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Progress: positive HE Ahmed Osman, Governor, Central Bank of Djibou
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CONTENTS
ISSUE 42 | MARCH 2017
Editor’s Letter
H
ello and welcome to the March issue of Banker Africa. This issue we turn our attention to Mauritius for our Country Focus. The island nation has traditionally been seen as a safe haven for investment and business in Africa, however the country is heavily dependent on its offshore banking sector—worth approximately 50 times its GDP. Turn to page 24 to find out more. HE Ahmed Osman, Governor of the Central Bank of Djibouti is on the cover of this issue. Djibouti has been seen for some time as an entry point into the Greater Horn of East Africa. HE discussed with us what his priorities are to help Djibouti achieve its economic and developmental goals, and what opportunities he sees for the country and its Central Bank in 2017. Efosa Ojomo, a Research Fellow at the Forum for Growth and Innovation at Harvard Business School gave us his thoughts on the obstacles to development in Africa. Speaking in an interview he said that “We’re going to keep on seeing Africa rising but Africans are not rising. That’s the problem.” He further stated that the continent has a perception problem, with outsiders believing there are few opportunities, but that with some investment and time, the reverse is actually true, find out the full story on page 38. In our Trailblazer section you will find the story behind Jamii, an innovative micro-insurance start-up looking to insure those who haven’t been able to afford insurance in the past. Currently the company offers insurance products for individuals and families in Tanzania and although small at the moment, Lilian Makoi, Founder & CEO, is looking to expand to some 100,000 subscribers by the end of 2017. Until our next issue,
20 IN THE NEWS 6 News analysis: South Africa reverses withdrawal from ICC
7
Essential financial news from around the continent
10
Spotlight: Botswana
HAPPENINGS 12 Egypt continues rebalancing, but challenges remain
13
11th Africa Finance & Investment Forum concludes
12
OPINION 14 Executive expansion
Executive talent and leadership is the backbone of financial services expansion in Africa, writes Magdy El Zein, Managing Director, Boyden Middle East
16
Driving financial inclusion in Africa
16
Verdant Capital has identified four main themes as the driving forces behind financial inclusion
MARKETS 18 Incoming upswing for
equity markets
A challenging 2016 for African equity markets should pave the way for improvements in 2017
COVER STORY 20 Progress: positive
Matthew Amlôt
10
24
HE Ahmed Osman, Governor, Central Bank of Djibouti discusses his plans for the future in this exclusive interview
COUNTRY FOCUS: MAURITIUS 24 Island sanctuary
27
Traditionally topping the indices in Africa for governance, competitiveness and doing business, this month we take a look at the Mauritian economy
Continental challenges
Mauritius could emerge as a facilitator for African growth and development, says Vikram Dabee, Head of International Banking, SBM
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CONTENTS
ISSUE 42 | MARCH 2017
OUTLOOK 30 Morocco to pick up steam in 2017
30
Despite poor growth in 2016, the Moroccan economy is likely to improve in 2017
www.bankerafrica.com
CASE STUDY 36 The value of a good name…
38
Brand Finance has released its latest annual report on the world’s most valuable banking brands, Banking 500 2017
38
Success follows innovation
Chairman SALEH AL AKRABI
Efosa Ojomo, Research Fellow at the Forum For Growth and Innovation at HBS on the obstacles to development in Africa, and how banks can help overcome them
SECTOR FOCUS: RETAIL BANKING DIGITAL TRANSFORMATION 40 West Africa’s digital future
40
In a new report, the growth for digital infrastructure is highlighted in the West African region
Jamii Africa is looking to change the landscape insurance landscape with its innovative microhealth insurance product
TECHNOLOGY 44 Linking the chain
44
Mohammed Kateeb, Group Chairman & CEO of Path Solutions discusses the effect technology has had on microfinance in Africa
GOVERNANCE 46 IFRS 9 compliance deadline is fast
50
approaching… are you ready?
Banks need to get their systems and processes in order for IFRS 9 compliance, says Desan Naidoo, VP for Africa Region, SAS
AWARDS 48 Results are in from the Banker Africa– Southern Africa Banking Awards 2017
2017
2017
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HE Ahmed Osman, Governor, of Djibou
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Progress : positiv e
Renewed optimism
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NEWS ANALYSIS
South Africa reverses withdrawal from ICC South Africa has revoked its decision to withdraw from the International Criminal Court following High Court ruling
Permanent headquarters of the International Criminal Court in The Hague, Netherlands (CREDIT: RICK BAJORNAS/UN PHOTO/FLICKR).
S
outh Africa had originally announced its intention to withdraw from the Rome Statute of the International Criminal Court (ICC) in October 2016. However a recent ruling by the High Court declared the move “unconstitutional and invalid”. A statement released on the matter has not made it clear though as to whether the Government has abandoned its plans to leave the ICC altogether, or if alternative routes to exit are being explored. The high court also added that any further attempt to leave the international court would also require the approval of Parliament.
6 page 6 News Analysis.indd 6
Two other African nations also announced plans to leave the court in 2016, Burundi and The Gambia— although The Gambia has since reversed this decision earlier in 2017. Furthermore, a January 2017 meeting of the African Union (AU) in Addis Ababa, Ethiopia called for a “strategy of collective withdrawal” from the ICC. Recent backlash from the African continent against the ICC falls in lines with accusations often made that the international court is biased against African states. In addition, arguments have also been made that the court violates the sovereignty of nations—the 2013 AU summit decided
that the ICC case against Kenyan leaders during investigations into political mass violence prior to the 2007 Kenyan elections violated the country’s sovereignty. One of the three main reasons given by the South African Cabinet for the decision to withdraw from the ICC, in addition to aforementioned belief of the court’s African bias, was a desire to preserve the diplomatic immunity for incumbent leaders, along with incompatibilities between the court and South Africa’s diplomatic mandate. The particular argument over preservation of diplomatic immunity for foreign leaders came to a head for the South African Government in 2015 during the visit of the incumbent Sudanese president, Omar al-Bashir. Al-Bashir is subject to an ICC arrest warrant on charges of international crimes, including genocide, in Sudan’s Darfur region. Despite this he was allowed to leave South Africa before an arrest could be made. Overall, time will tell if the Zuma Government continue to push for a South African exit from the ICC. Should this eventually occur, the ICC could face a potential mass exodus of African countries, significantly weakening the organisation’s mandate on the continent. Criticism of the ICC should not be ignored either and the court needs to fix the problems within its own structure and mindset.
ICC FAST FACTS Entered into force in 2002 Currently 124 states ratified the Rome Statute USA notably has not ratified Publicly indicted 39 people— all Africans
www.bankerafrica.com
20/03/2017 11:50
IN THE NEWS
RATINGS REVIEW BANKS AND BUSINESSES Moody’s affirms Eastern and Southern African Trade and Development Bank long-term issuer rating of Ba1, with a positive outlook. Moody’s has affirmed the Ba1/NP and Ba2/ NP local and foreign-currency deposit ratings of Credit du Maroc and changed the overall outlook to positive from stable. S&P has assigned preliminary ratings of ‘B’ for Helios Towers Africa’s long-term corporate credit rating with a stable outlook. The agency also assigned a preliminary ‘B’ issue rating to proposed senior notes to be issued by HTA Group Ltd.
SOVEREIGNS
ON THE RECORD ENBD PMI: Deterioration of business conditions slows
The Egyptian non-oil private sector continued on a downward path in February, as business conditions worsened for the 17th straight month, led by sharp declines in both output and new work.
deVere Group receives investment banking licence
deVere Group, has announced that it has received an investment banking licence. deVere’s investment bank is licensed and regulated by the Financial Services Commission of Mauritius.
Afreximbank and Ecobank sign MoU on trade and investment
The African Export-Import Bank (Afreximbank) and Ecobank Transnational Incorporated (ETI), parent company of the Ecobank Group have signed an MoU to promote joint corporate objectives through the financing of private sector projects and trade finance transactions
Global borrowing to drop by four per cent to $6.8 billion
S&P projects that the 130 sovereigns it rates will borrow an equivalent of $6.8 trillion from long-term commercial sources in 2017, according to its Global Sovereign Borrowing report.
Moody’s has affirmed the issuer and unsecured ratings at Ba1 for the Government of Morocco. The outlook has been changed to positive on the back of an improvement in foreign exchange reserves and declining fiscal imbalances. CI Ratings has affirmed its ratings of Egypt’s Long-Term Foreign and Local Currency Ratings of ‘B-‘ and its Short-Term Foreign and Local Currency Ratings of ‘B’. The outlook for these ratings is stable.
S&P said that $5.2 trillion of sovereigns’ gross borrowing will be to refinance maturing longterm debt (CREDIT: RAVIPAT/SHUTTERSTOCK).
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7 20/03/2017 12:54
IN THE NEWS
A QUICK WORD
Social and economic development can only be led by the private sector — Ban Ki-moon, former UN Secretary General, delivering a keynote speech during AFIF 2017 For these stories and more, visit www.bankerafrica.com
Egyptian start-up accelerator Innoventures opens fourth cycle
I
nnoventures has opened applications for the fourth cycle of its accelerator programme ‘Startup Reactor’ in partnership with VC4A after a successful third cycle and its grand finale last December. Startup Reactor is an accelerator programme designed to support innovative startups operating in several high-opportunity industries in Egypt. The programme creates an environment to connect entrepreneurs, investors and mentors for a duration of six months. Participating investors and mentors will receive an equity stake in the ventures which they choose to support. Qualifying startups will follow an immersive training programme as they focus on developing their Start-up accelerators can be crucial in ensuring business model, prototype, success of new businesses (CREDIT: RAWPIXEL.COM/ brand and customer base. SHUTTERSTOCK).
WorldRemit sees 150 per cent YoY growth in Tanzania Digital money transfer service, WorldRemit, has consolidated its rapid expansion in Tanzania in order to support growing demand for instant remittances to the country from the over four million expatriates living abroad. WorldRemit announced that it recorded a new record of 10,000 unique transactions completed in December 2016 alone, and 150 per cent yearon-year growth in 2016, driven primarily by the rapid expansion of Mobile Money accounts as the preferred receive method. The company also noted that the biggest senders to Tanzania include migrants currently living in the UK, Sweden, Australia, Norway and Canada, amongst others. Ismail Ahmed, founder and CEO at WorldRemit, said, “Our mobile money partnerships combined with existing services for bank deposits and cash pick-up will give more choice to Tanzanians, further supporting the transition from costly offline remittances via high street agents to faster, cheaper and safer online transfer methods.”
8 page 7-9 In the News 042.indd 8
South African finance house passes Shari’ah audit Shari’ah Advisory and Investment Firm, Global Islamic Financial Services Firm (GIFS) confirmed a clean and successful Shari’ah Audit of Lendcor PTY (LTD). Wayne Austin, the Chief Financial Officer of GIFS, in a statement, said the company complied with all recommendations and policies from a Shari’ah audit and governance perspective. Lendcor offers Home Improvement Facilities on Murabahah basis to clients in South Africa. Mufti Ismail Desai, CEO of GIFS said, “The issuance of a Shari’ah Audit Certificate to Lendcor lends further credibility to the Islamic finance industry in South Africa and enhances the level of transparency for Shari’ah Compliant Products offered in the market. We must continue to raise standards from a Shari’ah audit/governance perspective to enhance the level of overall and general compliance of product offerings.”
IMF staff concludes 2017 discussions with WAEMU on common policies for member countries A staff team from the International Monetary Fund (IMF), headed by Boileau Loko visited Abidjan and Dakar from 7 to 15 February 2017 for discussions with the institutions of the West African Economic and Monetary Union (WAEMU) on Common Policies for Member Countries of the Union. At the end of the mission, Loko issued the following statement, “Member countries need to stick to their planned fiscal consolidation paths, which include reducing budget deficits to three per cent of GDP by 2019, in line with the WAEMU convergence criteria, and fiscal plans for 2017 need to be consistent with that path. This will require steadfast implementation of reforms to enhance revenue mobilisation, contain current expenditure, improve public financial management, increase public investment efficiency and strengthen debt management. to create space for infrastructure investment and social spending.”
www.bankerafrica.com
20/03/2017 12:54
IsDB Group sets out a roadmap to Mali to receive $25 million concessional promote the Arab-African trade
T
he Islamic Development Bank (IsDB) Group is aiming to strengthen Arab-Sub Saharan African trade over the next three years. The roadmap includes identifying business opportunities and the areas of finance, building logistics platform, supporting trade, credit and The IsDB Group President has urged Arab and Sub Saharan insurance, and developing the countries to take advantage of capacity development programmes (CREDIT: FEDOR SELIVANOV/SHUTTERSTOCK). necessary infrastructure to facilitate trade. IsDB Group President, Dr. Bandar Hajjar, and Mamoun Buhedod, Minister Delegate to the Minister of Industry, Trade, Investment and Digital Economy in charge of Microenterprises and the Integration of the Informal Sector in the Kingdom of Morocco, inaugurated the Arab-African Trade Bridges (AATB) forum, held on 22-24 February in Rabat. Addressing the event, the IsDB Group President said that the volume of the Bank’s support for development programmes and infrastructure projects in Africa has reached more than $43 billion, which included funding for projects in infrastructure.
IMF staff initiate discussion with Cameroon on an economic programme supported by the Fund An International Monetary Fund (IMF) team, led by Corinne Deléchat, visited Yaoundé from 20 February to 6 March 2017, to hold discussions toward a threeyear economic and financial programme for Cameroon. At the conclusion of the visit, Deléchat issued the following statement, “The IMF team and the Cameroonian authorities started discussing an economic programme through 2019 that would lay out a path to sustained economic recovery and higher and more inclusive growth. The team follows the 23 December summit in Yaoundé, where CEMAC heads of state agreed that a resolute and concerted effort to preserve macroeconomic stability in the region was necessary, and to initiate discussions with the IMF and other development The decline in commodity prices, security threats and partners as part of a path toward civil unrest in the Central African Republic has negatively the resolution of the region’s impacted Cameroon’s external and fiscal balances, says the IMF (CREDIT: ANDREI TUDORAN/SHUTTERSTOCK). economic challenges.”
loan to build utility-scale photovoltaic plant The African Development Bank (AfDb) Board of Directors has approved a senior concessional loan of $25 million in order to fund the Segou Solar PV Project. This will be Mali’s first utility-scale solar photovoltaic (PV) power plant. The project is attempting to lead to an increase in the country’s installed renewable energy capacity to 52.7GWh annually, which will represent 10 per cent of the current generation capacity, with a lifespan of 25 years. “Introducing utility-scale solar PV as an energy source will enable Mali to harness its abundant solar energy potential, diversify the country’s energy mix, and increase access to cleaner energy for its citizens,” said Anthony Nyong, AfDB’s Director of Climate Change and Green Growth. “The project’s specific business model is a potential energy game-changer for Mali and indeed for all of West Africa. The project is a demonstration of the significant role that concessional climate finance can play in mitigating project specific risks and in addressing barriers that would otherwise hinder private sector involvement in renewable energy projects.”
IMF Executive Board approved extension of arrangement under extended credit facility for Malawi The Executive Board of the International Monetary Fund (IMF) approved on 5 December 2016 an extension of Malawi’s arrangement under the Extended Credit Facility (ECF) to 30 June 2017. This extension will provide additional time for the authorities to achieve the programme’s objectives. The ECF arrangement for Malawi was approved on 23 July 2012 in an amount equivalent to SDR 104.1 million ($146.7 million). An earlier extension of the arrangement from 30 June 2016 to December 2016 and an augmentation of access by the equivalent of SDR 34.7 million ($49.2 million or 25 per cent of quota) was approved by the Board on 20 June 2016 to strengthen the country’s response to the El Niño-induced drought. The programme is aimed at the achievement and maintenance of macroeconomic stability and implementation of policies and structural reforms to spur growth, diversify the economy and reduce poverty.
www.bankerafrica.com
page 7-9 In the News 042.indd 9
9 20/03/2017 12:54
NEWS SPOTLIGHT BOTSWANA
Botswana law firm joins Africa Legal Network Desai Law Group (DLG) announced that it will be joining ALN (Africa Legal Network) as its member firm in Botswana. Dr. Cheick Modibo Diarra, ALN Chairman, welcomed DLG and said, “DLG is a natural fit for ALN given the firm’s desire to remain independent, its commitment to capacity building, and willingness to ALN is a legal network that assists clients in key invest in infrastructure and its people.” industries across the continent ALN is one of the continent’s (CREDIT: CORGARASHU/SHUTTERSTOCK). legal alliances and represents clients across a wide range of industry sectors. DLG’s support is part of ALN’s move to maximise its ability to support investors in the SADC region. “Adding DLG to our alliance is a further step in our commitment to support clients across the continent through a network of firms who share the same the vision of implementing international best practices, uncompromising integrity and commitment to our clients,” added Dr. Diarra.
Hollard Insurance acquires Regent Botswana Group
Botswana Minister of Finance and Economic Development stands by banking setup requirements Kenneth Matambo, the Minister of Finance and Economic Development, in a debate on his ministry’s proposed budget said that the setup requirements to create a bank, which were mandated by the Bank of Botswana, are reasonable. “I do not think it is unreasonable; it is a small amount, actually. With regard to experience, I think it is important that if you say you are going to establish a bank and start handling other people’s money, those people better be confident that you are the type of person or institution that will handle their money safely, and if you do not have experience, then there could be a problem,” he contended, as reported by Weekendpost. His comments were made in the face of opposition remarks that the banking sector is still dominated by foreign banks, and that the process of supporting home-grown banks and financial institutions needs to be started.
IMF release report on Botswana banking sector safety net and crisis management Following a visit made at the request of the Bank of Botswana (BoB) an MCM technical assistance mission visited Gaborone to provide technical assistance and better align the bank safety net, bank resolution and crisis management framework of Botswana with best international practices. The report found that the current legislative framework guiding bank resolution and financial sector crisis management is weak but the authorities have embarked on revising it. Furthermore, should a bank become acutely distressed, the report stated that the Bank of Botswana lacks the legal powers to resolve the situation effectively. This means that major amendments are required to the banking legal framework of Botswana, the report continues.
10
The acquisition will create Botswana’s largest shortterm insurance company (CREDIT: ZIMMYTWS/ SHUTTERSTOCK).
H
ollard Insurance has acquired Regent Botswana Group from Imperial Holdings. The deal is set to result in the creation of Botswana’s largest short-term insurance company. “The acquisition will ultimately result in the creation of a merged entity known as Hollard Botswana, which will employ approximately 120 people, creating Botswana’s largest short-term insurer and the country’s third-largest life insurer,” said Frans Prinsloo, Hollard Regional Head. “This unification of two strong industry players will create a Botswana-based insurer with significantly larger financial resources and a comprehensive collection of skills. “We anticipate exciting growth in the Botswana insurance sector and plan to participate in that growth through the vision and innovation shared by the two entities,” he added.
www.bankerafrica.com
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HAPPENINGS
Egypt continues rebalancing, but challenges remain Analysis released by Fitch Ratings suggest that progress has been made in Egypt’s gradual external rebalancing in early 2017, but challenges remain
Recent developments have engendered a positive outlook for Egyptian rebalancing, says Fitch (CREDIT: EGYPTIAN STUDIO/SHUTTERSTOCK).
T
he ratings agency pointed to rising levels of foreign exchange reserves, a return to private capital inflows and currency appreciation point as progress in Egypt’s external rebalancing. Further fiscal consolidation in combination with external rebalancing also lays the groundwork for a broader improvement in sovereign credit metrics in 2018, the agency continued. FX reserves have continued to rise for the North African county, reaching some $26 billion as of end January 2017, up from $24 billion in December 2016, and more than $10 billion up of Egypt’s July 2016 low. In line with this the Egyptian pound has also continued strengthen, up 20 per cent against the USD since late December 2016,
12 page 12 Happenings.indd 12
reversing some of the losses following flotation in November. The agency went on to comment that a return of foreign inflows in Egyptian treasuries prompted a partial retracement of government debt yields, with 91-day T-bill yields down by around 200 basis points in the month in mid-February. Anecdotal evidence suggests that progress has been made in clearing the backlog of FX demand in the economy, Fitch continued. These positive developments largely reflect inflows from multilateral and bilateral institutions—notably the IMF and World Bank—and a resumption of foreign portfolio inflows and remittances after the authorities floated the pound, as well as import compression and improving export activity, said the agency. Fitch commented that this is in line with
the agency’s general expectations when it affirmed Egypt’s ‘B/Stable’ sovereign rating in December of last year following the floatation of the EGP and IMF board approval of a $12 billion extended fund facility, $2.7 billion of which has been disbursed. Furthermore, the rebound in FX reserves has been stronger than anticipated, due to a large international bond issue in January of $4 billion. A completion of the first review of the IMF programme before the end of June 2017 would release an additional $1.25 billion, providing a further boost to reserves and economic and investor confidence. Fitch believe that this is a likely result as Egyptian authorities appear to have met monetary targets, as well as the introduction of VAT in September and controls being put in place on civil service wage growth and other measures suggest that budgetary targets will be broadly met. Implementation risks still exist, however, particularly on the fiscal side, said Fitch. Despite recent appreciation in the Egyptian pound, the currency is still around 44 per cent weaker than it was prior to the flotation, which may make more extensive near-term subsidy reforms necessary to achieve 2017 deficit targets. This would add additional inflationary pressures on the Egyptian economy and would be politically sensitive, adding to the risk that social unrest will prompt the government back off from some reforms, the agency continued. In conclusion, Fitch believes that the Egyptian government’s ability to balance fiscal, monetary and economic reforms with the risks of a social backlash remain an important sovereign rating consideration.
www.bankerafrica.com
20/03/2017 11:52
HAPPENINGS
th
11 Africa Finance & Investment Forum concludes The 11th edition of the Africa Finance & Investment Forum concluded at Strathmore University in Nairobi, Kenya
Christian Mwijage, MD, EcoAct (Tanzania) winner of the AFIF Entrepreneurship Award 2017.
T
AFIF 2017 is a pan-African meeting of entrepreneurs and investors convened by EMRC.
he Af r i c a F i n a n c e & Investment Forum (AFIF) 2017, a pan-African meeting of entrepreneurs and investors convened by EMRC took place between 13 and 17 February 2017 in Nairobi, Kenya. The conference brought together over 200 participants with the aim of addressing how to increase access to finance in leading economic sectors of Africa, namely agriculture and agribusiness, infrastructure, energy, water and healthcare. Some 400 B2B meetings between investors and entrepreneurs were organised during the event. Ban Ki-moon, former UN Secretary General, who was in attendance for the event, delivered a keynote speech. The former Secretary General stated that, “Social and economic development can only be led by the private sector.”
He went on to further encourage young entrepreneurs to form alliances and network with peers, adding the governments should aid this in creating a supportive environment for the private sector to operate without restrictions. The AFIF Entrepreneurship Award 2017 went to Christian Mwijage, Managing Director of EcoAct (Tanzania). EcoAct Tanzania is a social enterprise established with the aim to address the challenges of urban waste management, plastic pollution, deforestation and climate change. Through recycling methods, EcoAct transforms consumer waste plastic into durable and environmentally friendly plastic lumber. “This award will help me to increase my production by 30 per cent,” Mwijage explained. “Aside from the prize, I’m
Ban Ki-moon, former UN Secretary General, gave a keynote speech at AFIF 2017.
going back home very empowered thanks to the two-day training that we have received. This is the best way EMRC is supporting entrepreneurs.” The hands-on training Mwijage is referring to, entitled ‘Scaling your Entrepreneurial Venture’, took place from 13 to 14 February at the Strathmore Business School. Entrepreneurs learned how to present a business plan, how to pitch and communicate your project and how to access funding in Africa. There was a special session additionally conducted on the Japanese Kaizen method, delivered by experts from the Japan International Cooperation Agency (JICA). Kaizen, Japanese for ‘improve’, in business refers to a continual improvement process of all functions involving all employees from the CEO down.
www.bankerafrica.com
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13 20/03/2017 12:58
OPINION
Executive expansion Executive talent and leadership is the backbone of financial services expansion in Africa, says Magdy El Zein, Managing Director, Boyden Middle East
Magdy El Zein
T
he financial services market in Africa is evolving very quickly in the major countries and hubs. Financial services institutions are having to adopt innovation and technology to attract new clients and improve their market penetration. As a consequence of these rapid changes over the past few years, the skillsets critical to the leadership of African financial institutions have also changed and evolved. The new leadership needs to understand and comply with the global
14 page 14-15 boyden.indd 14
regulatory environment, ensure that corporate governance is of world class standards in a continent where historical substandard practises were accepted in the 1980s to 1990s. As a few countries in Africa benefited from the commodity boom, economic growth accelerated at above average rates, which has prompted financial institutions to accelerate their expansion plans both locally in the case of most banks as well as regionally for major players. These expansionary models resulted in the need to possess strong risk management, business development
and people management skills to ensure the successful execution of the growth plan locally and across the continent. While the institutions continue to grow their franchises geographically, new technological advances and the ongoing digitalisation of the financial services industry have exponentially increased the demand for tech savvy talent capable of visualising futuristic services focused on reaching millions of customers via their smartphones and tablets. Smartphone-based payment systems are being rolled out across
www.bankerafrica.com
20/03/2017 13:56
Leadership needs to be carefully chosen, says Zein (CREDIT: JIRSAK/SHUTTERSTOCK).
the continent and financial institutions are having to adapt their offering and follow the fast paced development, and adoption of new technologies. Based on research results, in the majority of high performing institutions the leadership are champions of the technological drive and therefore the level of adoption of these solutions was high. The capex investments in technological platforms mean that while improved services should result in customer satisfaction, the leadership has to ensure that they manage costs to avoid eroding margins, and maintain or improve profitability of their different products. At the same time, regulatory changes have meant that financial institutions need to look at the way they work and make revisions to their business models. These changes in process and potentially culture require a major change in the way leadership think about the business—it requires a change from what has always been done. Taking relatively dormant local traditional retail institutions to cutting edge, modern institutions with broader services and product offerings to both retail and institutional clients and competing against major international players has resulted in a major upgrading of the executive talent taking on responsibilities at a relatively young age. There has also been a strong push on identifying African talent residing in developed markets and trying to attract them back to their original home countries to accelerate the transfer of knowledge and world class practises. As a consequence of all of these changes, the financial rewards and incentives have become more attractive and driven by performance. It also creates an additional challenge—that of retention of talent in a competitive environment. Talent needs to be a priority and effectively managed to ensure business growth and continuity.
Despite the recent drop in the commodity prices, and the economic difficulties that this has created in countries such as Nigeria and Angola, the general consensus is that Africa will continue with the modernisation of the economy and financial institutions will need to follow. The leadership of these institutions will have to focus on upgrading their talent pool across the board, investing in their future leadership in order to build a sustainable business, and by doing so expand their customer base and the economy. This puts the leadership of these financial institutions in the driving seat, spearheading economic growth by inclusion of previously excluded communities which will undoubtedly further enhance socioeconomic development in countries which were left behind for decades. With these ambitious requirements, the future leadership will need to be selectively chosen. They need to be strong, innovative and forward-thinking, people who are open to change and new technologies, and who are able to make the big decisions that accompany major changes, as well a strategic enough to ensure that the customer and business lead technology innovations, and not the other way around. Time needs to be invested in attracting and retaining this type of talent now in order to ensure business development in the face of increased competition for business and people, increasingly demanding and evolving customers, and potential changes to the economies and regulations of African countries in the months and years ahead. By appointing the right leadership and embracing world-class management and team development practises, financial institutions in Africa are demonstrating how they can become a powerful and sustainable force in preparing the two billion plus population of the continent to face the challenges of the 21st century.
www.bankerafrica.com
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15 20/03/2017 13:56
OPINION
Driving financial inclusion in Africa Verdant Capital has identified four main themes as the driving forces behind financial inclusion Technology is a key driving force behind financial inclusion (CREDIT: LIU ZISHAN/SHUTTERSTOCK).
A
critical theme in terms of the development agenda in Africa is financial inclusion, this means increasing the proportion of poorer people (including those who live in rural areas) who have access to financial services, for example basic savings products, credit and insurance. Persons without access to such services are said to be financially excluded. We identify four key themes driving financial inclusion in Africa: (i) technological change, (ii) adoption of best practice, (iii) the broadening of wholesale funding markets available to the lending institutions on the ground, and (iv) finally, financial inclusion has become a mainstream segment for a broad range of market participants such as private equity, entrepreneurs, and mergers & acquisition (M&A) advisors. Technological change has driven financial inclusion to the extent that traditional measures of access to financial services have become much less relevant.
16 page 16-17 Opinion_042.indd 16
For example, in Kenya, perhaps the most advanced adopter of mobile money, 68 per cent of people report use of phones for a financial service, versus only 23 per cent who have saved at a bank in the last year. Mobile money technology, defined as services transacted using the USSD code transmitted through the mobile network, initially a portal for transmission of payments, has evolved and companies such as JUMO World and Getbucks have developed technology for the USSD code to be a means of disbursing and repaying loans, and access to basic savings products. Mobile money can help remove the costs associated with physical banking, e.g. expensive branch infrastructure and reduce the need for the expense of moving cash,
thereby reducing the absolute costs of doing business with bottom of the pyramid customers especially in rural areas. Clients who would otherwise be uneconomical to the bank because of opex/loan or opex/deposit ratios can be banked effectively using technology of this type. The technology has also had a revolutionary impact on many customers’ lives, who have access to a traditional bank account, by negating the burden of walking long distances to a bank branch. There is the potential for further revolutionary change in mobile money. For more affluent customers, over the last decade, going to the bank branch has been replaced by on-line banking, and more recently mobile apps for smart phones.
ACCESS TO FINANCIAL SERVICES (TRADITIONAL MEASURES) USA India Nigeria Kenya
Bank branches per 100,000 adults 35.4 10.6 6.4 5.2
Saved at a bank in the past year 50.4 per cent 11.6 per cent 23.6 per cent 23.3 per cent
Access to personal credit 61.9 per cent 1.8 per cent 0.8 per cent 6.1 per cent
Source: Global Findex, World Bank
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The cost of smart phones has fallen rapidly to less than $100 per phone, and financial institutions such as RenMoney in Nigeria are extending credit to customers for the purposes of buying a smartphone. For many customers this is a means to get online for the first time. Smart phone penetration has grown to 19 per cent in Sub Sahara Africa as estimated by JUMO World. Mobile app banking offers the potential for a much broader range of services than banking by USSD message. That said, it is too soon to predict the demise of USSD-based mobile banking, as battery life constraints (and access to power) and limited 4G coverage, restrict the potential of app-based banking in much of rural Africa. Furthermore, if you exclude South Africa, Kenya and Nigeria from the smart phone penetration statistics for Africa, the average is reduced to around nine per cent. Leaving aside technology, applications of best practices, or new products, often learned from competitors and/or from other markets is also important. An example is agency banking, where a rural bank or microfinance institution uses agents to extend its geographical coverage to areas too small to support the cost of a branch. Depending on the precise model, agents can be shopkeepers running a petrol station or small shop as their primary business, such as introduced by First Allied Savings and Loans in Ghana, or can be outreach agents without a fixed location. It is wrong to assume that technology such as mobile banking will ultimately replace outreach practices such as agency networks, for example mobile money payments business models use agents to collect cash for value as mobile payments. Leaving aside factors driving down the cost of doing business with the bottom of the pyramid, provision of credit to micro enterprises and the “missing middle� is dependent also on the microfinance banks and other lending institutions
Ed Higenbottam, Managing Director, Verdant Capital
mobilising funding to lend out. Microenterprises and SMEs have been largely ignored by the traditional banking sector in Africa given the specialist skills required the manage the associated credit risk and the type of institution that can manage the associated operating costs notwithstanding the small loan amounts. The institutions that are active in lending to these segments are microfinance institutions and a range of alternative finance institutions that lend to the missing middle (including specialists, in products such as leasing, supply chain finance and merchant credit). Globally an investor base of 60-70 institutions has emerged over the last ten years, with assets under management of around $15 billion (Verdant Capital’s estimate) allocated to the sector in developing markets globally. Ten years ago a corresponding figure was around $2 billion of assets. Africa has historically been underrepresented benefiting from about 10 per cent of the funds, but many investors have soft targets for Africa to be 20 per cent of new loans. A critical factor is the emergence of an active foreign exchange hedging market for a broad range of African currencies.
Ten years ago in Africa, hedging was available only for the South African Rand, but now three to five year hedges are available for the currencies of most of the large- and medium-sized economies in Africa. The availability of the hedging market is a critical risk mitigant for alternative finance institutions lending mainly in local currency but borrowing from international funds. In the last 12 months, Verdant Capital has raised funding for alternative finance institutions in five different African countries, and the bulk of the funding has been raised in local currency. Finally, as the sector has grown, an active M&A market has grown. A community of about half a dozen specialist private equity funds are investing in Africa, dedicated to developmental financial services, and at least two more are fund raising. Many of these funds are now in exit mode for their investments in their first and second funds. Cross-border M&A, driven by desire to enter new markets, has also been a significant driver, for example earlier this year, Verdant Capital sold leading Ghanaian consumer lender, afb Ghana, to Letshego, a leading pan-African consumer and micro-enterprise lender. Finally, consolidation within markets is also an important factor, as speciality institutions look to grow their product mix, for example the acquisition of FIDES Bank by Trustco in Namibia in 2014. The renamed Trustco Bank has restarted SME-lending this year following capital raised by Verdant Capital. In all we have seen around 30 M&A transactions in the sector in the last five years. Financial inclusion, or reducing financial exclusion, is an important part of human development in Africa. However, to view this from the opposite perspective, financial exclusion represents a vast commercial opportunity to businesses who can exploit this gaping (but in many ways challenging) market opportunity.
www.bankerafrica.com
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17 20/03/2017 13:58
THE MARKETS
2016 was tough on African equity markets, says PwC in a report (CREDIT: VINTAGE TONE/SHUTTERSTOCK).
Incoming upswing for equity markets A challenging 2016 for African equity markets should pave the way for improvements in 2017
A
frican equity markets had a tough year in 2016 in the midst of global economic slowdown and political upheaval. In a PricewaterhouseCoopers report, 2016 Africa Capital Markets Watch, the organisation revealed that African equity capital markets bucked three years of growth in 2016 and recorded a decline of 28 per cent in the number of transactions and a 33 per cent decline in capital raised over 2015 in US dollar terms.
18 page 18-19 Markets.indd 18
The report aims to analyse equity and debt capital market transactions between 2012 and 2016 in both exchanges and African companies on exchanges. Since 2012, the report has found that there have been a total of 450 African equity capital markets transactions which have raised a total of $44.9 billion, up eight per cent in capital raised terms over the period 2011 to 2015. Transactions incorporated in this analysis included initial public offerings (IPOs) and further offers (FOs) by
African companies on exchanges worldwide, in addition to offerings made by non-African companies on African exchanges. Analysis of debt capital markets (DCM) transactions was limited to debt funding raised by African companies and public institutions. Nigeria was highlighted in the report for the challenges the West African state faced in 2016. The report goes on to state that these challenges were mainly a result of lower commodity prices and an uncertain environment regarding transactions or investment in foreign currency as a result of the disconnect between the official and parallel market pricing of the naira. Darrell McGraw, PwC Capital Markets Partner based in Lagos, said, “Many African economies, in particular those dependent on resources suffered in a low growth environment, significantly reducing ECM activity, and a continued lack of clarity around foreign exchange risk in Nigeria further discouraged foreign investment.� The Central Bank of Nigeria moved to a managed float of the naira in June 2016 which, although bringing about a brief alleviation of the problems between the official and parallel exchange rates, also brought on rapid currency devaluation and failed to entirely address the differences between the two rates. The report also emphasised that other major oil exporting economies, such as Angola and those in the CEMAC region, continue to be vulnerable to lower commodity prices, which could lead to extended currency weakness and a more depressed economic outlook. In contrast, the report argued that East Africa continues to be a brighter spot from a growth perspective. Several countries in the region, such as Ethiopia, Kenya and Tanzania have posted GDP growth for 2016 of 5.5 per cent or higher, according to the
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there was a significant increase in ECM activity, particularly IPOs, in the second half of the year, indicating the cautious optimism of issuers and investors as the year progressed,” continued McGraw. In terms of value the JSE was in lead position in African capital markets, with the next largest IPO proceeds originating from the EGX at $1.1 billion and the Nigeria Stock Exchange at $751 million. IPOS CONTINUE Coenraad Richardson, PwC Capital TO BE POSITIVE Markets Partner based in Johannesburg, From an IPO perspective, $1.5 billion said, “The JSE retains the leading was raised in 2016, PwC noted that this year were by consumer goods • Although overall ECM activity position in the African capital markets, although this represents a decline over decreased in 2016 in terms of both companies; Dis-Chem, the South transactionwith volume capital and value asraised from IPOs by Africanthe pharmacy chain and Arabian 2015, overall trend for IPO activity Food Industries Company Domty compared to 2015, there was a companies the JSE representing 42 has been upward in the five year period (‘Domty’), a leading Egyptian cheese significant increase in ECMon activity, and juice concern. particularlyper IPOs,cent in theof second half African IPO capital the total from 2011 to 2016. Over this period, of the year, indicating the cautious and 34 per cent of the total number of African companies worldwide, and nonDue to the potential individual optimism of issuers and investors as transactions since 2012.” African companies on African exchanged significance of transactions to a year’s the year progressed. ECM results, continueinto 110 analyse raised $6.5we billion IPOs. From trends both on an annual basis and • Our analysis is based on figures a over sector standpoint, financial FOs a five-year period as an indication services denominated in USPERFORMANCE dollars. The of longer-term decrease inREFLECTS activity noted above continue to trends: be the stand-out leader CHALLENGES (and pictured in figure 3) reflects with 45 per cent of total value in the FO activity in • Since 2012, there have been 450 the decreasing US-dollar value the of African market saw African ECMmarket transactions raising 2016, a proceeds in currenciesdecrease such African IPO during and raised a significant in 2016, both in total of $44.9bn, up 8% in terms of as the Egyptian pound and Nigerian 55 per cent of total volume, followed terms of transaction volume, down 27 capital raised over the previous fivenaira. by consumer goods, 31 per cent, and per cent, and transaction value, down year period 2011-2015. industrials, 13 per cent. 34 per cent. This decline in FO activity “Overall ECM activity decreased points toadjusted uncertainty in the African Note: Data presented in our 2016 Africa Capital Markets Watch report has been for two additional 2015 IPOs (Bank of Africa-Mali SA of $14m and AFMA SA of $18m), and in 2016 in terms of both transaction region reflecting challenges on both a two additional 2015 FOs (Banque Centrale Populaire of $170m and Investec Property Ltdvalue of $178m), were addedto to the Dealogic dataset subsequent to our 2015 volumeFund and aswhich compared 2015, regional and global level.
For the five year period between 2011 and 2016, 340 FOs have been conducted on both African and international exchanges, raising a total of $38.4 billion. The financial services sector was also in a commanding lead for FOs, accounting for 47 per cent of FO value, followed by healthcare which accounted for 12 per cent. PwC also highlighted that DCM activity, in particular Eurobonds, represents only a portion of the total debt raised in Africa. Investment grade and high-yield proceeds from Eurobond issuances by African corporates met continued decline in 2016, falling 21 per cent to $4.5 billion, with the number of issuances falling by 53 per cent. Andrew Del Boccio, PwC Capital Markets Partner based in Johannesburg, notes, “Despite challenging times, we expect to see improved conditions around capital markets activity in 2017, continuing the momentum built in the final two months of 2016, including an increase in ECM activity by companies on the JSE as well as by companies pursuing privatisation plans through the capital markets in Nigeria, Rwanda, Tanzania and the BRVM region.”
World Bank the and IMF. Meanwhile, oil-importing countries have shown continued resilience, said PwC in the report, highlighting that Côte d’Ivoire is expected to become the fastest growing economy in Sub Saharan Africa for 2017 with anticipated GDP growth for the year to hit eight per cent.
can equity markets
publication.
IPO TRENDS BY YEAR, 2012 - 2016
African IPO Market
2 500
35 30
90
76
9 000
6 000
68
52
5 455
51
5 102 22
3 000
0
401
891
2012
2013
Source: Dealogic
page 18-19 Markets.indd 19
25
13
Value IPOs ($m)
n non-commodity Source: Dealogic o the growth story of omies, such as energy, e, agriculture and ods continued to form a cant component of African . Two of the top 10 IPOs
9 478
1 701 2014 Value FOs ($m)
30
African IPO trends 80 11 060 70
• Over the past five years, there have 60 been 110 IPOs by African companies on both African and50international 7 286 exchanges, raising $6.5 billion, a 40 7% increase in capital raised over 30 the preceding five-year 30 period. Volume
Value ($million)
12 000
20
2 000
25 22
20 20
1 701 1 522
1 000 13
20
25
2 023
1 500
891
15 10
500
• 2016 saw the lowest volume in IPO since 2013, 10 although there 2activity 023 1 522 has been an overall 0upward trend 2015 2016 over the five year period.
5
401 0
# IPO transactions
2012
2013
Value ($m)
2014
2015
2016
0
# IPOs
• During 2016, eight of the top 10 # FO transactions IPOs by proceeds were launched on domestic exchanges in North Africa Source: Dealogic or on the JSE, demonstrating the Source: Dealogic resilience of more mature markets Figure 5: IPOs trends by half year, 2012-2016 in a difficult economic climate. • For the first time since 2013, none of the top 10 IPOs had a primary or dual listing component outside of Africa, reflective of the declining risk appetite of global investors PwC | 9 for African exposure over the past year.
1 600
15
16
15
13 www.bankerafrica.com
1 400
12
14
1 425
activity in 2016 continued ated by the financials ding closed-end funds te), although this sector’s total was amplified by the on rights issue by Barclays y 2016, which accounted l ECM proceeds during
100
93
12
1 200
11
10 1 000 800
7
9
19
12 1020/03/2017 14:01 8
e
15 000
e story of 2016 is one of When analysing 2016 uarter, data indicates market sentiment in alf of the year, which 0% of 2016 IPO capital was raised in the last e.
Figure 4: IPO trends by year, 2012-2016
1 222
Figure 3: ECM activity, 2012 – 2016
Volume
EMC ACTIVITY, 2012 - 2016
9
mies, particularly those n resources suffered wth environment, with entering recession in cantly reducing ECM a continued lack of nd foreign exchange risk rther discouraged foreign
82
ar, ECM activity broke hree successive years of rding a decline in overall of 28% from 2015 in the ansactions and 33% from s of capital raised.
Value ($million)
South Africa began 2016 ws of a few large managed local listed companies by nts, shaking an investor lready bruised from out in late 2015.
($million)
he ECM results noted d half of 2015, 2016 nging year for African ets, primarily due to h or recession in larger nd new global political s introduced by the US le and the Brexit vote.
COVER STORY
Progress: positive In an exclusive interview with Banker Africa, HE Ahmed Osman, Governor, Central Bank of Djibouti discusses what his plans for the future are
20
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21/03/2017 15:55
W
HE Ahmed Osman
hat priorities do you have for 2017?
The strategic development initiatives of the Central Bank of Djibouti focus on five main areas: Modernise financial infrastructures; Provide the BCD (Central Bank of Djibouti) with adequate means to carry out supervision that meets the required standard of the banking sector. To this end, the agenda consists of developing human and technical resources with the ability to implement effective and efficient supervision and to ensure the financial soundness of financial institutions; Further strengthen the anti-money laundering and anti-terrorism financing framework to preserve the integrity and reputation of the financial centre in the context of significant inflows of capital and investors from abroad. The development and proliferation of financial delinquency on the international scene calls for continued vigilance and clampdown in this area; F urther strengthen financial inclusion: despite the growth of the national financial sector, there are still inadequacies in the financing of the economy, in particular for SMEs/SMIs, while the rate of banking services barely reaches 20 per cent; C ontinuously have legal and regulatory frameworks in line with the changing context and financial activities: supervisory guidelines for Islamic financial institutions, microfinance, regulation of electronic means and instruments of payment, etc. The priorities for the 2017 agenda include the operationalisation of many projects considered to be of major
economic and social importance. These include: The adoption of regulatory standards for the introduction of mobile banking in the domestic market; The implementation of the new, fully automated and integrated payment system; Unlocking and full exploration of the potential of Islamic banking, which after notable results in the last decade, is likely to bring significant resources to meet the financial challenges of our economic development.
Do you have any plans to help contribute to Djibouti’s role as a regional gateway to East Africa?
Due to its geographic location, Djibouti is naturally positioned to serve as a gateway for East Africa to the world, particularly Asia and Europe. Djibouti’s development strategy already includes a broad platform of services and logistics to exploit its natural advantage. In line with this strategy, the financial sector needs to expand and solidify to provide sufficient depth and robustness to support the intensity of the economic development model, which must extend its influence across a vast economic space. Thus, having a broad, solid and modern financial industry is a fundamental objective that we have been continuously working towards over a decade. The supply of the financial sector must be able to respond to the challenges posed by the country’s current economic development, while also capturing all the opportunities provided by the vast economic area of the Greater Horn of Africa. In practical terms, this vision is reflected in operational plans that give rise to considerable reforms and investments, which I mentioned earlier; a robust and secure financial ecosystem framed by efficient regulation. cont. overleaf
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21 21/03/2017 15:56
COVER STORY
cont. from page 21
Today, the financial sector hosts all ranges of basic finance and is a leader in the sub region. It needs to be strengthened further and become an international financial reference centre. I believe that all the ingredients necessary to realise this vision are being implemented progressively.
Which industries do you see as key to assisting in Djibouti’s development and what policies do you have in place to support these?
Djibouti’s development model stems from Vision 2035, the implementation of which targets a profound transformation of our society. To achieve this, the strategic industries, promoted to initiate the economic emergence of Djibouti, are above all those with high potential structuring. These industries are mainly associated with the large logistics platform and transportation infrastructure. Energy and water access
HE Ahmed Osman, Governor, Central Bank of Djibouti
22
is also a critical condition, and even a prerequisite for the success of Djibouti’s economic policy In this context, the financial industry, in connection with and in support of sustained economic development, is of strategic importance. Without a robust financial industry, there can be no significant impact in terms of development. In order to guide this process, the government introduced important reforms targeting investment promotion and the streamlining of administrative procedures. Professional skills and training have also attracted considerable investment in gearing the performance of the education system towards the new challenges of the labour market. In order to streamline its actions, the Government set up the Djibouti Economic Development Board (DEDB), a high-level steering and monitoring body for reforms and investments, headed by the Prime Minister.
What do you think the implications of the launch of Silk Road International Bank are going forward?
T h e l a u n c h o f t h e S i l k Ro a d International Bank facility contributes first and foremost to enrich the financial sector. By becoming the eleventh initiative, Silk Road completes the vast list of active lending institutions in Djibouti. Furthermore, the realisation of this project is the culmination of a vision that finds its most successful expression through a strategic partnership— by becoming the link devoted to the financial dimension of the Silk Road, Djibouti realises a long-standing dream to become a top international financial centre. By electing Djibouti as the financial anchor of the Silk Road strategy, Chinese investments are giving a new impetus to the influence of our financial sector. As a result, Silk Road International Bank is the first component of the future Chinese financial presence in Djibouti in return for its economic presence. Having already invested in all the key areas of development of our economy, Chinese capital must also express itself in the banking and financial sectors to support their development in the Horn of Africa. Silk Road International Bank is also one of the multiple facets of our country’s partnership with the Middle Kingdom [China]. Animated by a spirit of friendship, fraternity and solidarity, with the aim to create a win-win situation. This project involves a number of companies operating in the free zone with the Djiboutian government a shareholder at 25 per cent. Silk Road International Bank is expected to provide substantial financial support for the setting-up of new operators in Djibouti, and specifically the free industrial zone, which will generate significant job
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21/03/2017 15:53
Objectives set out in Vision 2035 are being realised in stages, says HE Ahmed Osman.
creation in the range of 5,000 at the end of 2017 and 15,000 jobs in three years.
Is Djibouti on track to achieve the goals outlined in Vision 2035?
It would seem that for the most part the answer is yes, because if I were to summarise in simple terms the Vision 2035, it is about creating a peaceful and prosperous society where everyone has the opportunity to succeed in life and even to flourish. To address this point, the objectives set out in Vision 2035 are being realised in stages, the essential components of this policy are taking shape—meeting the basic needs of the population has significantly improved in the last few years. Indeed, access to healthcare and housing has increased, poverty incidence has declined from 74.4 per cent to about 42 per cent.
The production, transportation and supply of water and electricity at competitive costs, have already been accomplished and for the past few months, the new train is carrying out its experimental trips. At the same time, new port construction projects are being launched, along with that of the future Chinese free trade zone.
What opportunities do you see for Djibouti and the Central Bank in 2017?
The current favourable climate, which is the result of a well-thought-out development policy, must be preserved and the Government is making every effort to keep up the pace of foreign direct investment and achievements: by Sunday 12 March 2017, the ‘Single Window’ was launched which aims to bring together the entire administrative body (administrative paperwork) in one place.
This leads to more simplified business start-up procedures with costs are reduced by half. The aim is to speed up business registration so that it does not exceed 72 hours (three days). The Central Bank is associated with all these projects and fully involved in their implementation, notably through the modernisation of financial infrastructures and the automation of financial operations. Through these initiatives, we intend to strengthen the process of financial inclusion by a significant uptake of low-income populations and/or on the fringe of the formal financial and economic circuit. Generally speaking, following the rollout of the first wave of projects and the emergence of integrated economic hubs, the year 2017 should, by knockon effect, allow to exploit other highpotential and unexploited economic sectors such as fishing or tourism.
www.bankerafrica.com
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23 21/03/2017 15:54
COUNTRY FOCUS MAURITIUS
Island sanctuary Traditionally topping the indices in Africa for governance, competitiveness and doing business, this month we take a look at the Mauritian economy The luxury beaches of Mauritius have played a significant role in the country’s successful tourism sector (CREDIT: LEOKS/SHUTTERSTOCK).
T
he Mauritian economy had a relatively good year in 2016. GDP growth was expected to grow by a modest 3.8 per cent in 2016, according to data from The World Bank. The bank did note, however, that much of this growth is dependent on whether public investment picks up in accordance with the 1.2 per cent of GDP lift in public capital expenditures, a figure targeted in the FY2016/17 budget. Traditionally Mauritius has been viewed as one of the most stable countries in Africa. Indeed it has, in the past, been referred to the “The Mauritian
24
Miracle” due to the success the island nation has had in driving increasing standards of healthcare and education for its citizens in addition to the country’s economic accomplishments. The latest Ibrahim Index of African Governance, published in late 2016, which provides an annual assessment of the quality of governance in African countries, found Mauritius once again emerging as the top performer—a position it has maintained since the index began in 2006. This adds further credence to the narrative of Mauritius as a stable functioning economy, and will aid it well in the face of unforeseen challenges.
Furthermore, Mauritius was also rated the best performing economy in Africa, and 45th out of 138 economies in the Global Competitiveness Report 20162017, published by the World Economic Forum. The country scoring most highly in contrast to other countries in the goods market efficiency pillar, ranking 26th, which represents the country’s ability to produce the right mix of products and services for its particular supply-and-demand conditions, in addition to ensuring that these goods can be effectively traded in the economy. Finally, Mauritius is also ranked first in Africa in the most recent cont. on page 26
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MAURITIUS
by the numbers POPULATION
1.3 million populous 157th most in the world Credit: CIA World Factbook (July 2016 est.)
TOURISM TOURISM WELCOME TO
MAURITIUS
10.8
% YoY Increase
INCOME
MUR
in 2016
TOP 10 BANKS IN MAURITIUS YEAR-ON-YEAR THE TOP 10 BANKS IN MAURITIUS:
55.9 billion
73% OF ARRIVALS CAME FROM: France Reunion Island United Kingdom
South Africa Germany India
China
0.44 % Liabilities UP 1.20 % Revenue DOWN 7.85 % Net profit DOWN 2.67 %
Assets UP
Credit: Statistics Mauritius
Credit: Banker Africa
ECONOMY Rated Best Performing Economy in Africa ated 45 out of 136 economies in The Global R Competitiveness Report 2016-2017, World Economic Forum Credit: The Global Competitiveness Report 2016-2017
3.7
%
Economic growth in 2015
Projected growth in 2016
Credit: Africa Economic Outlook 2016
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3.8
%
25 21/03/2017 16:21
COUNTRY FOCUS MAURITIUS
cont. from page 24
Doing Business report ahead of five other OECD countries. A higher ranking represents a regulatory environment that is more encouraging of the starting and operation of a local company. Exports for Q4 2016 registered a 6.5 per cent decrease year-onyear, amounting to MUR 20 billion, according to Statistics Mauritius. This drop was mainly attributed to decreases in exports in machinery and transport equipment, miscellaneous manufactured goods and ship’s stores and bunkers. These decreases left Mauritius with a trade deficit of MUR 25 billion, 13.7 per cent higher than Q4 2015. This deficit is expected to significantly increase in 2017, with Statistics Mauritus forecasting a trade deficit of MUR 94 billion for the year.
KEY SECTORS
In terms of how the economy has performed, there are several key areas to note. Since independence in 1968, Mauritius has developed from a low income agricultural nation to a diversified economy based principally on its industrial, financial and tourist sectors. Numbers from Statistics Mauritius indicate that tourism increased in 2016 by 10.8 per cent year-on-year, reaching nearly 1.3 million arrivals. According to the Bank of Mauritius, tourism earnings amounted to MUR 55.9 billion in 2016, a figure that is expected to increase
Best Bank Rank Bank 1
MCB Group
2
Barclays Bank Mauritius
3
Investec Bank Mauritius
4
AfrAsia Bank
5
SBI Mauritius
6
State Bank of Mauritius
7
HSBC Bank Mauritius
8
Bank One
9
ABC Banking Corporation Mauritius
10
Banque Des Mascareignes
Source: Banker Africa
to MUR 58 billion in 2017—a 3.8 per cent increase. Financial and insurance activities contribution to GDP increased 5.7 per cent in 2016, representing the country’s continued march towards embracing the financial services sector. Moody’s, in a report earlier in 2016 argued that Mauritius’s financial sector has provided support for economic development and generated foreign-currency earnings. The authorities have encouraged the development of the financial sector through preservation of tax and non-tax competitive advantages, maintenance of overall macroeconomic stability and fostering sector competiveness through financial innovation.
However, the agency argues, the sector’s complexity, size and linkages may also be a source of systemic risk for the country. Moody’s note that the authorities have been strengthening the country’s crisis management framework and working to reduce the Government cost of settling troubled banks, but challenges remain for the Government to continue to maintain broad macroeconomic stability until these changes have been put into place. Offshore banking account for a significant portion of the financial sector’s liabilities, some 43 per cent according to Moody’s, with an asset worth of approximately 50 times the country’s GDP. This makes Mauritian banks particularly sensitive to disruptions in the offshore sector, and means that banks could be exposed to refinancing risks. Overall though having emphasised the potential vulnerabilities from the financial sector, Moody’s views a systemic banking crisis as unlikely—based on the system’s sound capital and liquidity buffers.
OUR NUMBERS
Banker Africa’s analysis of the top banks in Mauritius has revealed some interesting results. In our first chart we rank the ‘Best Banks’ in Mauritius. This ranking is based upon two primary factors of equal weight—dollar growth year-on-year and overall size of the bank.
Credit: Domestic authorities/Africa Economic Outlook. Estimates (e) and projections (p) based on African Economic Outlook calculations.
26
www.bankerme.com
page 24-25 Country Focus Mauritius_Final.indd 26
21/03/2017 16:16
COUNTRY FOCUS
(CREDIT: VKILIKOV/SHUTTERSTOCK).
Continental challenges
Mauritius could emerge as a facilitator for African growth and development, says Vikram Dabee, Head of International Banking, SBM (CREDIT: PATRICE6000/SHUTTERSTOCK).
W
hat challenges have you faced with banking across borders in Africa?
The transformation of Africa from an underdeveloped to a developing continent is bound to be fraught with risks across political, economic, financial and social sectors. For too long now Africa has been a victim of political instability born out of poor governance, lack of transparency and disclosure, biased decisions, undue favouritism and corruption. cont. overleaf
www.bankerafrica.com
page 27-28 Country Focus-042.indd 27
27 20/03/2017 14:08
COUNTRY FOCUS
cont. from page 27
The legal system remains quite loose and the banking system is questionable at times. Africa has always been led by the informal sector whereby most of trade takes place. The risks to economic conditions stem from high fiscal deficit and current account deficit, high inflation and unstable exchange rate and all combined keep the monetary policies resistive to growth. African financial information is very often obsolete which makes decision making quite difficult. The opportunity to boost growth has not been accompanied by the right public and private investment and debt leverage to capital. The gap between the economic objectives and its means to achieve them has remained unfilled. As far as the social sector is concerned, Africa suffers a lot in terms high unemployment, questionable living conditions, and the capability to fund consumption remains low. With all these combined, the appetite to take on financial risk through financial intermediation is low. This vicious cycle needs to be broken. Africa is hungry for capital, especially in infrastructure and its propensity to save is too low to meet the huge demand. Liquidity from financial centres like Mauritius can help in reducing capital deficit through project financing, trade financing and wholesale banking. What are the solutions that you are using to address these challenges? The control of risks around politics, economy, and social sectors are not in the hands of foreign investors or lenders. The opportunity is for those who have deep pockets to play the high risk—high reward game. The only risk mitigant is to stay prudent and be selective in risk exposure, either funding capital investment or the working capital cycle. The exposure has to be either for asset creation or capacity expansion of the business enterprise.
28
high operating cost intensive retail loan portfolios. Customer delight comes from online product access, quick credit check and seamless disbursement of loans. The digital driven benefit for managing credit risk is access to a large data base enabling instant credit check on the borrower based on past behaviour.
How will SBM’s acquisition of Kenya’s Fidelity Bank impact your bank’s international banking operations in the future?
Vikram Dabee, Head of International Banking, SBM
Since African countries often fall prey to money launderers there is also a need for enhanced ‘Know Your Client’ protocols and due diligence exercises.
What impact, if any, has the ever-more digitally connected world had on international banking?
Digital in banking and financial services largely revolves around ease of doing business and establishing customer-service connects with the minimum use of brick and mortar branch infrastructure and people. Digital transformation has brought in significant improvement in transaction banking related products, such as payments, receipts and collections, what is called cash management services for both individuals and companies and helping to stay “cash less” or “less cash”. Banks now use digital for their
SBM’s growth strategy for the future is obviously focused outside Mauritius, and to build scale and profitability in the India-Africa corridor. India is preparing for second phase of growth momentum which began in 1991, while Africa is poised for superlative growth for the next two to five decades. The Africa story begins with entry into Kenya as hub for East Africa with gradual expansion into West Africa and other regions. The Mauritius operations now contribute to 90 per cent of the Group top and bottom line, which should decrease to 30 to 35 per cent in next five years or so, thereby achieving diversification of risk and reward.
What is your view for the future of international banking between Mauritius and the continent? Positives and negatives?
Mauritius is located as a financial corridor between India and South East Asia as well as Africa and GCC countries. Mauritius being an African country can emerge as liquidity aggregator to African growth, and facilitate in the management of investment, wealth of cash-rich companies, and ultra-high net worth individuals. All combined, it is a huge positive for Mauritius to connect the rest of the world to Africa through the financial and investment structures in Mauritius.
www.bankerafrica.com
page 27-28 Country Focus-042.indd 28
20/03/2017 14:08
THE BUSINESS OF BANKING Banker Middle East is the MENA region’s most prestigious financial title. Read by senior bankers & financiers across the Middle East, for more than a decade it has been the most informative source of news, developments and strategic thought from within the financial community.
Banker Middle East is a controlled circulation publication. You may apply to subscribe via our website or by emailing subscriptions@cpifinancial.net
CPI Financial FZ LLC • PO Box 502491 Al Shatha Tower, Office 1209 Dubai Media City, Dubai, U.A.E. Tel: +971 (0) 4 391 4681 • Fax: +971 (0) 4 390 9576 • www.cpifinancial.net BME_October 2016.indd 1
21/03/2017 16:41
OUTLOOK
Support for reform, declining fiscal imablances and improving forex reserves support a positive outlook for Morocco in 2017 (CREDIT: DMITRY KAMINSKY/SHUTTERSTOCK).
Morocco to pick up steam in 2017 Despite poor growth in 2016, the Moroccan economy is likely to improve in 2017
T
he Executive Board of the IMF has concluded its Article IV Consultation with Morocco. The IMF noted that despite Morocco’s continued improvements in macroeconomic conditions since 2012, growth has remained sluggish—likely due to a contraction in agricultural output and subdued non-agricultural activities.
Moody’s also improved its outlook to positive on the Government of Morocco earlier this year and affirmed the issuer and senior unsecured ratings of ‘Ba1’. The ratings agency stated in a release that there were two main drivers behind the rating action. The first driver was the country’s improving external position suggested by the build-up of foreign exchange
reserves in line with new resilient export industries and lower oil prices. The build-up of a foreign exchange buffer amounted to around seven months of import cover by the end of 2016, up from 4.1 months in 2012. Morocco has been one of the biggest beneficiaries of lower oil prices as the state is amongst the most energy import dependent countries in the MENA region, added Moody’s, which helps to support the long-term forecast for the preservation of the buffer. The second driver was that of declining fiscal imbalances, said the agency. This is reflective of gradual but steady fiscal consolidation, supported by reforms in fuel subsidies and public pensions which in turn supports a gradual reduction in public-sector indebtedness. The fiscal deficit declined to four per cent of GDP by the end of 2016, against an objective of 3.5 per cent of GDP for cont. on page 32
30 page 30-32 Outlook 042.indd 30
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OUTLOOK Graph 1.pdf
1
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cont. from page 30
elevated risks remaining due to credit 2016 but down from 7.3 per cent in concentration. IMF Directors noted 2012. This reduction has been partially that rising nonperforming loans, credit reliant on a drop in the energy subsidy Morocco FOCUS ECONOMICS concentration risks and expansion bill down to 1.2 per cent of GDP in in Sub Saharan Africa will require comparison to 6.5 per cent in 2012. The Real Sector Economic continued monitoring. fall in oil|prices played aIndicators key role here, In addition, comments were also but the elimination of fuel subsidies and Real made GDP in encouragement Fiscal Balance to authorities introduction of an automatic pricing in inregards to the to formula in 2015 also played a part, variation and % % ofsubmission GDP parliament of the draft central bank will continue to shield the country from Individual Forecasts 2017 2018 2017 2018 help strengthen an increasing Barclays Capital deficit should oil prices 2.3 law, which 3.5 would -3.3 -3.0 the Morocco of Bank Al-Maghrib USECONOMICSrise again, said Moody’s. independence BMI Research 4.3 3.8 -3.4 -3.1 its roles In a release made in late 2016, BNP Paribas 4.1 and expand -3.5 into promoting t Sheet financial stability and inclusion. Fitch Ratings stated that for the Capital Economics 4.5 5.0 -3.0 -3.0 The Directors also welcomed efforts Moroccan banking sector structural Credit Agricole 3.9 4.0 eral Data Morocco in the Region by Bank Al-Maghrib’s to strengthen strengths and weaknesses were EIU 3.6 3.3 -3.7 -3.6 t h e f i n aPopulation n c i a l r e| %-share g u l a t o in r yMENA and unlikely to change much for 2017. A al name: Kingdom of Morocco Emirates NBD 4.7 4.8 -3.1 -2.5 supervisory environment. key weakness highlighted by Fitch is al: Rabat (1.9m) Int. 4.8 4.2 -noted in their the concentrations of highCasablanca single-name r cities: Euromonitor (3.5m) FocusEconomics Frontier StrategyinGroup 3.9 Forecast Middle - Morocco East & North borrowing Morocco’s banks combined Fes2.9 (1.2m)Consensus 8.5% Baerthe rising stock of impaired loans 4.0 Africa 4.0 - its panellists (km2): Julius with 446,550 March 2017 that 3.733.8expect3.9 Oxford lation (million, 2016 est.): to seeOther GDP-3.5 growth of -3.1 3.9 per inEconomics domestic books. Overall Fitch lation density (perbelieves km2, 2016): and four per cent in 2018 that we can expect further 75.8cent in 2017 29.1% Summary Egypt 22.9% lation growth rate (%, 2016 est.): 1.0 and a stable outlook weakening in the sector throughout Minimum 2.3 3.3 -3.7for the country. -3.6 expectancyMaximum (years,2017, 2016 est.): given for this were although the trends are 4.876.9The main 5.0 factors -3.0 -2.5 acy rate (%, 2015): 31.5a likely rebound in the agricultural not alarming. Median 4.0 4.0 -3.4 -3.1 Iraq uage: Arabic,comments Berber, Frenchsector, with 9.1% the external sector The IMF made similar Consensus 3.9 4.0 -3.4 -3.1also sures: systemexperiencing a strengthening Iran due to an in its Article IV Consultation,Metric stating Algeria 20.2% 10.2% : exports. that although the banks are wellGMTexpansion in manufacturing The IMF is more bullish on capitalised and have stable funding, Morocco’s medium-term prospects, nonperforming loans are rising with
nomic Infrastructure
Economic Structure 2
GDP | variation in %
communication (2015) phones - main lines (per 10 100 inhabitants): phones - mobile cellular (per 100 inhabit.): net Users (per 100 inhabitants): dband Subscriptions (per 100 inhabitants):
6.5 127 56.8 3.4
gy (2014) ary Energy Production (trillion Btu): ary Energy Consumption (trillion Btu): ricity Generation (billion kW-h): 0 ricity Consumption (billion kW-h): upply (thousand bpd): Morocco onsumption (thousand bpd): MENA World Emissions (million metric tons): 2005
37.3 812 27.1 28.9 296 51.7 2010
2015
2020
sportation (2013) rts: 55 Source: FocusEconomics ways (km): 2,067 4 | GDP | evolution of forecasts ways (km): 58,395 rways (km): 5.0 www.bankerafrica.com Ports: Casablanca, Safi, Essaouira 32
ical Data
100
2017
2007-09
2013-15
Morocco
MENA
120
2007-09
12.0 2013-15
2010-12
Net Exports
10
10.5 Manufacturing
5
2005
2010
2015
9.0
30
0
Services
0 2000
Investment
60
Other Industry
20
0
-4.9 -1.4 -2.5 -2.5
90
60
40
Current Acc % of GDP 2017 -2.5 -1.8 -2.3 -1.5 -2.5 -4.9 -2.9 -1.4 -3.0
GDP by Expenditure | share in %
Agriculture
Government Consumption
Private Consumption
7.5 2000
2020
-30
2005
2010
2015
2020
Source: FocusEconomics
Trade 5 Structure
6 | MAD per USD | evol of fcsts Primary markets | share in %
3.0 2017
10.5
2018
2017
2018
page 30-32 Outlook 042.indd 32
4.5
2010-12
March
3 | Exchange Rate | MAD per USD
GDP by Sector | share in %
15
80
5
-5 2000
forecasting growth of 4.4 per cent in 2017, and reaching 4.5 per cent by 2021. Notable risks listed by the IMF against growth prospects were given however, including growth in advanced and emerging countries, geopolitical tensions in the region, Prices (CPI) prices andExchange Rate world energy global financial market var. involatility. % MAD per USD C o n t i n u2018 e d i m p l2017 e m e n t a t i2018 on 2017 of1.9 reforms in regard to labour 2.1 10.20 9.70 March 2017 participation, labour 3.0 2.1 market 10.00efficiency, 10.00 access 1.4 to finance, - quality education, public spending efficiency as well as 2.5 2.8 further improvements to the overall 2.0 2.2 business environment will remain 2.1 2.2 10.17 9.90 key in maintaining and strengthening GDP | %-share in MENA 3.0 3.0 medium-term growth. More inclusive, 1.3 1.4 - growth sustainable and higher Morocco 3.3% 2.2depend on 2.3continuing - poverty will 1.5 reduction and1.5 lowering regional and 1.5 disparities, 2.0 added 10.40 SaudiIMF. 10.25 gender the Arabia Overall the economic21.7% future of Other 38.4%seems to be improving over Morocco 1.3 1.4 10.00 9.70 that reforms by10.25 the 3.0of 2016. Support 3.0 for10.40 Government suggests that it is unlikely 2.0 2.2 10.19 9.95 Iran 14.0% that this trend will change in 2017. 2.0 2.2 10.19 9.96 Although some risks do remain they Egypt UAE are generally10.7% constrained 12.0% to an extent thus meaning the outlook for 2017 will remain positive.
Other
Other EU-28 19.5%
Other
U.S.A. 6.5% Other EU-28
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A
FSIC is the leading investment event ADVERTORIAL focused on Africa’s financial services sector. The annual AFSIC, now in its 5th year, attracts financial services companies, predominantly leading Banks, Insurance Companies, Microfinance, Leasing and other FSIC is the leadingservices investment event focused regulated financial companies from on Africa’s financial services sector. The almost all parts of the African continent. AFSIC annual AFSIC, now in its 5th year, attracts financial 2017, 3-5th May 2017 in London, will again be services companies, predominantly leading Banks, attendedCompanies, by a recordMicrofinance, number of delegates. Insurance Leasing and
A
other regulated financial services companies from The wide spread of financial services companies almost all parts of the African continent. AFSIC attending from across Africa attracts a highly 2017, 3-5 May 2017 in London, will again be significant of of major institutional attended by aproportion record number delegates.
investors focused on investment into Africa,
The of financial companies and widespread those considering the services increasing merits of attending from across Africa attracts a highly doing so. These investors include Sovereign significant proportion of major institutional Wealth Funds, Supranational investors, listed investors focused on investment into Africa, and equityconsidering and private equity investors, African those the increasing merits of doing regulated asset managers, alongsideWealth impact so. These investors include Sovereign Funds, Supranational investors, listed equity and investors such as Development Finance private equity(DFIs) investors, regulatedfocused asset Institutions andAfrican microfinance managers, alongside impact investors such as investors. Development Finance Institutions (DFIs) and microfinance investors. In additionfocused to major Financial Services
companies and Investors AFSIC is well
In addition to major Financial Services companies represented by major Dealmakers focused and Investors AFSIC is well represented by major on Africa,focused such onasAfrica, Investment Bankers, Dealmakers such as Investment Stockbrokers, CorporateCorporate Finance Finance experts, Bankers, Stockbrokers, experts, Fixed Income Debtspecialists, specialists, M&A Fixed Income and and Debt M&A bankers many of whom attend the Meet African bankers many of whom attend the Meet African Dealmaker event which takes place on the first Dealmaker event which takes place on the first night of AFSIC in the historic surroundings of the night of AFSIC in the historic surroundings of British Houses of Parliament.
the British Houses of Parliament.
Africa is poised to experience strong economic Africa is poised to experience strong growth over the next 20 years and Africa’s Financial economic growth next 20 years and Services sector will beover a key the beneficiary. Favourable Africa’s Financial Services sector will be a to key demographic tailwinds, increased connectivity the global economy, falling corruption, rapid beneficiary. Favourable demographic tailwinds, urbanisation and technological changes with increased connectivity to the globalallied economy, substantial infrastructural developments across falling corruption, rapid urbanisation and Africa will all lead to sustained growth and this is technological substantial reflected in the changes continuedallied strongwith annual growth
infrastructural developments across Africa will all lead to sustained growth and this is reflected
34 page 34-35 Advertorial_042.indd 34
in the continued strong annual growth that AFSIC has demonstrated and is reflected in delegate numbers with 500 delegates expected to attend in 2017, with over 150 speakers in solo and moderated panel sessions and support from excellent sponsors. With companies from that AFSIC has demonstrated and is reflected in over 30 African countries expected to attend delegate numbers with 500 delegates expected in 2017 AFSIC offers delegates the chance to to attend in 2017, with over 150 speakers in develop and nurture a robust, extremely high solo and moderated panel sessions and support quality networksponsors. of friends,With colleagues, investors from excellent companies from and contacts across the continent over business 30 African countries expected to attendin in 2017 AFSIC offers delegates the chance to preparation for Africa’s continued emergence develop andexciting nurture investment a robust, extremely high as the most destination. quality network of friends, colleagues, investors This year in contacts conjunction FSD Africa, and business across with the continent in preparation for Africa’s continued emergence as AFSIC 2017 is hosting a new session focused the bringing most exciting investment destination. on opportunities in frontier financial
markets which are often overlooked to the This year in conjunction with FSD Africa, AFSIC attention of investors. Based in Nairobi, FSD 2017 is hosting a new session focused on bringing Africa is a UK in Government agency for inclusive opportunities frontier financial markets which are often overlooked to the attention of investors. financial sector development in sub-Saharan Based inIt Nairobi, FSD Africa is a UK Government Africa. is mandated by the Department for agency for inclusive financial sector development International Development (DFID) to be a risk in sub-Saharan Africa. It is mandated by the taking capacity builder and investor in both Department for International Development (DFID) the retail and capital market fields. begin, to be a risk taking capacity builder andTo investor in both the retail and capital market fields. it will focus on: the Democratic RepublicToof begin, itSierra will focus on:and the Zimbabwe. Democratic It Republic Congo, Leone will also of Congo, Sierra Leone and Zimbabwe. It will also prioritise two themes: forcibly displaced people prioritise two themes: forcibly displaced people and andthese theseare arereflected reflectedininthe the and remittances remittances and content theFSD FSD Africa sponsored content ofofthe Africa sponsored panelspanels and solos during AFSIC 2017. and solos during AFSIC 2017. According Huxley Africa’s – FSDRegional Africa’s According toto JoeJoe Huxley—FSD Regional Strategies Co-ordinator: “AFSIC is Strategies Co-ordinator: “AFSIC is fast becoming the premier investor for Africa. Weevent are fast becoming the event premier investor delighted help horizons andbroaden broker for Africa.toWe arebroaden delighted to help new partnerships focused on good quality, longhorizons and broker new partnerships focused term investments in Africa’s frontier markets. on goodtoquality, investments We hope unlock along-term valuable dividend for bothin Africa’s frontier markets. unlock a investors, but also some ofWe the hope most to vulnerable and marginalised onfor theboth continent.” valuable dividend investors, but also some of the most vulnerable and marginalised www.afsic.net on the continent.” www.afsic.net
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20/03/2017 14:10
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Banks, Banks,Insurance, Insurance,Microfinance Microfinanceand andLeasing Leasingcompanies companiesand andother otherAfrican Africanfocused focused Financial Financial Services Servicescompanies companiesfrom fromacross across Africa Africa attend attend the the annual annual AFSIC AFSIC conference, conference, which is being London from 3rd-5th May2017. 2017.Multiple Multipleopportunities opportunitiesfor for African African Financial beingheld heldinin London from 3-5 May Services Servicescompanies companiestotonetwork networkwith withInvestors Investorsare arebuilt built into into the the event event Programme. Programme. Want totowiden widenyour yourdeal dealnetwork networkfurther furtheracross across Africa? Africa? Don’t Don’t miss miss out out on on the the Meet Meet African Dealmakers Dealmakersevent eventbeing beingheld heldininthe theBritish BritishHouses Housesof ofParliament. Parliament.
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page 34-35 Advertorial_042.indd 35
35 20/03/2017 14:10
CASE STUDY
The value of a good name… Business valuation and strategy consultancy Brand Finance has released its report on the world’s most valuable banking brands, Banking 500 2017
B
rand Finance calculated the values of brands through a royalty relief approach that estimates likely future sales attributable to a brand and calculating a potential royalty rate that would be charged for the use of the brand if it were not already owned. Why is a strong brand so important? According to David Haigh, CEO of Brand Finance, in his foreword to the report, “Brand Finance’s recently conducted share price study revealed the compelling link between strong brands and stock market performance. It was found that investing in the most highly branded companies would lead to a return almost double that of the average for the S&P 500 as a whole. Acknowledging and managing a company’s intangible assets taps into the hidden value that lies within it…” Standard Bank topped the list for most valuable banking brand in Africa with an estimated value of $1.5 billion. Indeed, South African institutions dominate the top of the rankings, commanding the top five places. CIB and National Bank of Egypt mark the two Egyptian entries in the rankings, with Morocco’s Attijariwafa Bank making ninth place, and First Bank of Nigeria taking 10th place.
36 page 36-39 Case Study.indd 36
The report notes that this year’s analysis sees a major milestone with, for the first time ever, a non-western brand topping the table. Brand Finance names Chinese bank ICBC as the world’s most valuable banking brand and notes that total Chinese banking brand value now outstrips that of the US. UAE-based, Shari’ah-compliant institution Dubai Islamic Bank makes headlines too, showing the fourth largest increase in brand value 20162017 across the whole table, behind three Chinese banks. In fact, this year also marks the first time that Brand Finance has provided a ranking of Islamic banking by service brand value although the consultancy does say, “Though the most valuable contributions of Islamic banking are dwarfed by those from other areas, the industry is rapidly growing and will make an ever-increasing contribution to banks from the Middle East and the rest of the world too. “Dubai Islamic Bank currently has the largest brand value contribution from Islamic banking: $580 million of its $1.9 billion total brand value. This has helped the bank to register the fastest growth rate in the Middle East and one almost unmatched globally of 136 per cent year-on-year.”
Africa Standard Bank
Brand Value 2017 ($m) 1,512
ABSA
1,335
First National Bank
1,160
Investec
1,004
Nedbank
934
CIB
449
Capitec Bank
367
National Bank of Egypt
349
Attijariwafa Bank
323
First Bank of Nigeria
301
Source: Brand Finance
Middle East QNB
Brand Value 2017 ($m) 3,826
Emirates NBD
3,406
National Bank of Abu Dhabi
2,497
Abu Dhabi Commercial Bank
2,186
Al-Rajhi Bank
2,133
NCB
1,972
Dubai Islamic Bank
1,882
First Gulf Bank
1,861
NBK
1,592
Bank Pasargad
978
Source: Brand Finance
Islamic Banking Dubai Islamic Bank
Brand Value 2017 ($m) 580
Emirates NBD
502
Abu Dhabi Islamic Bank
435
Bank Melli Iran
252
Abu Dhabi Commercial
195
NBK
185
Qatar Islamic Bank
161
Sharjah Islamic
57
Union National Bank
45
Mashreq
31
Source: Brand Finance
The full Banking 500 2017 may be viewed at http://brandfinance.com/.
www.bankerafrica.com
20/03/2017 14:12
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23/03/2017 21/03/201709:30 11:12
CASE STUDY
Success follows innovation Efosa Ojomo, Research Fellow at the Forum For Growth and Innovation at HBS, had a discussion with Banker Africa on the obstacles to development in Africa, and how banks can help overcome them
W
hat would you consider some of the biggest obstacles to development in Africa?
I think that for me perhaps the biggest obstacle is the perception that there few opportunities in Africa. There are many challenges in corruption, infrastructure, human capital, regulation and working with government, but I think the biggest obstacle is this notion that
38
people in Africa have to boost their disposable income and then there will be opportunities. Broadly speaking you’ve got the OECD countries, you’ve got China that’s really on the rise now, you’ve got lots of European countries, they have all the capital and there’s a way that they have figured out how to invest. You go in and figure out the kind of investment you’re going to need, you already have a product developed because they’re
products that have worked in your market, and then when you take all that information and you look at Africa there are absolutely no opportunities. It’s very understandable why less than three per cent of global FDI in 2015 went to Africa when you look at it that way. When you look at it another way though, then you start to see the opportunities emerge. What’s fascinating about that is every rich country that we have today has come from a place where
www.bankerafrica.com
page 38-39 Case Study V2_042.indd 38
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How can the banking and finance industries help this process?
That's one of the struggles we have with development today. When we look at the best hospitals, the best banks, the best consumer product companies, and by the best we mean the most profitable, the most market cap and so on, they reside in the west, for the most part. Now here’s the thing, as a result of that we all want to be the best so we copy the best models. So when you look at our banks today, in form and function, for the most part they look like banks in western countries.
What needs to change?
It’s going to take a different kind of thinking but it really requires them to say that we know that this is a problem, for example, not many people have housing, not many people have food, or we don’t have good schools but we know that viable business models exist, we can develop them, let us deploy capital, not just financial capital, but human capital, political capital, there are all these things they have to do at the onset... If you set up your bank today, you’ve got a checking account, a savings
We’re going to keep on seeing Africa rising but Africans are not rising. That’s the problem. — Efosa Ojomo
Banks need to lead the way in funding innovative ideas (CREDIT: CHONES/SHUTTERSTOCK).
the demographics in those countries looked like the demographics in many African countries today. So for me, the biggest obstacle is really our understanding of what an investment opportunity looks like. Some other obstacles are the ease of doing business, infrastructure and so on, but I think those are minor in comparison to this perception issue that because people are poor there are no opportunities.
But the interesting thing is that when you rewind and look back to when America was not as rich as it is today, and likewise with England and Scotland and so on, what you find is that these banks did not look like they do today. Banks at the time were a lot closer to the innovation of the investments that they were making. Simply deploying capital is not enough and expecting regular returns is not enough. Many folks are familiar with the story of JP Morgan and Thomas Edison. They worked in close connection together and that is the function that banks have to do today. You have to create a division that not just deploys capital, because as we are there really is not yet what I call a specifiable verifiable and predictable investment with that. At the moment what you end up doing is funding projects that can give you what you call specifiable verifiable and predicable—so you end up funding oil, extraction, diamond mines, coal mines and so on and these, while these investments are important, they by themselves cannot engender economic prosperity.
account, money market investments and it looks like banks in France, Germany or America unfortunately you’re just not going to grow. We’re going to keep on seeing Africa rising but Africans are not rising. That’s the problem. You know JP Morgan didn’t simply say ‘hey Thomas Edison here’s some money go invent stuff ’. He worked closely with him; his was the first house that was experimented on. He introduced him to other people. That’s the kind of role that our banks need to be taking right now. Again, what’s fascinating is that if you go back far enough, even in Europe, all the financiers who lent money to the kings so they could fight wars and enlarge their territories, many of these guys weren’t simply just bankers, they were involved in what I would call the industry so to speak. This is the close connection with capital and what capital did, we don’t have the luxury to isolate capital the way it is today, we need to marry capital with innovation.
www.bankerafrica.com
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39 20/03/2017 14:14
SECTOR FOCUS RETAIL BANKING DIGITAL TRANSFORMATION
The only way is up for the digital banking growth in West Africa (CREDIT: SDECORET/SHUTTERSTOCK).
West Africa’s digital future Digital infrastructure is growing in the West African region, according to a new report
A
frican markets have already proved to be a hotspot for new digital banking technologies. Often the argument has been made that because firms are more constrained on the African continent by under developed existing infrastructure, than they might be elsewhere, they have had to employ new innovative technologies in order to bridge the gap. High mobile phone usage rates and penetration, coupled with a digitally-savvy population has aided Africa moving to the forefront of digital innovation in the financial services space. In a new report by Efma in collaboration with Oliver Wyman titled Retail Banking in Africa 2016: Digital Transformation, the organisations took an in-depth look at how retail financial organisations across Africa are transformation their businesses with digital technologies.
40
“Banks across Africa are leaping at the chance to adopt new technologies that are allowing them to develop new ways of doing business,” explains Vincent Bastid, Efma’s CEO. “They’re changing the way they connect with their customers, they’re enhancing their value propositions and they’re optimising their operations along the way. In this regional review we present the main challenges and opportunities that banks across Africa face as they seek to connect with a new generation of customers and put digital at the centre of their business models.” So far, the report states, most of the partnerships between banks and telco providers in bringing banking services via technology to new unbanked markets has been restricted to the East African region. However, this is changing with partnerships emerging
AFRICA IN 2020:
~50%
of population will have a smartphone
~37%
mobile penetration
650 million smartphones in circulation Source: Retail Banking in Africa, Efma & Oliver Wyman
www.bankerafrica.com
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20/03/2017 14:16
How payment methods are changing in the West African Economic and Monetary Union zone1
Growth of e P2P paymen Africa, €Md
2%
0% 5%
E/m-comm
15%+
18%
allowing consumers to access more Mobile money HOWpayment PAYMENTmethods METHODS ARE CHANGING How are changing Growth of Electronic money 30% IN THE WEST AFRICAN ECONOMIC complex financial services than they in the West African Economic and AND P2P paym Cash 1 MONETARY UNION ZONE 1 might otherwise be able to do with a Monetary Union zone Africa, €Md 95% standard feature phone. 80% 2% 0% Speaking on the continent as a 5% E/m-co 55% 15%+ 18% whole, Greg Rung, Partner at Oliver Mobile money 0 0.3 Wyman said, “Africa’s population of Electronic money 30% Cash 2015 20 2016 2011 2021 1.1 billion is set to double by 2050 and with it will come a need for widespread Based on95% interviews with retailers in West Africa 80% Source: Ovum, Rocket I Source: Ovum, GSMA, Oliver Wyman access to financial services.” 55% “Before we get to this point, banks 0.3 must tackle low banking penetration Banks need to move fast. Africa is quickly becoming better connected and get rates within the existing population. access to 2011 2015 2016networks 2021(see chart below left), opening up opportuniti faster mobile To do this, they will need to develop for moreBased advanced, sophisticated mobile banking services. Fast-growing mobi on interviews with retailers in West Africa How payment methods are changing Growth of e/m-commerce andincreasing adoption of smartphones 1penetration Source: Ovum, Roc Ovum, GSMA, Olivercoupled Wyman phone Source: rates withinthe Based on interviews with retailers West Africa new approaches and new in the West African Economic and ways of (see chart P2Pbelow payments right) show that the market is ripe for digital innovation and Monetary Unionwith zone1 their customers, banks Africa, €Md connecting are making everyOliver effort to keep up with the pace of change and adapt Source: Ovum, GSMA, Wyman creating sustainable business models how customers connect between each other and with services. 1
1
0% 5%
2%
18%
15%+
Mobile money Africa’s population of 1.1 billion is set30% to double Electronic money Cash by 2050 and with it will come a need for widespread access to financial services. 95% 80%
— Greg Rung, Partner at Oliver Wyman
7.3
2.7
0.3 Mobile
network usage rates that improve financial inclusion, help 4G Number in the Economic 56% 2015 of subscribers 2016 2017 2018 Community 2019 3G 2011 to 2016 2021with new market them connect of West African States 2G Based on interviews with retailers in West Africa segments, improve their reach, and Source: Ovum, Rocket Internet 2015 annual report, Oliver Wyman Source: Ovum, GSMA, Oliver Wyman 84% keep costs down,” he continued. 1% 1% 15% Low banking penetration rates will be 43% 4G counteracted by increasing smartphone Banks need to move fast. Africa is quickly becoming better connected and getting 56% 3G access to faster mobile networks (see chart belowthird left), opening up opportunities adoption rates, as seen in the 2014 2020 2G for more advanced, sophisticated mobile banking services. Fast-growing mobile graph. Over the 10 years between 2010 phone penetration rates coupled with the increasing adoption of smartphones Source: GSMA, OVUM,84% Oliver Wyman until 2020right) theshow Economic Community (see chart below that the market is ripe for digital innovation and Source: Ovum, GSMA, banks making every effortStates to keep upwill with the paceaof change and adapt to Oliver Wyman 43% of are West African see how customers connect between each other and with services. smartphone adoption compound annual 2014 2020 growth rate of 46 per cent, suggesting SMARTPHONE ADOPTION RATES 8 Retail Banking in Africa 2016 that an enormous market will open up Mobile network usage rates Smartphone adoption ratesin the Economic Source: GSMA, Oliver Wyman Number ofOVUM, connections (millions) Community of West African States Number subscribers in the Economic Community Number of connections (millions) in the Economic in the ofnear future, and banks should be of West African States Community of West African States looking to position their institution now as the market leader in this imminent 1% 1% consumer segment. 8 Retail Banking in Africa 2016 15% The choice for banks is a simple 4G CAGR +46% 3G to one. Either they 56% will have 227 190 embrace new technology and 2G create 156 84% 125 innovative solutions in house, or 97 72 50 partner with existing43% fintech vendors 10 5 20 32 and telecommunication operators— 2014they risk 2020 otherwise being left behind by other institutions looking to pursue Source: GSMA, OVUM, Oliver Wyman Source: GSMA, OVUM, Oliver Wyman opportunities in this space. Source: Ovum, GSMA, Oliver Wyman
Smartphon
Number of co Community o
1
10 20
5
2012
2011
2010
Source: GSMA, OVUM
5
10 2
2012
2011
2010
Source: GSMA, OV
2020
2019
2018
2017
www.bankerafrica.com
2016
2015
2014
2013
Retail Banking in Africa 2016
2012
page 40-41 Digital retail banking.indd 41
1%
15% 0.9
2011
8
1%
55%
2010
across the continent and most recently in West Africa. This change, which is set to transform the West African banking sector, has been driven by the fundamental problems that traditional banking models are now facing whilst attempting to continue growth coupled with strong sector economics, said the report. Evidence to support this theory can be seen in the charts featured in this article. By 2021 cash transactions are set to shrink from its position as 80 per cent of payments in 2016 to 55 per cent, with huge growth occurring in mobile money. Another key facilitator in increasing the use of mobile money is better mobile data connections. By 2020 mobile network usage rates of 3G, a significantly faster mobile protocol which enables greater data speeds than the older analogue 2G system, will increase to 56 per cent from 15 per cent. This growth will support the development of West African banking services by
Banks need to move fast. Africa is quickly becoming better connected and g E/m-commerce access to faster mobile networks (see chart below left), opening up opportun MOBILE NETWORK USAGE mobile RATESbanking services. Fast-growing mo for more advanced, sophisticated phone penetration rates coupled with the increasing adoptionSmartphone of smartphon Mobile network usage Number of subscribers inrates the Economic of right) West States (seeCommunity chart below show that the Community market is ripe for digitalNumber innovation and Number of subscribers inAfrican the Economic of conn CAGR +171% are making the pace of change and ada 16.3 ofbanks West African Statesevery effort to keep up with Community of W how customers connect between each other and with services.
41 20/03/2017 14:16
TRAILBLAZER
Covering the underserved Jamii Africa is looking to change the insurance landscape with its innovative micro-health insurance product
I
n low-income countries that are only just waking up to large parts of society that have only recently become banked, accessing certain important services can remain difficult. One such example of this is insurance. However, a relatively new start up from Tanzania, Jamii Africa, is looking to change this by approaching the market with a new micro-health insurance product for the informal sector. Jamii has partnered with both Vodacom Tanzania, one of the largest mobile telecom operators in the country, and Jubilee insurance, one of the largest health insurance companies in Tanzania, in order to provide a platform for consumers to benefit from health insurance via utilising mobile networks. “What Jamii does is build a mobile quality management platform that will form all activities of an insurer— from registration, selecting a policy, premium collection, managing a policy ledger, to paying out claims directly to hospitals,” said Lilian Makoi, Founder and CEO of Jamii Africa. Makoi went on to argue that because the platform has cut administration costs, the company has been able to lower insurance registration costs for the consumer by approximately 95 per cent.
42 page 42-43 Trailblazer.indd 42
Lilian Makoi, Founder & CEO, Jamii Africa
HOW IT WORKS
Signing up to insurance with Jamii has been designed with simplicity in mind on for the consumer. In order to sign up, a customer dials a USSD number on their mobile phone and confirms their registration details (age, name, gender and location) before selecting the type of plan which is most suitable, after which payment is taken via the customer’s mobile money account.
“There’s no human interaction and no paperwork at all throughout the process,” said Makoi. Once payment has been taken, a unique Jamii number is issued, which the consumer can use at partnered hospitals for medical services. Makoi continued, “At the hospital you provide that number and the hospital has an interface to access your policy details and then you’ll receive services within your limit... We have about 200 hospitals partnered,
www.bankerafrica.com
20/03/2017 14:16
and that’s going to 400 hospitals this year.” Jamii currently offers policies for both individuals and families ranging from three, six and 12 months. When asked what led Makoi to found Jamii she responded with a personal story. “I had a house helper who was involved in a car accident… They took him to the hospital then the wife had to go and get money from friends and relatives through the night to come back the next day and pay the bill so that the husband could access the medical procedures and help—they didn’t have the $25 on hand.”
We are really excited about this year, because this is our breakthrough year. — Lilian Makoi, Founder & CEO, Jamii Africa We did a lot of research to understand how big the market was and how many people were exposed to this risk.” Creating Jamii was no small feat; Makoi argued that the financing space for start-ups with new innovative ideas in Tanzania can be a struggle at times. After the company was
As part of Makoi’s research into the Tanzanian healthcare insurance market prior to the product creation she found that only some 4.5 per cent of the population actually had health insurance. Once middle income earners and those that can afford the up-front out of pocket expense are removed from the remaining 95 per cent, Makoi said that 76 per cent of the population are left with no recourse should a health emergency arise.
TO THE FUTURE
Jamii is looking to provide health insurance to those that have been unable to afford it in the past.
Unfortunately by the time at which the wife had managed to make it back it was too late. “I must say that doctors confirmed he would have survived the accident if he had medical help, but they couldn’t access medical help because they couldn’t afford it,” added Makoi. “That experience was a wakeup call for me, and I realised that there is a population out there that is ignored and don’t have any options if they want to secure their healthcare.
founded in 2014, all through its product development phase until late 2016, Jamii was entirely financed on Makoi’s salary. “You actually couldn’t access things like loans at that time, with the financial services landscape here, you’d have to have collateral and if you were taking a loan against the business they wouldn’t give you a loan at the start-up stage when there’s no proof of concept.”
This provides Jamii with enormous opportunities going forward and this year Makoi expects to expand Jamii from the previous pilot stage that it had been in. “We are really excited about this year, because this is our breakthrough year,” said Makoi, “We have managed to raise funds to take the product to market the right way, our partners are very excited, Vodacom is extremely excited, Jubilee can’t wait for us to go the next country and the next and our investors are geared and waiting to see the results from this year for them to take this product to new and bigger markets—and they’re not just talking about Africa, they’ll be talking about Asia, India and other low-income, third world countries.” In 2017, should Jamii follow the plan that it has for expansion, Makoi expects the company to move from its pilot stage of 10,000 subscribers to well over 100,000. “We have changed a lot in the past two years but it was good platform for us to test out our concepts, pricing, product design and test out our market strategies one by one. From these we have picked the successes, tested them and recorded whether they work and, if so, how many conversions we can expect and how much it will cost.”
www.bankerafrica.com
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TECHNOLOGY
Linking the chain Banker Africa sat down with Mohammed Kateeb, Group Chairman & CEO of Path Solutions for a discussion on the effect technology has had on microfinance in Africa
W
hat impact has the uptake in digital banking technology had on the African microfinance segment?
I believe technology has had a tremendous impact on this segment in Africa. When we talk about telecommunication technologies, the impact is nowhere more dramatic than in the African continent. As you know most of the African countries do not enjoy a traditional inland telecommunication infrastructure covering the widespread rural geographies which result in very limited access to banking services. The spread of mobile technology in Africa was a great answer to this challenge as it doesn’t require inland infrastructure. Mobile banking and more specifically epayment solutions are regarded as a worldwide success story, extending out to hard-to-reach low income populations which is the main objective of microfinance. I believe that technology played a critical role in helping countries with less of a traditional infrastructure to actually reach customers in these geographies that otherwise had been unreachable. Technology has played a tremendous role in financial inclusion, and I think in the last 10 years mobile technology has made it possible to accelerate the pace of financial inclusion. The growth of cloud computing has also impacted positively on the use of mobile devices, supporting more flexible networks
44
Mohammed Kateeb
for people who didn’t have access to similar services before in rural areas. Differences remain in rates of penetration of microfinance services across the continent: West Africa shows the highest, with five out of the ten countries with the highest penetration rates. Microfinance has experienced the highest growth in penetration in Eastern and Southern Africa, and the lowest in Central Africa. Of course, technology here emerges as a powerful tool to expand outreach for microfinance services in remote areas.
Do you think that the digital banking infrastructure in Africa may be ahead of other regions? This is definitely true for some services such as epayment. What has happened in the last 10 years or so in Africa surpasses many developed countries, allowing the people to use primitive mobiles for payments in segments, which even developed countries have been trying to reach for years. I believe this worked in so many of these countries, again, because of the lack of traditional infrastructure that is available in developed countries,
www.bankerafrica.com
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which meant they had to be very creative in using mobile technologies and supporting the lowest-featured mobile phones. I believe a lot of countries are looking at the African experience and how they’ve managed to perform these services with this wide reach.
Is there a place for branchbased banking in the future? Echannels have been replacing the branches very rapidly because people’s behaviour is changing and some customers want to perform banking anywhere, anytime; I think the pace of technological progress will continue to move aggressively. However, there will be another class of customers who will continue to ask for customised services and prefer the human interaction. I do not believe that traditional branches will disappear totally, but they will be less in number, more advanced in services and will complement the evolving echannels.
How important is improving microfinance availability play in the development on a state level? We believe that the micro and small segments in society that microfinance is targeting are critical to the development of any economy and of societies at large, but they have been ignored for such a long time. Banks have been designed to target the high-medium to the wealthy segments, and actually most traditional banking products have been developed as such. The two segments at the bottom of the pyramid, which range from the very poor to the low middle class, have been ignored for a long time, and this is what financial inclusion initiatives are all about. It’s about how to go down the pyramid and address those two segments because they are very critical to the growth of the country, and in some countries these segments are huge.
It’s very important to address them and bring the unbanked portion of the society to the banking sector. Microfinance addresses this issue and I think we see in some countries it is done in creative ways by using technology to reach the previously unbanked, a market that traditional financial institutions had failed to reach. I think you will witness massive growth in some of these geographies because of this segment coming in and being a productive part of society.
these hard-to-reach areas. We must come up with very creative but feasible ways to reach them. If you look at the advanced connectivity-related technologies that large multinationals such as Google, Facebook, Microsoft, Amazon, etc. are heavily investing in, the target is very clear, complete worldwide coverage, the connected earth! It’s a very ambitious goal, but I am sure that we will get there.
I think connectivity, when it comes to technology, is the most important piece to reaching out to people.
Why do we need these companies and why is this important?
— Mohammed Kateeb
Why has microfinance been ignored? I think that the concept of banking from inception targeted the wealthy, and throughout its history concentrated on the middle to the top of the pyramid. It was never really designed to reach the low-income people. The commercialism has captured banks in such a way that business with and financing to the poor has gone astray from their agenda. I do believe that the role of risk perception for risk management played a huge part in it, the way that banks structure their risk and their products wasn’t really addressing those segments.
What sort of trends do you see for the future of microfinance, and are there specific technologies that you think might help the sector? First, let’s talk about infrastructure; I think connectivity when it comes to technology impact is the most important piece to reaching people in
There are very challenging areas geographically, and far-reaching populations in rural areas that cannot be feasibly reached to build a telco tower or dig in the ground fibre cable, so the coverage must be from the skies. Technologies such as low orbit satellites covering the earth, or flying balloons covering rural geographies and others, need large investments and beyond borders coverage and such companies have that. Many companies are participating in offering innovative technological solutions that can power microfinance and financial inclusion. Technologies such as the cloud, artificial intelligence, social media, etc. will play a big role in this area. Path Solutions is a company that is investing heavily in microfinance solutions that work online and offline mode to overcome some of these challenges. Finally, education; educating people to use these financial services and their benefits is a critical component and many of the technologies mentioned above will help with this objective. I believe that technology will play a critical role in the whole microfinance space, and it will be empowering financial inclusion and bringing the unbanked into the financial system. I think with the advancements around the world in technological solutions, the process will continue to advance very quickly.
www.bankerafrica.com
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GOVERNANCE
IFRS 9 compliance deadline is fast approaching… are you ready? Desan Naidoo
Banks need to get their systems and processes in order for IFRS 9 compliance, says Desan Naidoo, VP for Africa Region, SAS
I
s it just me, or does it seem like the world is still trying to recover from the financial crisis of 2008? It feels like we’re always talking about tough economic times, about where we can cut costs and find more revenue, and about new regulations that are becoming ever more stringent. What I do know is that, in times like these, banks turn their focus to two main areas: minimising fraud losses and reducing customer churn. This runs in parallel with impending legislation, including—but not limited to—new International Financial
46
Reporting Standards (IFRS 9), the Basel Committee on Banking Supervision’s regulation number 239, and the same committee’s Fundamental Review of the Trading Book (FRTB). Compliance is not an option if we are to bring the African banking industry in line with international standards and, at least for IFRS 9, time is running out for banks to get their systems and processes in order. Realistically, banks need three years’ implementation time, so those that have not started the transition will miss the January 2018 compliance deadline.
RACE AGAINST THE CLOCK
IFRS 9 represents the International Accounting Standards Board’s comprehensive response to the financial crisis and includes a logical model for classification and measurement; a single, forward-looking ‘expected loss’ impairment model; and a substantially reformed approach to hedge accounting. The aim is to enhance investor confidence in banks’ balance sheets and the financial system as a whole. But you already know this. What you might be wondering is how you will meet the compliance deadline,
www.bankerafrica.com
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especially if you don’t have the in-house skills or the time or money to overhaul your existing infrastructure. A recent Deloitte study found that 46 per cent of surveyed banks do not believe they have sufficient resources to deliver changes by 2018, with the biggest implementation challenges being the forward-looking requirements and coordinating the multidisciplinary effort that includes finance, credit, risk and IT. With the new expected-loss impairment model, banks are not only required to calculate actual credit losses but they must also be able to predict future losses—and they need to provide an audit trail of how they came to those calculations. The only way to do this is by applying advanced analytics to your own data and to data from external, unstructured sources. This means data lineage and data integrity are key. It means you need the infrastructure and solutions in order to draw on these various data sources and predict what potential outcomes could be. It means you need the skills and know-how to be able to set up, maintain and run these systems and processes, all while complying with new regulations and applying best practice. That’s a lot to consider.
BUT HAVE YOU CONSIDERED OUTSOURCING?
You can mitigate all of this through managed services hosted in the cloud. African banks are at a distinct advantage in that they don’t need to follow the same path that South African banks did three or four years ago. Back then, managed services were not as mature as they are today, which meant banks had to put in the graft of setting up systems, finding skills and learning as they went along. While you could still go this route yourself, it’s not likely that you’ll be able to have your ecosystem up and
running—and producing the outputs you need—by January 2018. Ideally, your IT department should be focusing on the things that add value to your business, like attracting and retaining customers and finding new sources of revenue, rather than on ticking compliance boxes. The biggest advantage of partnering with a managed service provider like SAS is that we’ve already put in the work. With more than 20 years’ experience in Africa—and 40 years’ global experience—we’ve invested not only in user-friendly solutions that can handle any type of data perform any calculation but because we’ve worked with banks across the world, we’re able to apply best practice without compromising confidentiality—and without ripping and replacing your existing infrastructure, legacy or not. What that means for you is faster time to market, access to worldclass skills and technology and, most importantly, the ability to meet compliance deadlines and to produce the outputs required by the regulator. An added advantage is that you’re assured of reliable, accurate and organised data—no matter where that data comes from—and that you can confidently make business-critical decisions that directly impact your bottom line.
DATA-DRIVEN INTELLIGENCE
Just one example is the ability to have a single, 360-degree view of your customer, which allows you to predict when and why they might churn by identifying implicit warning signs within their behaviour, and what the next best offer is in order to stop them from churning. In tough economic times, loyalty is the first thing that goes out the window. Even if someone has been banking with you for a decade,
they won’t think twice about moving to a competitor who can offer them a lower interest rate. What if you could see that coming and counter-offer with a better rate or another product or solution that meets the customer’s needs at that particular moment? When you talk to customers like you know them, you’re more likely to delight and less likely to annoy them. By extrapolating data from digital behaviour, biodata and geo-location, and combining it with your own data to get a single view of the customer, you’re able to offer them better experiences and better services. You’re able to identify trends and make meaningful decisions about how to engage with customers. It’s equally critical to ensure that all channels and departments across the bank have access to the same data. Most banks have multiple departments, channels and systems operating independently and are not set up to provide a holistic customer experience. Worse still, as customers know nothing of this internal fragmentation and view the business as a single brand, contrasting experiences across silos can lead to frustration and dissatisfaction. But by having a coordinated approach within the organisation, you can move the customer along their journey rapidly and efficiently. Data and analytics enable each department or channel to understand the wider customer context, where they fit into the broader customer journey, and what they must do to drive the customer experience forward. SAS can assist by providing the consulting skills and the tools necessary to sort the data gathered through various channels, collate it effectively and create the master data needed to allow analytics tools to utilise it more effectively. In the end, we hope to inculcate a true data-driven culture within banks, as this will be of enormous benefit to them and their customers in the long run.
www.bankerafrica.com
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AWARDS
Banker Africa—Southern Africa Banking Awards 2017 results announced The results are in for the annual Banker Africa—Southern Africa Banking Awards 2017
T
he annual Banker Africa—Southern Africa Awards is a programme open to all banks and financial institutions in the region. The aim of the Awards is to recognise outstanding performance and excellence in the financial services industry. Shortlists for the awards were compiled by our group of experts before voting opened on www.bankerafrica.com. The Southern Africa Awards are designed to reward innovation and the ability to gain market share. The winners were selected by the registered readers of CPI Financial products and services—in other words, your peers in the financial services industry.
THE RESULTS
This year nearly 4,000 votes were cast in the awards—the results of which are:
Best Retail Bank Southern Africa First National Bank Best Corporate Bank Southern Africa Sasfin Bank Best Commercial Bank Southern Africa Barclays Africa Best Investment Bank Barclays Africa (CIB) Best Emerging Bank Southern Africa BancABC (Atlas Mara) Best Mobile Security Technology Entersekt
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SOUTHERN AFRICA AWARDS 2017
REWARDING EXCELLENCE
The core philosophy of CPI Financial, the publisher of Banker Africa, is transparency, ensuring accurate reporting of economics and financial matters, the factors determining the future of the banking and finance community and the business deals driving the industry forward. Our Awards programmes are designed to reward and promote excellence and competition in the drive to set new standards in the industry in quality of service, best practice and financial performance. The financial institutions that win one or more of the Banker Africa Awards in 2017 and in future years will be those offering best-in-class services that meet the needs and exceed the expectations of their customers. They will, truly, be winners. In each of four regions, North Africa, East Africa, West Africa and Southern Africa, we hold separate awards competitions.
www.bankerafrica.com
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Celebrating the best of the best in East Africa!
STARTLS APRI
2017
Preparation and research is underway for the Banker Africa Awards. The Awards are grouped in four regional categories: North Africa, Southern Africa, East Africa and West Africa. >To learn more about the Awards process, please email events@cpifinancial.net
CPI Financial
Partners
The professional face of financial media CPI Financial is Africa and the Middle East’s leading financial publisher with a portfolio of market-leading products educating and informing readers about the latest trends and developments in banking and finance as it affects them.
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THE VIEW PICTURE OF THE MONTH
Akuja was eight years old when war forced her to flee South Sudan. After living in Khartoum, Cairo and the UK, Akuja returned to South Sudan in 2004 to help rebuild her country. Akuja leads the Girls’ Education South Sudan (GESS) programme which is supported by UK aid. (CREDIT: BRUNO BIERRENBACH FEDER/ DFID/FLICKR)
POLL
This month we asked our readers on bankerafrica.com and twitter @bankerafrica...
What is your outlook for foreign direct investment to Africa?
50 page 50 Spotlight.indd 50
20%
VERY NEGATIVE
20%
NEGATIVE
19%
NO CHANGE
20%
POSITIVE
VERY POSITIVE
21%
www.bankerme.com
20/03/2017 14:22
Not your copy? Banker Africa is a controlled circulation magazine delivered to specific, named individuals in board level and the very top management positions within the continent's banking and financial services sector, and to CFOs and Treasury heads in large, listed corporates. Others may subscribe to receive the magazine regularly through the subscription form below. Institutions may also arrange bulk purchase orders of the magazine and its supplements to circulate among internal and external stakeholders. If you wish to arrange regular bulk deliveries, please contact subscriptions@cpifinancial.net for terms.
Annual individual subscription (11 issues/year) US$240
To subscribe, simply fill in the order form and return it, with your cheque for US$240 to: CPI Financial, PO Box 502491, 1209 Shatha Tower, Dubai Media City, Dubai, UAE. NAME POSITION COMPANY ADDRESS LINE 1 ADDRESS LINE 2 ADDRESS LINE 3 PO BOX ZIP/POSTAL CODE COUNTRY
CPI Financial FZ LLC • PO Box 502491 Al Shatha Tower, Office 1209 Dubai Media City, Dubai, U.A.E. Tel: 4681 391 4 )0( 971+ • Fax: 9576 390 4 )0( 971+ • www.cpifinancial.net
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20/11/2016 16:56
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20/03/2017 14:42