CAVMONT BANK
C CAVMONT BANK
25 Years and Counting
for Zambia’s Cavmont Bank PRODUCTION: David Napier
Zambia’s Cavmont Bank is set to open a number of new branches to help service areas of the country where its reach is limited. It is also set to enter the mobile payments sector in an effort to bring unbanked Zambians into the formal banking environment. All of this in the year of its 25th anniversary – Cavmont Bank is an extremely exciting operation and this year could be an important milestone in its impressive history.
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Cavmont Merchant Bank first opened its doors in October 1992 and the journey of one of Zambia’s most successful commercial banks began. Now celebrating its 25th anniversary, Cavmont Bank is home to around 50,000 clients and 270 employees. It provides a sophisticated product portfolio through its branch network of 19 outlets across the country. After its initial establishment, Cavmont Merchant Bank merged with New Capital Bank in 2004 and the new entity became the Cavmont Bank that Zambians know today. In 2007, following the search for a strategic investment partner, the Namibian group, Capricorn Investment Holdings (CIH), acquired a 44.2% shareholding. At the start of 2017, CIH increased its stake in Cavmont, taking a 97.9% effective shareholding in Cavmont Capital Holdings Zambia, which owns 100% of the share capital of Cavmont Bank. Starting out as a relatively small operation in a relatively small market,
Cavmont has always been an ambitious organisation, continuously targeting multiple market sectors with high-quality products and first-class service. 25 years on from its original inception, Cavmont celebrates modestly. “It’s a big deal; 25 years of operating is quite the milestone,” says CEO Charles Carey. “We’re celebrating in an understated way; we’ve advertised and sent messages out to customers; we haven’t paraded around in a marquee fashion but we’ve recognised our key stakeholders who have supported us over that quarter century and we feel that’s an appropriate way to celebrate. It’s a humble 25 years and our celebrations have been appreciated by the people who recognise our contribution.” Carey, who joined the business in 2013, has overseen a number of changes at Cavmont and says that after 25 years of development, it is now working towards global recognition for excellence. “Our ambition is to ensure that we continue to improve and ensure that
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INDUSTRY FOCUS: FINANCE
anyone coming into a Cavmont Bank, from whichever market, associates us with other world class financial service providers. “There are fundamentals across the business that you’d expect to receive anywhere from high-street London to high-street Lusaka. If you went into a branch here, even if you’d never set foot in Africa before, you’d see the similarities to flagship branches of banks anywhere in the world. We’re keen on ensuring that the infrastructure supporting our products and services is as robust in Zambia as it would be London or New York – that’s where we’re still growing as we’re reliant on different service providers such as power producers or road networks which are under a lot more strain here compared to other financial centres.” To ensure growth continues, and to guarantee outstanding service for existing clients, the next phase in Cavmont’s growth strategy comes in the form of physical expansion and the opening of six new branches, creating jobs and opportunity for Zambia. GROWING FOOTPRINT “If you look at our origins geographically, we had a biased towards Zambia’s northern provinces. Traditionally, we’ve targeted northern areas close to Lake Tanganyika and south from there. We’ve not grown in the central and southern areas and we don’t have a huge eastern coverage so there’s large swathes of Zambia that are underserved or not at all served by Cavmont,”Carey explains. “We have identified market areas where we know we have reputational advantage. We’ve established our credibility in the market, we have a brand that people trust and we’ve won a number of different accolades both locally and internationally. In the financial sector, we’ve picked up achievements as the second most well-recognised brand, and across all sectors we’re known as the third most recognised brand in Zambia.” Currently, Cavmont is present with branches in Lusaka (6), Chingola, Ndola, Kitwe (2), Mbala, Mpulungu, Mwense, Solwezi, Chipata, Chililabombwe, Kasama, Mansa and Mufumbwe. “We’ve put a lot of effort into building up
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our presence and being able to extend our brand credibility across different geographies so the six different towns that we anticipate moving into, in the southern, western and eastern areas, will help complete our footprint and will help support our customers that have a growing need for nationwide coverage,”details Carey. He adds that the majority of the planning is now complete and all that remains is to develop partnerships with local businesses to begin the roll out of the new branches. “We’ve done the business cases and we’re now looking at what partnerships we need to set up to develop the network. We don’t want to go in and buy land and build branches but there are a number of areas that are transforming their BTL proposition; there’s malls going up that we think fit around what we’re doing, and we want to build BOT-type (build-operate-transfer) partnerships.” Zambia is an extremely urbanised nation (one of Africa’s most urbanised), and more than one half the approximately 15 million people reside tightly around a handful of economic zones sitting along the main transportation links. Rural areas are underpopulated, underserved and are home to higher levels of unemployment. Cavmont has had to choose its new locations carefully and, alongside its growing footprint, the company will look to attract a whole new group of customers through further innovation in its production range. CAVMONT MOBILE PAYMENT PROGRAMME According to the IMF, Africa is poised to ‘become the epicentre of mobile payment adoption’. McKinsey&Company agrees, saying‘Sub-Saharan Africa offers tantalising potential for mobile financial services’, and the Financial Times has lauded the mobile payment industry’s ability to‘spawn entrepreneurs’. The well-documented success of M-Pesa is the perfect case study for those looking to enter the sector and Cavmont plans to launch its new mobile payment product this month with the hope that, like M-Pesa, this innovation can bring the‘unbanked’into the formal banking environment.
“Access, cost, usage and other factors are starting to redefine what banks can do for customers and that’s something that we embrace. We’re now in pilot stage of our initial foray into mobile banking and we anticipate having our product in market at the beginning of our financial year, or July 1st,” says Carey. “Globally, branch foot traffic is diminishing significantly on a quarterly basis and therefore you can end up with a legacy infrastructure which is not being utilised at the levels they should be. We don’t suffer from that yet. Our network is reasonable but not overly burdensome. We can effectively leapfrog that capital asset position by using mobile technology which is a broadly accepted concept. Mobile technology in Africa has grown exponentially; our penetration of mobile banking is around 80-90%; there are only 40,000 landlines in Zambia but more than nine million mobiles,” he adds. “The data in the market is shocking and suggests that financial inclusion both formerly and informally is still under 60%. Our population is around 15 million and around three million have accounts so that means we have around eight million of age potential account holders and that’s a big opportunity to grow the business – not just by the number of accounts but also in terms of value. There’s a tremendous amount of informal trading activity, and a business sector that is almost entirely cash-based and from a number of perspectives bringing the informal economy into the formal side would benefit and stabilise the wider Zambian economy in a big way.” The 2016 Zambian banking Industry Survey from PwC found that financial inclusion is certainly an issue that needs to be addressed.“Financial inclusion remains high on the agenda of the Government and regulator,”the report said.“The challenge facing the industry is how to provide services to the‘excluded’part of the population that are typically located in rural areas with poor social infrastructure.”The report’s author, Andrew Chibuye, suggests that technology will be a driver in this regard saying:“We believe that technology is the biggest game changer for the industry. Leveraging
CAVMONT BANK
technology to stimulate growth is a key priority for all players in the market. The banks that adapt best to technological changes and make the best use of complementary service providers, such as mobile phone companies, are likely to achieve an improvement in efficiency and customer service while growing their customer base and revenues.” Carey agrees.“Whichever way you do it, bringing in those cash trading individuals presents a big opportunity. It’s a perennial issue but is it impossible? Clearly not, the opportunity is absolutely there. Informal markets still provide huge potential for businesses like us.” Kenya’s M-Pesa supports livelihoods by providing access to medical insurance, bill payments and small business loans to those who would be excluded otherwise. “We’re highly ambitious with our targets. The more aggressive and more focussed the institution is on that opportunity, the more spoils you will take,”says the CEO.
the significance of a strong savings ethos to a strong economy. Using digital tools as well as traditional marketing methods helped Cavmont to reach its target audience, reinforcing the importance of technology in the industry. “We’re not a deep-pocket marketing organisation and we do work with a lean budget so the creativity that we need to deploy product launches makes things more challenging. However, we do expect a big bang when we market and we do smart things to get the coverage from media. We’re good at what we do and other banks look at us and wonder how we achieve what we do. “We’re among the top followed organisations in Zambia on Twitter and Facebook and that’s because we recognise the opportunities to connect with people for very low cost. We
recognise social media as a strategic initiative, and the rate of growth that we’re experiencing is significantly more than that of our competitors,” says Carey. ECONOMIC STORM With all the brilliant work that Cavmont is doing, and has done over the past 25 years, significant challenges still remain, and the banking industry and those involved are clear that in order to move forward in the correct fashion, challenges must be faced head-on and innovative solutions must be sought. The first, and perhaps largest, hurdle that the banking industry faces is the economic climate. Locally and globally, predicting the direction and health of any given economy is now more difficult than ever. The Zambian economy was the darling of international investors in 2012 while its neighbours were still feeling the hangover from the 2008 recession. Its debut euro bond was oversubscribed by a spectacular
PROMOTING A SAVINGS CULTURE Another arm of Cavmont’s reach into the unbanked community are its popular savings products. Launched in May 2014, the Imiti Ikula children’s savings and Imbasela accounts are directed at addressing the needs of the public by providing them cost-effective, value-driven and tailor-made solutions. These accounts were specifically marketed towards unbanked individuals and in just two years, the products have grown to become an important part of the Cavmont stable. “Looking at the numbers we bought in with those two accounts, it’s now just under 25% of our total customer base so it has grown significantly, and the values have also grown,” details Carey. “The cash that we’re holding in those accounts makes for interesting reading. It’s not big, high net worth individuals, they’re small accounts so we believe they are quality savings products, pitched at the right audience, with the right functionality.” Cavmont marketed the importance of a savings culture to young people and small businesses, and emphasised
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INDUSTRY FOCUS: FINANCE
CAVMONT BANK CEO CHARLES CAREY
CAVMONT BANK
15 times, attracting orders of nearly US $12 billion, even though it was offering lower interest rates than some developed-world bonds. Investment was also coming in big from Canadian and Swiss mining companies looking to get involved in Zambia’s rich copper sector, a sector which contributed 70% of the country’s export earnings. But in 2013,‘14 and‘15, copper prices tumbled thanks to weak demand from Zambia’s top trading partner, China. Between 2004 and 2014, the economy grew at an average of 7.4% but this slowed to just 3.4% in 2015 and now sits at just under 4%. “We’re not a huge economy”admits Carey“but we have grown considerably over the last decade. However, when we get a headwind it does slow us down considerably. We went through, and are probably still in, a bit of a storm. We’ve seen a drop in metal prices and they’re not at levels that we need to inspire industry. We then had exchange rate volatility and we’re down by about 40% from where we were two years ago. We then had inflation moving from single digits to over 20%. We’ve also seen infrastructure setbacks as the economy’s power is largely based on hydro and we had a decrease in seasonal rainfall resulting in load-shedding. Together, these things impacted the economy and we lost GDP percentage points. Fortunately, we have the capital base to invest in alternative power sources and we’ve always been able to ensure that our product is seamlessly delivered.” For Cavmont Bank, Zambia’s economic plight does not go unnoticed but the company has remained largely unaffected and continues on the growth path – the sign of a well-run business and a sound strategy. “In the last few years, we’ve grown our number of outlets and our headcount so we’ve avoided detrimental outcomes from economic challenges and that’s because our approach to business is a long-term one and we know how to be careful with our customers and prudent with our lending. Instead of looking at unpopular short-term cost cutting, we looked at lean management principles and refined operational costs wellbefore the pinch kicked in so we were better able to survive any storm. “Liquidity has kicked back in, the
government’s concern around exchange rates has abated slightly, cash has been released into the market, and as a commercial bank that is what we thrive on to developed economic activity,”says Carey. Of course, the ability of Cavmont to develop successful strategies comes from its employee base, which Carey regards as the best in the industry. CAVMONT PEOPLE “We have a developed sector and a good infrastructure for education around literacy. The banking sector is seen as an attractive job market for graduates so there’s not a real scarcity of talent but we do operate with a high price. Because of this we’ve started to invest in developing talent rather than buying talent. If we go to the right sources, we can pick up very intelligent and educated people who may not have experience in the banking sector but with the right training and development we can make most people very good bankers. “Looking at our capacity, a number of our bankers haven’t been formerly trained in finance but we see a level of desire to continuously develop oneself and that is particular to the Zambian market. We have a programme through which we pay for the education of our staff and from our perspective, that’s an investment well-made. We see that as soon as someone completes an accountancy or finance qualification, they’re onto the next and there’s a constant ambition among our staff to self-improve which is very healthy,”explains Carey. With six new branches set to open soon, a focus on people development, and a growing interest in innovation and mobile banking, Cavmont will continue to create jobs and provide Zambians with economic security – one of the five pillars of Zambia’s seventh National Development Plan. SET FOR THE FUTURE Through mergers, changes in ownership, technology advances, recession and expansion, Cavmont has remained steadfast in its vision; to be a world class bank rated amongst the best in Zambia with a focus on partnering with all its stakeholders. Although Carey doesn’t see
this vision to be achieved just yet, he is confident that Cavmont Bank is quickly heading in the right direction. “We are recognised as a good quality bank, whether we’d be seen as world class yet I’m not sure, but in terms of delivering quality across the market to stakeholders, I think we are on track. Everyone is ambitious for us to continue growing sustainably and the level of engagement and support we have is testament to the fact that we are on track,” he says. Growing into the mobile payments market, delivering quality service to customers through a respected product range, and, most importantly, growing its customer base, Cavmont Bank has every reason to celebrate. “For many years Zambia has proven itself as a robust market and an area where if you do the right things, and do them well, you can do good business and we prove that,” says Carey. “We’ve had customer growth rate of 25-30% per annum and our deposit base is growing. If your deposit base is growing, that is an indicator of how you’re treating your customers and the level of confidence that they and the market have in you.” 25 years of successful operation and growth has seen Cavmont cemented among the market leaders and who would bet against this determined and exciting organisation growing even further and targeting the industry’s top spot? For Charles Carey, more can still be done: “This isn’t a project for me; I’m fully invested and I wouldn’t say mission accomplished. There’s still a lot to deliver and a number of challenges to bring adrenaline. I’m here to stay for as long as my board and shareholders think that I’m adding value.”
CAVMONT BANK +260 21 1360023 @cavmontbank www.cavmont.com.zm
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Issue No.61
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JEGIE PADMANATHAN:
People Are The Power
of Bidvest Prestige ALSO IN THIS ISSUE:
CCI South Africa / Thebe Tourism Group / RPP Developments / ALG Estates
A S F E AT U R E D I N
ENTERPRISE AFRICA
AUGUST 2017