Perhaps the biggest African banking story so far this year was the announcement on 2nd October that South Africa’s Nedbank had acquired a 20% stake in Ecobank Transnational for just under $500m. This investment has been a long time in the works and there were many who doubted that it could ever happen, especially after Ecobank’s well-publicised troubles earlier this year. But it has, and the implications for both institutions are profound. Nedbank’s Managing Executive, Rest of Africa, Smit Crouse is in conversation with the editor of African Business, Anver Versi.
How did the story between Nedbank and Ecobank start?
I joined Nedbank at the beginning of 2008. Back then, we were having internal discussions about how to position ourselves into the rest of Africa. Compared to our peers we were one of the major banks without a significant footprint outside South Africa. We didn’t have a clear strategy of how to establish ourselves.
Nedbank was perceived as very strong in terms of corporate banking and yet we had no presence in the very fast-growing economies where most of the multinational corporates wanted to expand to, including West Africa and Central Africa.
We had one of two options really. One was going the traditional route and acquiring banks. But given the P/E multiples of buying banks at the time, especially in Nigeria, it was very difficult to see how one was going to get a decent return in the short to medium term.
So we opted for a very much longer-term view – ensuring that we have the risk mitigated and a capital-efficient strategy of moving into the rest of Africa.
Why were you picked to look into this,
especially as you were a lawyer and not a banker?
I’m an attorney by profession and before Nedbank I was at PwC doing corporate
finance, specialising in international M&A. So I looked at it objectively, without the appreciation of all the red tape and the complexities of expanding and buying banks – and that turned out to be a good thing.
What we needed was a defensive strategy in terms of maintaining our market share position in South Africa with our corporate clients, which was at risk without a larger African footprint; so we needed to accelerate the process and started looking at who we could potentially partner with.
Who approached who?
Our chairman, Reuel Khoza [the South African business leader and former freedom fighter] met Arnold Ekpe [former Ecobank CEO] at an event and they had a discussion.
Arnold had been known to our institution and various executives for some time and the idea was gaining ground; we had this concept of an African champion banking network which no one could match. I called the meeting with Arnold and his team. We wanted to have a conversation at the CEO and chairman levels to say: ‘Let’s talk about this in a very mature and a very unconventional way: how do we create something of value, which is very, very unique and long term’.