had reduced lending since 2015, but the volume of loans issued spiked in the second and third quarter of last year before slowing again.With loan growth beginning to recover from pre-crisis levels over the past year, banks have been earning a significant portion of their income from government securities, which offer high yields due to the government’s funding challenges.

This trend is expected to continue throughout the year even as the banks are paying more attention to generating income from transaction fees. Following the elimination of a key charge on certain transactions last year and a clarification from the central bank that stamp duties only apply to transactions on current and checking accounts, banks have moved to exploit their investments in technology and internet banking to charge fees on transactionsdoneonnon-bankchannels.

But while they are grappling with figuring out how best to earn returns in

the current climate, competition is intensifying as new banks, such as SunTrust and Providus Bank, seek to carve out a share of the market. The former, which launched in 2015 with a digital strategy that hinged on a vastly limited branch network, announced its results for 2016, its second year of operation. SunTrust posted an increased profit after tax of N212m($674,000),whichwas75%higher than the previous year.

Meanwhile, Wema Bank (#151), the country’s oldest indigenous bank, launched ALAT, a digital banking service which runs as a separate entity, to attract moredigital-savvycustomers,inMay.The bank hopes that the promise of an annual interest rate of 10% on a savings account,

which is three times the average rate offered in the industry, together with a simplified account-opening process, will help it reach its goal of acquiring 1.5 million new customers by 2020.

But despite the increased competition, the bigger banks remain vastly better capitalised than the smaller ones.

The likes of Guaranty Trust Bank (#30), Zenith, Access and UBA have either raised capital in the past 24 months or are preparing to pay off debt due in the coming months without needing to raise additional capital. With others, like Unity Bank (#136) and Wema Bank, struggling to raise funds, there could still be consolidation in the future.

Charles Idem in Lagos

Herbert Wigwe Chief executive, Access Bank (#27)

GOVERNMENT IS HURTING THE PRIVATE SECTOR What are the hindrances to lending to the private sector?

Two things. Number one, people are going to be extremely careful with these currency issues with respect to companies that have imported raw materials. Secondly, the conversion cycles for most companies is a lot longer […]. But I guess the most significant is the fact that if the government is issuing treasury bills at 18% or 19%, by definition the after-tax yield on all of those things is already in the 20s — about 24% or 23%. Now why do I want to start exposing myself to companies and take the risk and take the liquidity risk as well when the after-tax yield is returning at the same level? That is really the issue. The government is also issuing treasury certificates and therefore making people, even at

the retail level, want to invest in those treasury certificates. And by wanting to invest in those treasury certificates, technically you are crowding out the private sector from lending.

Where will the bank end up on key numbers at the end of 2017?

And looking at the currency, some analysts are forecasting further devaluation.

I don’t know what you mean by further devaluation. I think where we are on the outward limit — which is between N350 and N370 — by any measure you use to determine the value of the naira we would fall well within that range.

The critical thing is confidence, and we are getting more and more confident that the central bank will be able to deliver. But if you ask

me, once we can converge the rates, whether it is downwards or whatever, we will be fine and I don’t think it will be far away from where we are right now. Confidence is being restored. Yes, government needs to do a couple of things on the fiscal side, but it will take a bit more time. There will be some changes in monetary policy I think, but 2018 will be a bit more stable, and definitely we should be coming out of the recession.

For the bank, you know, when you are coming out of a recession, different things hit you […]. We must have the best asset-quality ratios in the industry. Definitely!

But I think quite frankly we will remain within the guidance levels we’ve been given. For nonperforming loan ratios — well, well within 5%.

Interview by C.I.

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TOP 200 BANKS

KENYA UNNERVING UNCERTAINTY With election disruption continuing to slow the economy, an interest-cap law and increased regulation, Kenyan banks are having to look further than loans to bolster their revenue

E

lections,decliningrevenues,downsizing, restructuring, and a more stringent regulatory environment are some of the things affecting Kenya’s banking sector. The ghosts of bank failures and an interest-cap law have forced Kenyan banks to tighten their loan criteria, resulting in the slowest growth in loans to the private sector in 14 years. In the aftermath of the caps, deposits grew faster than loans as banks opted to buy government securities instead of issuing credit. Exposure to government securities increased to 30% in 2017 from 26% last year. Still, the combination of trust issues, the cap and

BANK NAME

PROFITS ($m)

TOTAL ASSETS ($bn)

Top Kenyan Banks RANK IN TOP 200

92

48 KCB Bank Group

6.0

197.2

54 Kenya Commercial Bank

4.8

189.5

58 Equity Bank Group

4.5

159.1

70 Equity Bank Kenya

3.6

145.8

77 Co-operative Bank of Kenya

3.4

121.4

79 Diamond Trust Bank Kenya

3.1

74.0

93 Barclays Bank Kenya

2.5

70.9

96 Standard Chartered Bank Kenya

2.4

86.7

110 Commercial Bank of Africa

2.2

64.3

112 CfC Stanbic Bank

2.1

42.3

2016 RESULTS FROM TOP 200 BANKS RANKING

a slowdown due to the August elections have reduced revenue in the sector.

In the first quarter of 2017, all of Kenya’s biggest banks, with the exception of Diamond Trust Bank (DTB, #79; see profile), reported a decline in their earnings. ‘The banking sector has witnessed a deteriorationin asset quality over the past year, with the gross non-performing loan ratio rising to 11.6% from 8.1% in Q1 2016,’ Nairobi-based Cytonn Investments, an investment company, reported in its Q1 2017 Listed Banks report. For larger lenders such as Kenya Commercial Bank(KCB,#48),EquityBank(#58)and Co-operative Bank (#77), the ongoing

conflict in South Sudan has also hurt a critical revenue stream.

Caleb Mugendi, an investment analyst atCytonnInvestments,saysthat“withthe reduction in net interest margins and net interest income, banks are now seeking more non-funded income to fill the hole.”

Such moves include targeting transaction fees and leveraging the popularity of mobile money in Kenya’s financial sector.

Even before the rate cap came into effect, surviving in a new regulatory environment – after a series of bank collapses – had already begun affecting revenue and profits. To cope, lenders have been downsizing, with more than

Diamond Trust Bank DIAMOND HAS IT NOT SO ROUGH IN AN UNREMARKABLE YEAR for the Kenyan banking sector, the only player that has stood out has been Diamond Trust Bank (DTB, #79) Group. In the first quarter of 2017, DTB Group reported 8.3% growth in non-interest income, boosted by rises in forex-trading income, fees and commissions.

Its operating expenses dropped, allowing the bank's profit before tax to rise by 5.7% at a time when even flat growth is considered a win.

DTB was founded in 1946 and operates in Kenya, Uganda, Tanzania and Burundi.

It plans to enter the Democratic Republic of Congo and Rwanda soon. It has been on an expansion drive for the past two decades, culminating in the 2017 acquisition of Kenya's Habib Bank.

DTB moved from a mid-tier bank to a Tier-1 bank on the back of Imperial Bank's collapse.

The central bank and the Kenya Deposit Insurance Corporation worked with Kenya Commercial Bank and DTB to allow Imperial Bank's depositors to access some of their money. Both banks strengthened their customer numbers as the

sector struggled to stem a flight to quality and safety.

DTB's market share grew by 6.9% as a result, finally passing the 5% bar to join the list of big banks. A 44.9% stake of DTB is publicly traded on the Nairobi Securities Exchange, while 36% is owned by the Aga Khan Fund for Economic Development and associated companies.

DTB's chief executive Nasim Devji joined the bank in 1996 after a 20-year career as an auditor and tax adviser.

Devji became the group chief executive in 2001, joining a list of only three female chief

executives in the Kenyan banking sector. Her leadership coincided with the bank's transition from an assetfinancing bank into a fully fledged commercial bank.

It also coincided with a tumultuous time in the Kenyan economy, which included bank failures amidst the privatisation of state-run companies.

Despite its successes, DTB is still in a sector in transition.

The bank faces the same problems as its peers, including growth of bad debts and an interest-rate cap weakening profit growth. M.K.

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RICCARDO GANGALE/BLOOMBERG VIA GETTY IMAGES

TOP 200 BANKS

SHARES IN KENYAN COMMERCIAL BANKS

1,300 jobs lost last year from 11 banks, DROPPED SHARPLY AFTER NEWS OF and three banks closing 28 branches. In THE LENDING-RATE CAP IN MID-2016 July, Barclays Bank (#93) announced it would reduce its workforce by about 300 people. executive said it would be a conflict of In early June, Kenya’s largest lender by interest because KCB was appointed to assets, KCB, submitted a proposal to the manage Chase Bank in receivership. treasury and the National Social Security Chase Bank’s current suitors include Fund – its main shareholders – to acquire French giant Société Générale and a majority stake in the National Bank Mauritius-based SBM Holdings (#71). of Kenya (NBK, #169) through a share SBM acquired Fidelity Commercial Bank in May, and a Chase Bank acquisition swap. Although analysts had long been would give it a substantial share of the suggesting consolidation as NBK’s only salvation, they consider the KCB deal market held by the two Tier-2 banks. as potentially detrimental to its shareholders. Faith Mwangi, The adoption of the Total Cost of a senior research analyst at Credit pricing mechanism is meant investment bank Genghis to restore consumer confidence Capital, says “the only reason KCB would want to acquire NBK is to get a larger share of governThreemonthsearlier,Kenya’sInvestment ment deposits.” While this makes sense &MortgagesBank(I&M,#133)acquired at a glance, KCB already holds about GiroCommercialBank,completingadeal 30% of all government deposits and that started in September 2015, a shaky period for Kenya’s lenders. I&M paid would likely gain a marginal benefit from such an acquisition, which comes with for the acquisition of the Tier-3 lender a massive portfolio of bad loans and a in a cash and share swap worth $54.8m.

There are two new entrants into the host of corporate governance problems. market, Dubai Islamic Bank (DIB) and HUNGRY FOR AN ACQUISITION Mayfair Bank, after the central bank Cytonn’s Mugendi says it would be bad lifted a two-year moratorium on new licences. DIB has already begun offering for competition to have such a large sharia-compliant banking services from portion of government deposits in one May 2017 in a sub-sector with only two bank. He says: “KCB is hungry for an other players. Genghis Capital’s Mwangi acquisition because the revenues from its regional expansions have been falling, says: “Greenfield investments are not the particularly in South Sudan.” best option for investors in the banking KCB was initially thought to be insector right now.” She adds that the terested in Chase Bank Kenya (#148). market is overbanked between banks In August last year, however, its chief and mobile money.

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With declining revenue streams, banks arealsofacingamorestringentregulatory environment. There is a lot more scrutiny ontheoverallsectorandindividualbanks.

The central bank is working to close the loopholes banks have exploited. One measure meant to restore confidence is the adoption of the Total Cost of Credit pricingmechanism,accessibletocustomers through digital platforms, including www.cost-of-credit.com.

SMALLER BANKS, CHEAPER LOANS The portal, launched by the central bank and Kenya Bankers Association, allows borrowers to compare the cost of credit. A cursory review of the portal shows that smaller banks still offer the cheapest loans, as they hope to retain their market share among small and medium-sized enterprises.

But loans remain largely inaccessible for individual borrowers. Previously, says Geofrey Ngugi, a businessman based in Kitengela, a town 31km south of Nairobi, getting loans even with bad credit was easy. Interest rates would just be higher, and there were also unsecured loans. The new regulatory regime and interest rates have stopped this, and even borrowers with good credit are finding it hard to access loans.

The central bank is also seeking to restore confidence by recovering lost funds from troubled banks. In late June, Zafrullah Khan, the former chairman of Chase Bank, was arrested by the Banking Fraud Investigation Unit to face charges of theft and money laundering. An audit of the bank produced in court earlier this year showed that Khan bought his wife a limited-edition Chevrolet Corvette and a vintage Ferrari Dino, bought himself an apartment in Dubai and built a home in Michigan using bank funds.

Despite this, the central bank itself remains under pressure from depositors to prosecute its own officials who are complacent or complicit in malpractice.

Law firm MMC Africa Law recently called for the regulator to be held liable for bank collapses.

Even without the interest-rate cap and confidence issues, election cycles are typicallyperiodsofsloweconomicgrowth for Kenya. Borrowing falls as the private sector slows down investment, choosing to wait for the election period to end.

Analysts in Nairobi say that the impact on revenue and profits in the second half of 2017 will be bad, but not major.

Morris Kiruga in Nairobi

93

TOP 200 BANKS

GABON LIVE BY OIL, DIE BY OIL With local banks lending to oil services and other companies in the hydrocarbons sector, the worst is yet to come as analysts predict recapitalisations will be needed in the year ahead

SUPPLY CHAIN STRAIN Gabon’s banks lend less to the local oil industry than, say, their counterparts in Nigeria. But Gabon’s banks do lend to other companies involved in oil supply chains, and this has hurt their performance. Ecobank Capital’s Bodo explains: “We think there are sizeable exposures to the services and downstream businesses […]. The current low oil prices have decimated the entire chain. We think this will remain a problem for Gabonese banks – especially [those with] the larger balance sheets.” With reduced revenue, the

PROFITS ($m)

BANK NAME

56 BGFIBank Group

4.7

63.5

122 BGFIBank Gabon

2.0

25.8

Banque Internationale pour le (218) Commerce et l'Industrie du Gabon

0.7

13.9

(334) Orabank Gabon

0.3

13.5

(351) Ecobank Gabon*

0.3

-4.1

(364) Citibank Gabon

0.2

10.3

(448) United Bank for Africa Gabon

0.1

1.4

2016 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2015 RESULTS

government is late in making payments to companies, and its domestic arrears are at 7.5% of GDP, which is putting strain on the private sector and banks.

The country’s largest bank by assets, BGFIBank Group (#56), reported 30% growth in net profit to 39bn CFA francs ($69m) in 2016 (see profile). Over that period, its subsidiaries in Madagascar and São Tomé é Príncipe were the only ones to produce negative results.

Cameroon and Gabon – where profits rose 14% to 16bn CFA francs – made up for weaker performances in the oil-backed economies of the Republic of Congo and Equatorial Guinea. Even

in Gabon, not all of the numbers are up, and deposits dropped by 3%. The bank’s activities had dipped in 2015 after it adjusted its provisioning pursuant to new regulations in the Communauté Economique et Monétaire de l’Afrique Centrale that require banks to cover an additional 0.5% of their loans in good standing.

Mobile banking has been slower to develop in Gabon than in other parts of Africa, but things are beginning to move forward. In 2016, Airtel Gabon and its banking partner BGFIBank launched a partnership that allows Airtel Money users to withdraw money without a

Financial soundness indicators for Gabon’s banking sector Capital: regulatory capital to risk-weighted assets (%)

25 20 15 10 5

Asset quality: non-performing loans (gross) to total loans (gross) (%)

8 6 4 2 0

Earnings and profitability: return to equity (%)

25 20 15

n/a

10 5 0

2010

2011

2012

2013

2014

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SOURCE: BANKING COMMISSION OF CENTRAL AFRICA

A

s goes the price of oil, so goes the Gabonese economy. The biggest banks are better placed to handle the downturn – the top three banks control 75% of the sector’s total assets – and have recently performed relatively well. But George Bodo, head of banking research at Ecobank Capital, says the worst is yet to come: “Between 2015 and 2016, 67% of banks’ equity was impaired by non-perfoming loans, which effectively means that banks will need to beef up their balance sheets in 2017 via recapitalisation.”

The Gabonese economy is in the doldrums. The IMF predicts gross domestic product (GDP) growth of just 1% this year and in a report warns of risks to the financial sector ahead: ‘The sector is relatively small (34% of GDP) and is being confronted by depressed economic activity, tightening liquidity conditions and a rising share of loans in arrears.’ Loans in arrears – those where payments are between one and 89 days late – almost doubled, up from 5.3% of total credit in the middle of 2014 to reach 9.7% in December 2016.

TOTAL ASSETS ($bn)

Top Gabonese Banks RANK IN TOP 200

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TOP 200 BANKS

BGFIBank ALL CHANGE IN 2020 WITH A PRESENCE IN 11 COUNTRIES, BGFIBank Group (#56) is the largest bank by assets in Central Africa, and it has so far remained profitable amidst the downturn in oil prices since 2014.

Gabon is the group's base and largest subsidiary. It is in Gabon that BGFIBank has had its most recent troubles.

In February of this year, the Gabonese authorities arrested nine people, including Edgard Théophile Anon, the managing director of BGFIBank Gabon (#122), after discovering a large-scale fraud using prepaid Visa cards. Similar governance problems were revealed in BGFIBank's Benin operations in 2012.

In the case of Gabon, the bank lost 1.9bn CFA francs ($3.4m) through the scheme

and has since undergone a reorganisation to strengthen its management and information technology. BGFIBank Gabon is also going to refocus its activities on companies and richer clients, leaving other market segments to its subsidiaries Loxia and Finatra.

The banking group's growth strategy is laid out in its ‘Excellence 2020’ programme, with an emphasis on strengthening the bank's human capital, particularly through the BGFI Business School, which the bank founded in 2008. The programme also targets 10% annual profit growth rates for the next three years through expanding its retail banking, mortgage and insurance activities. New acquisitions

card from BGFIBank cash points. Airtel and BGFI are the biggest players in the mobile-money market and have some 680,000 customers.

The Union Gabonaise de Banque ( U G B ) , o w n e d b y M o r o c c o’s Attijariwafa Bank (#6), continues to grow its operations and already has 21 branches in the country. UGB reported net profits of 10.9bn CFA francs ($19.4m) for 2016, up from 9.2bn CFA francs in 2015. It accounted for 11% of the net profit of Attijariwafa’s international subsidiaries in 2016, coming far behind Attijariwafa’s operations in Tunisia and Senegal.

based around the timber sectors are which have reached 100bn CFA francs, promising sectors for investment. have meant Poste Bank’s customers French bank BNP Paribas is said to cannot access their savings. A few court be on the lookout for a buyer for its 47% cases are ongoing about claims of fraud stake in the Banque Internationale by the bank’s former managers. pour le Commerce et l’Industrie The Banque Gabonaise de du Gabon (BICIG, #218), Gabon’s Développement (BGD) also entered into provisional administration in May third-largest bank by assets. Two of this year. COBAC first intervened in Moroccan suitors went away without 2015 after the bank defaulted on private a deal last year, with rumours sugdebt it owed, and insisted that the BGD gesting that the Fonds Gabonais d’Increate a turnaround programme. The vestissements Stratégiques could take BDG submitted one in 2016 that COBAC over from BNP Paribas. Despite the criticised as “incoherent and unrealisstrained economic backdrop, BICIG reported growth in profits of 27% in 2016 to reach 8.6bn Despite the strained economic CFA francs ($15.3m). backdrop, BICIG reported Several Gabonese banks a 27% growth in profits in 2016 majority owned by the government are in the midst of tic.” COBAC says that the bank has to crises that are several years old, as goventer back into profitability by 2020 ernance is a widespread problem in the state-run banks. Poste Bank was placed and slash its costs as both its deposits under provisional administration in and loans continue to shrink. late 2015 and has yet to implement The worst off of the state-run banks is the Banque de l’Habitat du Gabon, a workable plan to get its operations which was liquidated in June after on the right track. A plan submitted to the regional institution that oversees being put under provisional adminisbanks, the Commission Bancaire de tration in 2015. Those three troubled state-run banks are small and not l’Afrique Centrale (COBAC), in January calls for a new capital injection from systemically important, so their problems do not present a strong risk to the government, Poste Bank’s majority shareholder, and the streamlining of the stability of the financial sector. the bank’s services. Ballooning debts, Honoré Banda

TOWARDS DIVERSIFICATION With the government of President Ali Bongo Ondimba talking up its desire to diversify the economy away from oil, UGB chief executive Abdelaziz Yaaqoubi told local media this year that he sees his bank’s role as supporting local companies with finance, helping companies to develop export markets and “bringing in investors to develop economic sectors that have great potential in the country”. He adds that the government and private sector are working together to identify measures to strengthen economic diversification.

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are a possibility, and the bank leadership said that could include deals in anglophone markets like Ghana and Nigeria. The most recent new subsidiary was launched in Senegal in 2015.

2020 is also critical as the year when long-serving bank director Henri-Claude Oyima's mandate is due to end. He has been seen as someone close to the Bongo family, which has ruled Gabon since 1967.

Oyima told our sister magazine Jeune Africa that he will not try to stay in charge forever: “Terms have a start and a finish.

When they finish, you have to give way.”

He added that he is not interested in appointing a successor, suggesting that big changes could come with an eventual H.B. change in leadership.

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TOP 200 BANKS

EGYPT LIBERALISATION ROLLER COASTER The end of capital controls and the floating of the Egyptian pound in November 2016 are a boon to banks, but high interest rates and inflation are hurting lending to the private sector

O

n the back of a $12bn programme with the International Monetary Fund, the Egyptian government’s plans for reform include the liberalisation of the foreign-exchange market and the privatisation of some state-run banks. The 2016 decision to float the currency has helped banks by shifting activity from the black market back to the formal sector, but the government is also crowding out private investment amid high levels of inflation. The central bank reported that banks were doing well in

BANK NAME

7 National Bank of Egypt

PROFITS ($m)

TOTAL ASSETS ($bn)

Top Egyptian Banks RANK IN TOP 200

96

38.6

684.6

15 Banque Misr

23.6

302.3

19 Qatar National Bank Al Alahli*

16.9

406.4

22 Commercial International Bank

14.7

330.7

25 African Export-Import Bank

11.7

165.0

32 Arab African International Bank

10.0

251.6

38 HSBC Bank Egypt*

8.0

322.5

64 Société Arabe Internat. de Banque

4.2

48.5

65 Faisal Islamic Bank of Egypt

4.1

158.5

74 Bank of Alexandria

3.4

83.1

2016 RESULTS FROM TOP 200 BANKS RANKING; * IN ITALICS 2015 RESULTS

the first quarter of 2017, with the top 10 banks recording a combined total profit of E£26.2bn ($1.5bn). Non-performing loans are on the decline from 5.9% in September 2016, hitting 5.7% in March.

The government wants to maintain control of its larger banks and plans to sell off small stakes. After completing the listing of shares in Banque du Caire in February of this year, the goal is now to raise an expected E£2.3bn, with HSBC and EFG-Hermes advising on the 20% stake sale of the country’s third-biggest

lender. The move is significant because it’s been almost a decade since Egypt privatised a public institution. There are also talks to sell a 20% stake in Arab African International Bank (#32) through an initial public offering as well as the sale of the state’s controlling stake in Union Bank to a strategic investor.

The timing for the sales is a bit troublesome given the state of the banks’ balance sheets. And with a weakened pound, selling these stakes means that the government will get about half the

Youssef Beshay Senior banker, BNP Paribas Egypt

ALL 2017 FIGURES HAVE SO FAR BEEN COMFORTING TAR: What can easing capital controls mean for the value of the pound?

This move will not trigger massive outflows of dollar currency, the reason being that it comes at a time when the balance of payments is posting a strong surplus, with a lot of visible inflows coming from oil foreign direct investment, remittances, portfolio investments — especially in the pound debt market — and a slight recovery of tourism.

Of course, it's all supported by a lot of multilateral and market funding, from the eurobond proceeds

or International Monetary Fund loan. When you have a balance-of-payments surplus of that magnitude, which I think was $11bn in the first nine months of fiscal year 2016/17, I think it's a strong indicator.

Firstly, the macroeconomic situation is supportive to taking this move. Secondly, the Egyptian banking system has remained very resilient in terms of capitalisation and nonperforming loans even after devaluation. All 2017 figures have so far been comforting.

Can you tell us more about the particular nature of inflation in Egypt?

If you decompose inflation in Egypt, 40-50% is food inflation and this is the main driver.

A big part of this food inflation is derived from inefficient supply chains. You lose a lot of value of fresh produce from farm to consumer because of poor storage, transportation and uncompetitive displays.

Look at the number of formal supermarkets in Egypt. I think they don't constitute more than a 15% share of the food retail market. Once you see the opening up of these stores, prices go down because these retailers make it possible to do bulk purchasing and reduce prices to end

users. I think that's the best way to counter food inflation and, consequently, headline inflation.

How attractive is Egypt to foreign investors?

I know that Egypt has topped the global dashboard of a lot of multinational corporations in different sectors after the pound flotation. The cost base is becoming low. You still have a good resource base of white-collar, well-educated Egyptians who can manage businesses. And you have a scalable, good export base and sufficient trade links.

Interview by A.S.A. in Cairo

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TOP 200 BANKS

value they would have sold for before the pound’s depreciation.

Banks are thirsty for liquidity.

Commercial International Bank (CIB, (#22), the largest bank listed on the stock exchange, said it is seeking approval to issue one bonus share for every four original shares in order to increase its capital by 25% to E£14.5bn. Earlier in the year, CIB sold a 75% stake in its subsidiary, CI Capital Holding, and the bank recently said it sold another 10% of its stake, raising a total of E£811m.

STR/AFP

CAPITAL SHORTFALL ‘Some Egyptian banks are still at risk of struggling to meet minimum regulatory capital requirements as a consequence of currency weakness after the Egyptian pound was floated last November, given their high exposure to foreign-currency loans,’ Fitch Ratings said in a statement in April 2017. ‘The currency devaluation will also weaken asset quality, with Egypt is recording steady uptrends in debt restructuring of loans for smaller its remittances and net foreign reserves as more dollars are being channelled corporates already taking place, but we through the banking system, with cash expect only modest deterioration,’ said the ratings agency. inflows totalling more than $57bn since In November 2016, the government the float. “Most remittances have been made a difficult decision to liberalise the re-channelled through the formal bankcurrency to seal a $12bn International ing system while, before, they were Monetary Fund programme. As a result, leaking [into the parallel] market, when the pound has since lost half its value. there were two prices for the foreign currency with a big gap,” says Youssef On the upside, there is more dollar availability in the market after months of a Beshay, a senior banker at BNP Paribas (see interview). currency crunch that moved the central bank to impose capital controls, signifExposure to currency risks has been icantly hindering business activities. a problem. The banking sector’s ratio These capital controls have been gradof foreign-currency loans to deposits ually eased by the central bank since the fell by 3.7% in the first quarter of 2017, float, most recently lifting a $100,000 having risen to more than 66% in 2016, Fitch says, adding that while this ratio monthly limit on individual bank transis high, it is expected to decline. actions. The remaining controls include a $50,000 monthly limit on deposits for ‘Egypt’s removal of foreign currenimporters of non-priority goods. Statecy transfer limits will help to restore confidence in the economy and attract owned National Bank of Egypt (#7) reported that it had financed nearly$5bninimportsbetween A sudden hike in interest rates November 2016 and February brought the benchmark overnight 2017, suggesting that activity is deposit rate to a record 18.8% picking up.

“The move to remove capital foreign investments, increasing the controlswaslongawaitedandgoeshandin-hand with the float,” says Hashem availability of foreign currency and Fouad, chief investment officer at the helping banks provide more lending needed by foreign-currency borrowers, newly launched Enara Capital Fund. particularly importers,’ Fitch Ratings Fouad, who previously worked at Crédit Agricole, notes that net foreign reserves said in a statement released early in July. breaking the $30bn mark for the first The downside of the currency float is its inflationary effects, which the central time since the 2011 uprising were what prompted the central bank to “give indibank tried to combat by hiking interest rates 7% since the float. Most recently, viduals freedom to repatriate their funds”.

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FINANCE MINISTER AMR AL-GARHY (2ND L) AND CENTRAL BANK CHIEF TAREK AMER (C) ANNOUNCE A $12BN IMF DEAL

the central bank announced a sudden and unexpected 2% increase, bringing the benchmark overnight deposit rate to a record 18.8%. This was after inflation peaked at a 30-year high of more than 31% in April before cooling slightly to just below 30% in May and June.

These conditions have impacted the banking system, where the higher cost of borrowing is straining balance sheets and limiting access to credit by retail and smaller corporate clients. A fresh round of fuel subsidy cuts implemented at the beginning of July, plus impending electricity tariff hikes, may push inflation higher still.

Local banks are not investing in the government’s eurobonds and instead are geared more toward buying up local treasuries “because that’s their only option”, Fouad adds. This limits the liquidity available for banks to invest in loans to corporate or retail clients.

Higher interest rates serve to compound the problem. Higher borrowing costs have “created a problem for the asset side of banks’ balance sheets,” Fouad says. “Companies’ financial statements are posting losses due to declining cash flow from operations, rising borrowing costs and foreign-exchange losses,” he explains. Beshay says he expects “muted private sector credit growth this year because interest rates are very high.”

Amira Salah-Ahmed in Cairo

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JASON NJOKU

Collateral or bust

M

rs Njoku was worried. A few months earlier we had just became parents with our firstborn, and she needed some security. As a Nigerian Nigerian, she looked upon start-up equity with a measure of scepticism. Mrs Njoku was concerned that we were living in rented accommodation and rather than me trying to remedy that, I was busy trying to buy Rolexes, Hublots and such things. Very immature of me. Rightly so, she was very worried.

So I relented. So I told her to find a house in Lagos. Let me go find the financing. Contrary to what most people think, the Njokus are absolutely not rolling around in dollars. That $40m raised was for iROKOtv. Iroko does not = Njoku.

But granted, I am not complaining. I’m pretty well paid and would sit in the top 3% of salaried earners anywhere in the world. If I lived in London or New York or Paris, I could pretty easily get a $1m mortgage without too much effort. This isn’t me bragging, as will be apparent shortly.

So she looked in Lekki/Ikeja etc. This is 2014, so N167 = $1. We found a few places we liked at N130m–150m ($778,000-$898,000). We had some savings so we ‘only’ needed N100m. So I went to my friends at Zenith Bank and asked for a mortgage.

In order to borrow N100m, I would need to pay back over 60 months at N2,761,891 per month.

I obviously couldn’t afford this type of thing and simply wasn’t prepared to take a mortgage at such rates. Mama didn’t raise no fool. Was I annoyed? You betcha. Both mine and Mrs. Njoku’s salaries sat in Zenith. We had never asked them for anything. Their general attitude was very much take it or leave it — with a respectful smile. They were, at the time, Iroko’s primary bank in Nigeria and I knew they were earning fat fees from us importing US dollars to pay naira expenses here, but they refused to budge.

For me it was simple. My wife and I ceased operating our personal accounts at Zenith Bank in April 2014. There was literally zero upside to it.

As Zenith had not really done anything to Iroko, we maintained the accounts, payroll and balance there for a further three years. We needed nothing from them, so we were a great customer. In 2016, Iroko passed $2.25m and N645m through Zenith’s accounts.

We were great customers, until we asked them to add value. We asked them for: — A N10m overdraft. Sometimes it takes time to import and exchange dollars. If I remember rightly, they asked for an equivalent of $100,000 cash collateral to cover the facility. Which renders it pointless.

— We had secured a five-year low-interest N500m loan for content but needed a bank guarantee in order to access it. Remember, we passed N645m and $2.25m through their accounts last year? Zenith Bank refused. They needed collateral of N600m equivalent in cash or land. My account officer told me he needed “something tangible”.

The reason? Everything we had done in the past was kinda irrelevant. The guy from Zenith actually told me that. Forget we had raised $40m from international investors and had a business that had year-on-year revenue growth of 90%.

Not only was I shocked, I was actually saddened. Six years of enjoying juicy inflow fees, transactions (and we make many), and every Iroko member of staff was encouraged to open a Zenith account and most did.

That all meant nothing. Because, you know, anything can happen tomorrow. I can close my account with Zenith Bank Nigeria. By the week’s end, I cleared 99% of Iroko's money from Zenith.

What is the point of a bank? ATMs and internet banking. Fuck that. In normal markets, it’s to extend credit, support investments and pay interest on your deposits.

The Nigerian banking system, for me, is like Nigeria. It has basically failed. I actually don’t need the Nigerian banks. But many, many others do. They don’t have the opportunity to tap international capital. They are stuck with the Nigerian banks.

Why would I bother bringing this up? With the failure of Etisalat, once again the Nigerian banks are out of pocket hundreds of billions of naira. That’s depositors’ money. They are playing casino with our money and giving us nothing back in return. The tycoons get rich. And we, the depositors, lose.

The Nigerian banking system, for me, is like Nigeria. It has basically failed.

I don’t need the Nigerian banks.

But many others do. They are stuck with them

Jason Njoku The author is the chief executive of iROKOtv, a company that streams Nollywood movies and Nigerian TV series.

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