We have an interesting new player in Atlas Mara with Ashish Thakkar and Bob Diamond and Arnold Ekpe. They haven’t spelled out their strategy yet. I think it’s certainly going to be a regional bank if not entirely pan-African. So I see banks increasingly trying to do this; we know that Equity Bank is interested in expanding, for example.
Equity has moved out of Kenya…
It has moved out of Kenya, not on a large scale yet, because I think they recognised the issues that we’re talking about. It’s very much a
mass-market bank, it’s bottom up. How do you replicate that effectively?
Do you see South African banks being successful going north?
It’s a mixed bag, I think that Standard is doing well in many markets and has increasingly focused on Africa, selling off its Russian and Latin American interests. We haven’t seen much of
First Rand yet; it’s doing very nicely in its old markets, Namibia, Botswana, but it hasn’t really pushed much further than that. It’s a very strong South African bank but has tried and not succeeded in Ghana and in Zambia, for example.
Nedbank, of course, has an interesting option in Ecobank and we’ll see if they decide to exercise it. South African companies in general, although they are now increasingly moving into sub-Saharan Africa, have been tentative, and not always successful.
Extractive industries have been an exception but only a few months ago, Woolworth, the South African clothes retailer, pulled out of Nigeria, blaming costs as the main issue.
Although the South African banks are a little tentative, they’d be all powerhouses if they move north as they’re very well-run banks.
How well or badly do African banks compete with international ones?
I would say they do pretty well because there’s not much international banking going on in Africa – but that depends on what you include in banking. There’s a big chunk of corporate banking by the large international banks and offshore – so offshore oil and gas in Nigeria is almost entirely done out of Paris, New York or London.
The same is true for some extractive industries – for example, Standard Chartered, Barclays, Citibank. Citibank’s a very good example and Citibank is everywhere but it’s not involved in the local banking market very much except for a few large corporates.
But when it comes to everything below that – larger domestic corporates, SMEs and regional banking, then it’s local African banks to a very, very large extent. The exceptions are Stanbic and Barclays primarily, maybe Soc Gen as well in Francophone West Africa, but the rest is handled by African banks.
Which countries still have fairly weak banking sectors?
You will find these mainly in the smaller African countries, but among the larger ones, DRC is a very weak and has a very small banking market, Zambia has a lot of banks and quite a few good banks, it’s going through a process now of increasing capital requirements, which should either force some consolidation and/or make banks more local; some of the Nigerian banks, for example, have opted for a local part ownership to qualify for loan capital requirements.
Then you have a number of small, weaker banking markets. It’s very difficult to be a sophisticated cost-effective bank in a Sierra Leone or even a Rwanda, because the markets are so small. The key to resolving that is, in part, economic growth, to make the economy and therefore the banking sector grow more quickly, but also technology. Technology will be very helpful here.
What do you think is the contribution of mobile banking and micro credits?
First of all, many of us have been trying to replicate M-Pesa but it’s very difficult to do for a couple of reasons. I think Kenya had a unique set of circumstances with a banking regulator that took his hands a little bit off and said ‘Hmm, go ahead, we won’t try to interfere with this, it sounds like a good idea’.
When we tried to replicate it, we run into banking regulators that want to have a piece of the action and several telecoms operators competing and all of a sudden it’s not as easy.
It’s happening in every bank nonetheless but we don’t get the big bang M-Pesa effect in one country – we’re getting a number of mobile systems and that is happening fairly quickly.
I don’t think you can ever completely walk away from bricks and mortar, you have, to some extent, be on the ground, deliver cash, collect information, see your customer eye to eye, but you can do away with a lot of the expensive administration processing that can be built into internet-based applications.
Cheap and simple money transfers increases trade – if we can do that across borders, it will be amazing. At present, currencies get in the way. But the potential is there and it’s absolutely necessary for economic growth.