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JUNE 2017 | ISSUE 45
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EDITOR’S LETTER
ello and welcome to the June issue of Banker Africa. This month you will find enclosed a supplement for the East African Awards with details of all the winners. The evening was a great success, and I wish all those that participated the best of luck for the year ahead. Our cover for this month features Kee Chong Li Kwong Wing, Chairman of SBM (page 20). I had the pleasure of visiting Mauritius earlier this year and meeting some of the leaders of the banking industry. One issue that stood out in particular is that a lot of the banks on the island are turning their eyes to expansion on the continent. SBM is a perfect example of that with its recent purchase of Fidelity Commercial Bank in Kenya, and the rumours that it is currently bidding for Chase Bank. The African Financial Services Investment Conference 2017 was held earlier this year and we feature coverage from several of the attendees about the challenges of investment in the Sub Saharan Africa region. “All our economies develop through local money being
invested in that economy. Africa shouldn’t be different,” said Hoda Atia Moustafa, Africa Regional Head at the World Bank. You can find the full coverage on page 28. Finally, our trailblazers for this month features Islamic Travels & Tours South Africa. The company began some three years ago and delivers tourism packages tailored exclusively for Muslim travellers looking to explore South Africa. The Muslim population world over is one of the fastest growing markets, with Halal-related industries becoming more lucrative as a result. “It’s not something that can be ignored, and whoever ignores it will be at a loss. Whoever is able to offer the services that Muslims require, in whichever area of life it is, will obviously benefit immensely,” said Khalid Vawda, the MD of the company. You can get the full exclusive of this story on page 42.
Explore what banking could be
Until our next issue,
Matthew Amlôt
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IN THE NEWS 6 News analysis: Barclays raises $2.85
billion from Barclays Africa Essential financial news from around the continent 10 Spotlight: Zambia
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Trusted mobile app security and authentication solutions
HAPPENINGS 12 G20 refocuses on Africa 13 ECOWAS to admit Morocco
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OPINION 14 Egypt: open for business
Dr. Abou Shoka on Egypt’s new investment law to promote international interest MAY 2017 | ISSUE 44
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2017 international expansion
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SECTOR FOCUS real estate markets Africa’s divergent
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S TRAILBLAZER
Clean, mobile, secure
Continued growth for Tanzania
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INSIDE:
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OPINION Trends and policies in the banking & finance industry in Kenya—2017
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SECTOR FOCUS Micro-funding, macro results
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TRAILBLAZERS Building the future
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Chairman SALEH AL AKRABI Chief Executive Officer ROBIN AMLÔT robin@cpifinancial.net Tel: +971 4 391 4681
Managing Editor GEORGINA ENZER georgina@cpifinancial.net Tel: +971 4 391 3728
Sales Director OMER HUSSAIN omer@cpifinancial.net Tel: +971 4 391 5419
MARKETS 16 UBA lists debut $500
million Eurobond The bank’s five-year senior unsecured benchmark bond is listed on the Irish Stock Exchange 17 Downgrades hit South Africa Moody’s has taken ratings actions across the board in South Africa 18 Foreign currency liquidity improving for Nigerian banks Nigerian banks’ ability to access foreign currency has improved significantly, says Fitch
COVER STORY 20 Continental expansion
SBM is taking advantage of Mauritius’ unique geographical position in its expansion plans, says Chairman, Kee Chong Li Kwong Wing
COUNTRY FOCUS 24 Resurgent Rwanda
The East African country looks to set to recover from its 2016 losses
AFSIC 2017 28 Accessing Africa
Banker Africa shares its conversations from the Africa Financial Services Investment Conference (AFSIC) 2017
INFRASTRUCTURE 35 All eyes to port
Ports projects are on the rise in West Africa, with new expansion, construction and modernisation efforts underway
CORPORATE BANKING 38 Scoping new opportunities
Corporate banking growth remains a focus for Emirates NBD Egypt, says Amr Azab, Head of Corporate Banking, Emirates NBD Egypt
TECHNOLOGY 40 Core solutions
Klaas Kruger, CIO, PBB Rest of Africa, Standard Bank discusses the bank’s core banking journey
TRAILBLAZER 42 Halal hospitality
Islamic Travels & Tours South Africa provides tourism for the burgeoning Halal market
EAST AFRICA AWARDS 2017 44 Promoting excellence in East
Africa’s financial sector Banker Africa’s East Africa Awards 2017 concluded last month, with winners announced over 46 categories
INVESTMENTS 46 Malta: the gateway to Europe
For African firms, Malta could provide a jumping point into the European market 48 West African gem A new report points to Côte d’Ivoire as a key investment destination in Africa
THE VIEW 50 Photo and chart of the month
Log on to www.cpifinancial.net for news, polls, events, analysis, blogs, features, commentary and more.
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Barclays raises $2.85 billion from Barclays Africa Barclays cuts stake in its African business to 16 per cent
Barclays offices in Canary Wharf, London, the home for the multinational bank (CREDIT: PCRUCIATTI/ SHUTTERSTOCK).
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arclays has sold a stake worth an about $2.85 billion in its African subsidiary over the past month. The bank sold a 34 per cent stake of Barclays Africa after it had secured the approval of the South African Government. The sale now puts Barclays’ stake in the subsidiary at 16 per cent, down from 50.1 per cent. The bank will eventually end with a 15 per cent stake, as it has
pledged $110 million to the establishment of a black economic empowerment scheme. The move was part of a strategy at a group level for Barclays to move its focus towards its US and UK businesses. Selling the stake was important for the bank as it will use the funds to bolster its capital position following questions raised by the Bank of England last year as to the ability of Barclays to weather another financial crisis.
South Africa’s Public Investment Corporation, the Government’s pension fund manager, had also agreed to double its seven per cent stake in Barclays Africa to 14 per cent. In a statement to Reuters, Jes Staley, CEO, Barclays, stated that the deal, “Represents a key milestone in the execution of our strategy and the restructuring of Barclays.” Staley’s unwinding of Barclays’ Africa business represents a turnaround from the days of former Barclays CEO Bob Diamond, who pushed the UK-based lender further into the African market. Barclays had said in March 2016 that it was looking to sell the majority of its 62.3 per cent stake in Barclays Africa Group, with a target of eventually owning 15 per cent, a target which has now been reached following the sale. Barclays sold 286 million shares in Barclays Africa Group, with the shares priced at ZAR 132. The deal represented an estimated loss of $1.5 billion. The weakening South African rand against the sterling has cut into profits seen for the UK based lender from its African subsidiary, and likely played a role in the overall decision to deconsolidate its business on the continent. “The decision is more a signal of the bank’s weak finances than a gloomy outlook for African banking,” said Kevin Campbell, Senior Lecturer in Finance at the University of Stirling and Fredrick Kibon Changwony, Early Career Fellow in Accounting & Finance, University of Stirling, writing on The Conversation. “Barclays made the announcement alongside its annual results, which reported a two per cent profit drop and a dividend cut of more than 50 per cent per share. It also needs to raise funds to meet capital adequacy requirements. The underlying fundamentals of African banking, meanwhile, are sound.”
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RATINGS REVIEW BANKS AND BUSINESSES Fitch Ratings has downgraded Nigeria-based Seven Energy International Limited’s Long-Term Issuer Default Rating to ‘C’ from ‘CC’ following the non-payment of a material financial obligation. Moody’s Investors Service has downgraded Real People Investment Holdings Limited’s global scale issuer rating (GSR) to Ca from Caa2 (negative outlook), and its national scale issuer rating (NSR) to Ca.za from Caa2.za.
SOVEREIGNS S&P Global Ratings raised its foreign and local currency long-term sovereign credit ratings on Burkina Faso to ‘B’ from ‘B-’. The outlook is stable.
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ON THE RECORD ICD extends $5 million line of finance facility to Arab Gambian Islamic Bank
The Islamic Corporation for the Development of the Private Sector (ICD), the private sector arm of IDB Group, and AGIB Bank Ltd have entered into a Joint Strategic Collaboration to finance private sector entities in The Gambia.
CNH Industrial presents its Tunisian sustainable water management project
This year’s edition of the European Development Days saw CNH Industrial and its global agricultural equipment brand, New Holland Agriculture, present a three-year sustainable water management project that was launched in Tunisia in 2016.
GE signs multiyear agreement to upgrade gas turbines at Songas Ltd.’s Ubungo Power Plant in Tanzania
The multi-year agreement encompasses GE’s Fleet360 platform of total plant solutions, helping Songas ensure the long-term, reliable operation of its power plant.
Moody’s Investors Service today downgraded the long-term issuer and senior unsecured ratings of the Government of South Africa to Baa3 from Baa2 as well as the senior unsecured Shelf and MTN programme ratings to (P)Baa3 from (P)Baa2, and assigned a negative outlook. Moody’s Investors Service has assigned a provisional (P)B2 rating to the Republic of Maldives’ senior unsecured US dollar-denominated notes. The senior unsecured notes will rank pari passu with all of the Republic of Maldives’ current and future senior unsecured external debt. The (P)B2 rating assigned to the notes mirrors the Republic of Maldives’ issuer rating of B2.
The upgrades will help Songas increase the efficiency and the plant’s capacity at the Ubungo plant by approximately 10 megawatts (MW) (CREDIT: TONKID/ SHUTTERSTOCK).
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A QUICK WORD
We simply have to transform African agriculture. The African future is not, as some people think, based on oil and gas: you can’t drink oil or smoke gas. The future is food—you can eat food. Our continent’s food and agriculture markets will be worth $1 trillion within 13 years.
SOMALIA: DONORS COMMIT TO FILL $105 MILLION INFRASTRUCTURE PROJECTS FUNDING GAP
— Akinwumi Adesina, President, African Development Bank For these stories and more, visit www.bankerafrica.com
IMF Executive Board concludes 2017 Article IV consultation with Algeria
On 26 May 2017, the Executive Board of the International Monetary Fund (IMF) concluded the 2017 Article IV consultation with Algeria. Algeria continues to face important challenges posed by lower oil prices, said the Fund in a statement. The IMF Executive Board noted that the “Overall economic activity was resilient, but growth banking sector as a whole is adequately capitalised and profitable (CREDIT: in the non-hydrocarbon sector slowed to 2.9 per HARVEPINO/SHUTTERSTOCK). cent in 2016, partly under the effects of spending cuts. Inflation increased from 4.8 per cent in 2015 to 6.4 per cent in 2016 and stood at 7.7 per cent year-on-year in February 2017,” said the IMF in a statement. “Unemployment was 10.5 per cent in September 2016 and remains particularly high among the youth (26.7 per cent) and women (20.0 per cent). Despite fiscal consolidation in 2016, the fiscal and current account deficits remained large, and public debt increased, reflecting in part the assumption of a government-guaranteed debt. International reserves, while still ample, declined rapidly. External debt remains very low.”
IFAAS extends its activities in Africa
IFAAS announced at the African Islamic Finance Forum that it is setting up its fifth office in Casablanca, to harness a wide range of opportunities in Islamic finance across North and West Africa. Farrukh Raza, Managing Director, IFAAS Group, stated, “We have been serving North and West Africa for many years from our Paris office. Today, the time has come for us to enhance our presence in the region. By joining hands with Fineopolis who shares our passion and vision for Islamic finance in the region, our objective is to respond to our clients’ expectations by offering them proximity and a stronger proposition.” The new office, IFAAS Casablanca, will consist of four pillars including ‘Islamic finance advisory’, ‘Shari’ah compliance & audit’, ‘education & research’ and ‘SME finance advisory’.
Through the NDP 2017-19 the FGS has prioritised the rehabilitation and development of Somalia’s infrastructure (CREDIT: NAYPONG/SHUTTERSTOCK).
On 25 May 2017, during the African Development Bank’s Annual Meetings in Ahmedabad, India, the Federal Government of Somalia (FGS) and the African Development Bank (AfDB) organised a meeting with donors and friends of Somalia on “Financing the Infrastructure Pillar of Somalia’s National Development Plan (NDP) 2017-19.” An important channel to mobilise resources for important infrastructure projects is the recently established and AfDB administered Multi-Donor Somali Infrastructure Fund (SIF). During the meeting, the AfDB team presented a pipeline of priority energy, water and transport projects worth about $160 million that will be developed over the next three years using the resources that will be mobilised through the SIF. Of the total amount required, a funding gap of about $105 million still remains to be filled. Contributors to the SIF include the AfDB, Islamic Development Bank, United Kingdom, and Italy.
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AfDB-The Gambia: Country strategy update and portfolio review
An African Development Bank (AfDB) mission visited Banjul from 8 to 12 May 2017 to hold talks with the Government and other stakeholders on updating the Second Joint Assistance Strategy (JAS-II 2012-2016). Key among activities undertaken during the mission, was the Country Portfolio Performance Review (CPPR), which was found satisfactory. The mission examined the progress with the implementation of the partnership strategy (JAS-II) to identify results, key challenges, and lessons learnt as well as their contributions to the country´s development. The mission also delved into the challenges facing the country at this critical period, and engaged in a dialogue with authorities and civil society organisations as well as the private sector to see how it can best support the Gambian people to rebuild the economy and contribute to the process of development.
IMF STAFF COMPLETES A STAFF VISIT TO GUINEA
An IMF staff team led by Giorgia Albertin visited Conakry from 15 to 25 May 2017, to discuss recent economic and financial developments and Guinea’s economic prospects. The team prepared the ground for a future visit for the negotiation of a new IMF-supported programme. Upon conclusion of the visit Albertin issued the following statement, “After the slowdown caused by the Ebola epidemic, economic activity rebounded in 2016, with an estimated real GDP growth of 6.6 per cent. This was largely due to accelerated mining production as new projects came online, as well as an increase in agricultural and electricity productions.” “Growth prospects for the Guinean economy remain favourable. For 2017, growth should continue to be robust at 6.7 per cent. We expect continued strong performance in the mining sector, accelerated construction activity in hotels and energy, and good agricultural performance.”
AfDB promotes sustainable, resilient and healthy agro-and forest ecosystems with GEF
On 24 May 2017 at the 52nd Global Environment Facility (GEF) Council meeting, the GEF approved a total funding of $11.2 million for two projects co-financed with the African Development Bank (AfDB). The projects, one in Mali (Scaling up a Multiple Benefits Approach to Enhance Resilience in Agro- and Forest Landscapes of Mali’s Sahel Regions) and the other in Benin (Sustainable Forest Management and Conservation Project in Central and South Benin) focused on the “poorest and most vulnerable”, particularly Least Developed Countries (LDCs), according to the GEF CEO Naoko Ishii.
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UN study: digitisation of Kenyan farmer payments helps tackle poverty
A new case study by the United Nations-based Better Than Cash Alliance shows how agriculture non-profit organisation One Acre Fund, in partnership with Citi Inclusive Finance, successfully Digitising payments has been suggested as an important combonent of combatting digitised loan repayments for poverty (CREDIT: BYELIKOVA OKSANA/ farmers in Kenya. SHUTTERSTOCK). One Acre Fund, supported by Citi, enabled farmers to easily make loan repayments via mobile money instead of cash, reducing the uncertainty, inefficiency, insecurity and high costs previously caused by cash transactions. “Mobile repayments have allowed us to increase our efficiency and provide better service to farmers,” said Mike Warmington, the Director of Microfinance Partnerships at One Acre Fund. “We’re excited to be working at the forefront of this technology in the smallholder agriculture lending sector. In our experience, farmers were empowered to thrive in these communities. Clients receive immediate confirmation of payments as they happen, enabling them to better manage their businesses and family finances.”
Dangote to spend $1 billion on rice cultivation
Dangote Group is making a five-year investment of $1 billion to grow and process rice in five Nigerian states. The aim is to move the West African country, currently the biggest importer of grain in Sub Saharan Africa, closer towards self-sufficiency. Tunde Mabogunje, a Director of Dangote Group, said, “We have been contributing our quota to the growth and development of the Nigerian economy. Towards aiding agriculture, we are building a fertiliser plant in the Lekki Free Trade Zone, Lagos State. When completed, farmers will have regular access to fertiliser for their farming activities. The delays and disruptions experienced in waiting for imported fertiliser will cease. “We are investing about $1 billion in rice cultivation. We have an outgrowers scheme where thousands of farmers are empowered with improved seeds The programmes’ flagship activity includes a two week and items needed to residency in Cape Town, South Africa (CREDIT: MAVO/ cultivate rice.” SHUTTERSTOCK).
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US Trade and Development Agency funds Zambia wind power
Wind power is considered a key energy resource in the changing global energy environment (CREDIT: MAJECZKA/SHUTTERSTOCK).
The US Trade and Development Agency (USTDA) signed a grant aimed at increasing electricity access in Zambia. USTDA is partnering with Zambian company Standard Microgrid Initiatives Limited on a study that supports the deployment of containerised minigrid units in rural and peri-urban districts in Zambia. The project is anticipated to be the first large-scale deployment of solar with battery storage mini-grids in the country that utilises US technology solutions. During the ceremony, USTDA also announced approval of funding for a 130-140 megawatt wind power project being development by Access Wind One Zambia Limited, the Zambian subsidiary of Access Power Limited. “USTDA is pleased to help introduce US technology to Zambia, increasing access to reliable electricity and supporting the Zambian government in diversifying its energy generation mix,” said USTDA’s Sub-Saharan Africa Regional Director, Lida Fitts. “We are particularly happy to be here today with InfraCo Africa, proof that our support can have direct impact in attracting implementation financing for such projects.”
Zambia plans to move its capital from Lusaka to Ngabwe in the centre
Zambia is considering moving the capital city from Lusaka to Ngabwe, a site chosen as it is in the centre of the country, to the west of the city Kabwe. “When you look at Lusaka in the next 10 years, the city will not be able to sustain us. The rate at which commerce and industry and official activities are growing cannot be met with Lusaka’s ability to grow its capacity,” said The suggested location for the new Lucky Mulusa, Minister of National Planning, capital is directly in the centre of to the Lusaka Times newspaper. “Human Zambia at Ngabwe (CREDIT: ANDREI settlement on its own is a problem and that TUDORAN/SHUTTERSTOCK). is why my ministry is proposing that we start up a completely new capital city that will be planned on the modern principles of sustainable development.”
ZAMTEL launches mobile banking service
The Zambia Telecommunications Company Limited (ZAMTEL) has launched an electronic payment solution called ZAMTEL Kwacha, reported the Lusaka Times. The new service will enable subscribers of the government-owned telecommunication service provider to send and receive money electronically across all mobile phone networks. The new ZAMTEL Kwacha service will allow its customers to pay for goods and services at supporting merchants and agents, in addition to paying utility bills. ZAMTEL Acting Chief Executive Officer Sydney Mupeta was reported as stating that the new product will add value to its rural customer base, with particular emphasis added on Zambia’s farmers due to ZAMTEL’s presence across the country.
IMF staff concludes staff visit to Zambia
An International Monetary Fund (IMF) staff team led by Tsidi Tsikata visited Zambia during 31 May to 10 June, to continue discussions on the 2017 Article IV consultation and the authorities’ request for an IMFsupported programme. At the end of the visit, Tsikata issued the following statement, “IMF staff and the authorities have agreed on remaining actions needed to reach staff-level agreement on a programme that could be supported under the IMF’s Extended Credit Facility (ECF). The remaining actions entail measures to improve fiscal performance and concrete steps toward implementation of key policies contained in the 2017 budget. We aim to reach understandings in the coming weeks that would form the basis for presenting the authorities’ request for an ECF arrangement and the report on the 2017 Article IV consultation to the IMF Executive Board in August 2017. “The near-term outlook for the economy has improved in recent months, driven by good rains and positive sentiments in the financial markets as evidenced by increased foreign investor participation in the government securities market. A bumper harvest and increased hydroelectricity generation are expected to boost economic activity by more than previously projected; IMF staff project real GDP growth to improve slightly from the revised official rate of 3.4 per cent in 2016 to about four per cent in 2017. We also project the annual inflation rate (6.5 per cent in May) to remain at single-digit levels, notwithstanding the impact of the move toward cost-reflective electricity tariffs.”
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happenings
G20 refocuses on Africa Leaders of African nations and G20 members met this month to discuss opportunities to enhance business and investment on the African continent G20 Finance Ministers and Bank Governors met in Berlin in June (CREDIT: Africa Development Bank Group).
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t a two-day conference, hosted by Germany, which has recently taken over the presidency of the G20, in Berlin under the name ‘G20 Africa Partnership—Investing in a Common Future’, investors and African countries were brought together with the goal of convincing investors that their trust can be placed in participating African countries. In one session held on the G20 Compact with Africa, a programme which aims to increase investment opportunities in African countries, in addition to promoting sustainable infrastructure and employment, finance ministers from Côte d’Ivoire, Morocco, Rwanda, Senegal and Tunisia shared views on sustainable, stable long-term growth with additional inputs from Heads of the African Development Bank (AfDB), World Bank and IMF. “The Compact with Africa is very important because of the changing lens through which we are looking at Africa,” said Akinwumi Adesina, President, AfDB. “We are no longer looking at Africa through the perspective of just development. We are looking at Africa as an investment destination, and unlocking
its huge potential. This is a great shift in mind-set. Africa is a growth frontier.” By participating in the Compact African countries are committing to improve conditions for private investment. Although a relatively young programme, it currently has five countries committed to join, Tunisia, Morocco, Senegal, Côte d’Ivoire and Rwanda—with Ghana and Ethiopia in the process of joining. The first five countries have already created prospectuses for investors which outlines the country’s priorities and plans for reform. The prospectuses lay the groundwork to enable political changes that are necessary to translate into meaningful transformation of investment and jobs. In cooperation with international organisations and bilateral partners, the participating African countries will develop tailor-made measures and instruments designed to make them more attractive to investors. Germany, which currently holds the G20 presidency, has announced that it will make special efforts to promote the Compact, which began with this conference. “Bringing this initiative to fruition will require a lot of staying power: This
is why the initiative will be continued beyond the German G20 presidency, and this is also why everyone needs to work together and pull in the same direction,” said Ludger Schuknecht, Chief Economist at the German Finance Ministry. “Our companies play an especially important role in the Africa Partnership and they mustn’t miss out on the unique opportunities that it opens up to them. After all, the Compact with Africa is is not about hand-outs: Rather, it is about creating opportunities for those investments and profits which are crucial to generating jobs and sustainable growth. German companies have so far played a leading role in Asia; similarly, they should also be at the forefront of developments in Africa.” Adesina also highlighted the growth potential of the African continent, with a focus on agriculture as a business through processing methods rather than exporting raw materials. “The secret of the wealth of nations is very clear: the nations that are poor are the ones that export raw materials, and the nations that are rich are the ones that actually add value. We think this is very critical to change the narrative.”
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ECOWAS to admit Morocco The Economic Community of West African States (ECOWAS) Conference in Liberia has agreed in principal with Morocco’s request to join the group
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orocco’s request to join ECOWAS has been agreed upon in principal by the regional body. However, West African leaders are still studying the implications of its membership before the North African country can be formally admitted to ECOWAS. The issue was discussed at the 51st ECOWAS summit held in Monrovia, Liberia. King Mohammed VI of Morocco was expected to take part and give his first speech to the union—however, the trip was later cancelled in the face of controversy over the attendance of Israeli Prime Minister Benjamin Netanyahu at the event. The addition of Morocco to the union would make it the 16th largest economy in the world, ahead of Turkey. Morocco will also join ECOWAS as the second largest economy, after Nigeria. Due to its geographic, cultural and historic ties to both Europe and the Middle East, Morocco’s accession to the union may provide other members with a gateway to previously relatively untapped markets. The vision behind the West African union has been the creation of a borderless, integrated region, wherein the population enjoys freedom of movement, access to efficient education and health systems in conjunction with peace and security. “Despite the challenges encountered, ECOWAS is playing a leading role in the area of free movement in Africa. Today, there is an important flow
Although Morocco is not connected by land to other ECOWAS members, it’s trade infrastructure could prove valuable to the union (CREDIT: ESB PROFESSIONAL).
of population in our region, and the Member States that welcome more citizens are Cote d’Ivoire, Ghana and Nigeria. Out of 100 West Africans would-be-immigrants in the world, only 15 per cent go to Europe,” said Marcel de Souza, President of the Commission of ECOWAS, in Monrovia. De Souza further went on to highlight the opportunities present in trade — whilst noting that current trade levels are too low amongst members. “The volume of trade was estimated at $15 billion in 2015, against $3 billion in 2003, thus multiplying by five in 10 years. However, compared with Europe, we trade four times more with that continent than among ourselves,” he declared.
The BBC has reported a senior ECOWAS source as stating that Morocco, along with Tunisia and Mauritania which are seeking observer status and a return to the body respectively, will be invited to the next meeting of heads of state in Togo in December. Morocco’s request to join the West African regional bloc comes off the back of its re-joining of the African Union earlier this year in January and a refocus by the North African country to its southern neighbours. Morocco had previously left the African Union more than 30 years ago over the union’s recognition of the Western Sahara, a region that Morocco lays claims too.
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Egypt’s new law is aimed at increasing foreign investment into Egypt (CREDIT: XTOCK/SHUTTERSTOCK).
Egypt: open for business Egypt’s repositioning as a location for international investment comes at an ideal time, says Dr. Abou Shoka is a Cairo-based lawyer and founder of Abou Shoka Law
E
gypt’s new investment laws were passed on 7 May by the House of Representatives, with the aim of repositioning the country as an ideal place for international investors to do business, and encourage companies back into the area post-Arab Spring. The spotlight is now on whether these new investment laws have gone far enough, and what more could have been done to help re-position Egypt as a key destination for foreign investment.
Egypt now needs to continue to focus on building a much more solid and dependable legal system, which will put the country back on the map as a go-to destination for business. Just now, Egypt has a window of opportunity to take advantage of the current global political position, as given current disarray in Europe, all of a sudden investment opportunities in North Africa are looking more appealing in relative terms. The opportunities available in Egypt are
looking more attractive now that business people are becoming nervous of the after-effects of the European debt crisis and the fall-out around Brexit. Egypt should maximise on its position—geographically, it is important on the world stage as it links Africa to the Middle East, and for many European countries Egypt is the gateway into Africa. The Bill was put to the government in December 2016, at which point the state Council Legislation Department
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Dr. Abou Shoka
highlighted 23 problematic points in February 2017 which the Cabinet needed to consider so the passage from Bill to new law has been challenging. However, there has been a great amount of expectation within the business community around these new investment laws, reflected in recent foreign investment figures—up 39 per cent from $6.8 billion in the fiscal year ending June 2016, to $4.3 billion for just the first half of the next fiscal year. So, what do these new laws actually cover in practice? There is now new legislation to include provisions in returning to investors the price they pay for acquiring land for industrial projects, especially if work is started on production within two years. There are now new laws offering tax exemptions of up to 70 per cent for those investing in the poorest regions of Egypt, and also to direct focus towards certain key sectors e.g. electricity and renewable energy. Also there is legislation to improve and make the administration process easier and simpler, which has been done by creating an “investment window” where investors will only have to deal with one single body, rather than vast numbers of different government departments, and applications will have to be answered within 60 days. Another explanation for the positive rise in foreign investment is due to the new Corporate Governance Code which was introduced last August as part of Egypt’s National Anti-Corruption Strategy, designed to restore faith in the region. The anti-corruption strategy is focused on making Egypt’s marketplace more approachable for outsiders, and provide more transparency within the business community. The National Anti-Corruption Strategy was launched by the Egyptian Government in December 2014.
15
However as with any jurisdiction going through a post-revolution transition, confronting issues around bribery and corruption is not easy. Post-ArabSpring there has been an onslaught of bribery and corruption allegations and cases being brought within the Egyptian community – both genuine and trumped up, many of the false accusations are politically motivated. Egypt’s penal code criminalises several forms of corruption, such as active and passive bribery and abuse of office. However, in practice it can be hard to untangle the truth from the try-ons. For the new investment laws and corporate governance codes to have real traction with the international investment community, they need to go hand-in-hand with the government’s anti-corruption policies. Egypt has not yet achieved the required separation of political motive and criminal accusation, and the new investment laws have also remained silent on this. So what more can be done in Egypt to encourage foreign investment? Egypt could adopt a similar model to Dubai, establishing an independent legislative zone for foreigners to do business based on international standards and principles of common law [Dubai International Finance Centre (DIFC)]. Dubai’s independent jurisdiction has done well in attracting international trade and business activity, and Egypt can take lessons from the example this sets. The new investment laws being passed through Parliament has demonstrated positive change occurring in Egypt and is a good start in attracting foreign investors back into the region. However, much more still needs to be done to ensure that this doesn’t become a missed opportunity. For the business community to really thrive in Egypt, greater certainty and transparency is needed, especially to demonstrate that the Egyptian playing field is becoming fairer for all involved.
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UBA lists debut $500 million Eurobond The bond was significantly oversubscribed by global investors
Kennedy Uzoka, Group MD and CEO, UBA
T
he United Bank of Africa (UBA) announced this month that it has raised $500 million through its debut Eurobond. The bond was 240 per cent oversubscribed. The offering is a five-year senior unsecured benchmark bond listed on the Irish Stock Exchange. UBA stated that the inflows will be used to support the Group’s strategic vision to grow
its franchise across the continent and client segments. The bond is set to mature in June 2022 and was issued with a coupon rate of 7.75 per cent, priced at an effective yield of 7.875 per cent. In a press statement, UBA commented that the pricing was on par with that of the recent bond issue by the Federal Republic of Nigeria, which issued $1 billion in February 2017. Investor interest for the bond came from a global audience, including the UK, US, Europe, Middle East and Asia. Speaking on the offering, the Group Managing Director/CEO of UBA, Kennedy Uzoka said, “This successful dollar-denominated offering further illustrates global investor confidence in the strong fundamentals of our Group. The $500 million bond will complement our stable funding base and support the growth of our balance sheet and the overall business. More importantly, this medium-term funding will further enhance our strength in financing profitable, impactful projects on the African continent.” Also commenting on the Eurobond, Ugo Nwaghodoh, Group CFO, UBA, said, “UBA’s debut global offering is another milestone for us. It is timely in the Group’s growth phase and aligns with our strategic plan to profitably grow the balance sheet, as we maintain our prudent risk management and benchmark asset quality ratios.”
The bond was rated as ‘B’ with a stable outlook by Standard & Poor’s (S&P). The ratings agency noted that UBA operates in the top tier of the Nigerian banking sector and benefits from a sound franchise in the corporate and retail segments in Nigeria. Furthermore, UBA benefits from a degree of geographic diversification, with operations in some 18 other African countries. Earlier this year, Fitch Ratings assigned an expected rating of ‘B(EXP)’ to UNBA’s proposed senior unsecured medium-term notes. These ratings are in line with Fitch’s long-term foreigncurrency issuer default rating of ‘B’ on UBA. The agency noted that the likelihood of default on these notes is a reflection of the likelihood of a default of the bank. The agency continued that the Bank ratings are primarily sensitive to further asset-quality deterioration and capital deterioration, in addition to pressure on foreign-currency funding and liquidity. In addition, S&P commented that although the bank’s significant exposure to oil and gas, at around 20 per cent of total loans, has been shield from lower commodity prices, due to client hedges, non-performing loans have increased. As of year-end 2016 nonperforming loans jumped to 3.9 per cent, up from 1.7 per cent yearon-year.
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Downgrades hit South Africa Moody’s has taken ratings actions across the board in South Africa
Institutions across a variety of sectors have had their ratings and outlooks downgraded by Moody’s (CREDIT: PHOELIXDE/SHUTTERSTOCK).
F
rom the big five banks to insurance groups, ratings have been lowered following South Africa’s sovereign rating downgrade to ‘Baa3’. The primary driver for the ratings downgrade is the challenging operating environment that South Africa represents, which is also partially reflected in its sovereign rating. Economic slowdown, ongoing political issues and weakening institutional strength have all contributed to the downgrades. The five largest South African banks, Standard Bank, FirstRand Bank, Absa Bank, Nedbank and Investec all had their long term local and foreign-currency deposit ratings lowered to ‘Baa3’ with a negative outlook from ‘Baa2’. Standard Bank has also had its long term local and foreign currency issuer ratings lowered to Ba1 from Baa3.
Banks are susceptible to the challenging economic environment in South Africa, with lowering investor confidence, volatile asset prices and higher funding costs likely to put pressure on bottom lines. Furthermore, high exposure to government debt securities by banks in South Africa adds further risk, added the agency, a risk which has had an increased impact on ratings following the sovereign downgrade. Development Bank of Southern Africa (DBSA), the Industrial Development Corporation of South Africa (IDC) had their long term foreign currency issuer ratings downgraded, whilst the long term local and foreign currency issuer ratings of the Land and Agricultural Development Bank of South Africa (Land Bank) were downgraded, to Baa3 from Baa2. Moody’s noted that this downgrade reflected the weakened capacity of the
South African Government to support these institutions should they need it. This directly affects the rating of the three institutions as they are government owned. However, some rating positivity can be seen in the Government’s historic willingness to inject fresh capital should these institutions need it. In addition, Moody’s also downgraded the global Insurance Financial Strength (IFS) and related debt ratings of South African insurance groups and related entities, with a negative outlook. Moody’s considers the key fundamentals of these groups to be directly related to the economic and market conditions of South Africa. The agency believes that South Africa’s challenging political environment suggests a weakening of the country’s institutional strength, which throws doubt over its ability to resolve its ongoing economic woes. South African insurers downgraded included: Old Mutual Life Assurance Company (South Africa) Ltd: IFS rating downgraded to Baa2 from Baa1, with negative outlook. MMI Group Limited: IFS rating downgraded to Baa2 from Baa1, with negative outlook. National scale IFS rating affirmed at Aaa.za. The Guardrisk group of entities (Guardrisk Insurance Company Limited and related entities): IFS ratings downgraded to Baa3 from Baa2, with negative outlook. National scale IFS ratings affirmed at Aaa.za. Standard Insurance: IFS rating downgraded to Baa3 from Baa2, with negative outlook. National scale IFS rating affirmed at Aa1.za.
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Foreign currency flow and supply appears to have approved in Nigeria (CREDIT: VKILIKOV/SHUTTERSTOCK).
Foreign currency liquidity improving for Nigerian banks Nigerian banks’ ability to access foreign currency has improved significantly, says Fitch
F
itch Ratings has released new analysis suggesting that the ability of Nigerian banks’ to access foreign currency has improved considerably following the introduction of a foreign exchange ‘window’ at the end of April by the Central Bank of Nigeria (CBN) aimed at investors and exporters. Fitch stated that the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) mechanism, which is more commonly known as the ‘Investors’ and Exports’ FX Window’, has appeared to boost the foreign currency supply and flow of foreign currency liquidity in the West African nation. For banks that are rated by Fitch, the agency states that liquidity pressures have now eased following an acute short supply throughout much of 2016 and early 2017. This short supply has restricted imports in Nigeria and forced several banks in the country to extend maturities on their trade finance obligations. The goal of NAFEX is to provide investors and exporters with a more
transparent mechanism to sell their foreign currency to buyers. The mechanism seems to be succeeding with the volume of transactions through NAFEX growing. Banks that have been authorised act as intermediaries in the transaction and clear funds supplied by investors and exporters whilst ensuring a timely execution of settlement for buyers. In Fitch’s opinion, NAFEX offers, “A more transparent alternative to accessing foreign currency than is available through the other foreign-exchange markets in the country.” Nigeria has for some time had multiple exchange rates operating in the country. The Central Bank of Nigeria set its official exchange rate as NGN 305 to the USD, with black market rates occasionally breaching NGN 500 to the USD in early 2017. Additional exchanges rates exist for personal travel allowances, interbank rates and Western Union. NAFEX introduces another exchange rate, which may add further confusion to the system.
However, Fitch notes that due to its rates being set by market participants it is already attracting greater volumes than other exchange mechanisms and has begun forcing down exchange rates on the parallel markets. Banks will benefit from this as funds are drawn back into the banking sector, the agency added. NAFEX’s future success is particularly crucial when viewed through the lens of Nigeria’s highly import-dependent economy—the country is the largest importer of food in Sub Saharan Africa is one example of this dynamic in action. Fitch adds that although the CBN may intervene in NAFEX, banks have informed the agency that interventions by the Central Bank have been limited. Rates on NAFEX have averaged around NGN 380 to the USD recently with volumes hitting $1 billion per week. The agency concludes by stating that although improved foreign currency is a credit positive for banks, the sector remains constrained by Fitch’s ‘B+’/Negative sovereign rating on Nigeria.
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UGANDA
Tanzania
Your Bank. Your Future. Banki Yawe. Ejo Heza.
Nyagatare
DEMOCRATIC REPUBLIC OF CONGO
The Largest Banking Network in Rwanda
Musanze
NORTHERN PROVINCE
Burera
Gatsibo
Nyabihu
Rubavu
Gicumbi
Gakenke
Rulindo
EASTERN PROVINCE Gasabo
Ngororero
Rutsiro
WESTERN PROVINCE
Kayonza
Muhanga
Nyarugenge Kamonyi
Rwamagana
Kicukiro
Karongi Ngoma
Ruhango
SOUTHERN Nyanza PROVINCE
193, Branches countrywide
Bugesera
Kirehe
Nyamasheke Nyamagabe
105+ ATMs countrywide More than 150,000 Debit card holders
Huye Rusizi
Over 250,000 Mobile banking users 500 Mobile app users
Tanzania
Gisagara Nyaruguru
BURUNDI
Access to more capital for your business. Your Bank. Your Future. Banki Yawe. Ejo Heza. www.bpr.rw BA bleed guide.indd 1
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20
cover
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Kee Chong Li Kwong Wing
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Continental expansion SBM is taking advantage of Mauritius’ unique geographical position in its expansion plans, says Chairman Kee Chong Li Kwong Wing
W
hat have been your priorities for 2017?
SBM Group recorded a good financial performance for the year 2016 with an increase of 44 per cent of profit after tax as compared to that of 2015. This year we are aiming to achieve a profit after tax of at least MUR 3 billion, representing a rise of more than 25 per cent. The improved profitability would be underpinned by an increase in market share in all our business lines, coupled with a significant increase in our international business. Besides, we are gearing up on several fronts to improve our performance going forward. There are several priorities for this year. One major priority for this year shall definitely be the digitalisation of our bank. SBM wants to build proximity with its clients and at the same time be
handy to them through internet, mobile phone and tablet. Post-completion of the launch of SBM Bank (Kenya) limited, we are also aiming at completing the amalgamation of our current India branch operations with the newly incorporated whollyowned subsidiary, SBM Bank (India) Limited. Moreover, SBM Bank in Seychelles shall be operational by December 2017 in order to expand our footprint in the Indian Ocean. Beyond our initiatives on international expansion as mentioned above, internally within Mauritius, SBM is working on building revenue streams through investment banking, private banking and wealth and asset management. To meet the demands of our clients, our NBFC cluster has applied and is awaiting licences for starting our microfinance, factoring and credit insurance businesses.
Following the acquisition of Fidelity Bank, and news that SBM is bidding for Chase Bank in Kenya, what is SBM’s strategy for doing business on the continent? SBM acquisition of the Fidelity Commercial Bank, now known as SBM Bank (Kenya) Limited, was an opportunity for the Group to begin its Africa foray. The FCB was indeed a small bank and good enough for entry. The theme is to establish stability before building balance sheet scale. The immediate aim here is to turn the Kenyan operation into profitability in 2017 and build scale thereafter. The short-term agenda is to step into Tier 2 in 2018 and Tier 1 by 2020. The East Africa strategy with Kenya as a hub is valid and this will be pursued in due course. Mauritius has the advantage of its geographical position in the Asiacont. overleaf
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cont. from page 21
Kee Chong Li Kwong Wing, Chairman, SBM
cont. from page 21
Africa corridor and hence SBM has the potential to emerge as a liquidity aggregator to Africa growth and facilitate in management of investment and wealth of cash-rich companies and high net worth individuals of Africa across global markets. The long-term agenda of SBM is to position itself as a gateway for banks and financial institutions into Africa and Asia and an express way for investors into global markets across the regions. Our strategy also consists of focused relationships with customers and other stakeholders in order to build a strong and cost efficient liability franchise in the bank. We shall optimise our advantages in cross-border and financial market business.
What are the biggest challenges facing SBM in its expansion plans? As Africa transforms from an underdeveloped to a developing continent, it is bound to face risks associated with political, economic and social instability. The risk from political instability comes from poor governance, lack of transparency and disclosure and undue favouritism. Economic headwind conditions are associated with high fiscal and current account deficits, high inflation and unstable exchange rate. Given our focus in the Asia-Africa corridor, we need to handle two extreme environment and dynamics. That’s where we see the opportunity to
take Asia entrepreneurs, liquidity and technology to meet the supply of great African opportunities using Mauritius as base for deal structuring and flow facilitation. SBM sees great opportunities in the challenges that Africa faces today, which could only improve going forward.
How are you working to address those challenges? The control of risks around politics, economy and social sectors are not in the hands of the foreign investors or lenders. The only way to address those challenges is to stay prudent by keeping the greed away and to be selective in risk exposure. The Bank will identify good promoters, emerging sectors and asset
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backed finance and ensure that end use of funds is appropriate and not diverted elsewhere. We will be very cautious in the selection of opportunities and careful in post disbursement credit monitoring to keep a close watch on the operations and conduct of the borrowers.
How has SBM participated in deepening the financial services sector? In order to respond to the various needs of the financial sector, SBM has been working accordingly to the needs of the sector and of its clients. It has diversified its offerings in multiple ways. We still have a hand on the traditional banking services, but have enlarged our array of services to trading in bonds, derivatives and exotic currencies. We recognise that there is an important trade finance gap in Africa, and are proposing structured trade solutions. On the non-banking side, we are expanding into factoring, microfinance, and advisory services. Our asset management services are also called upon to grow with our focus on private wealth and institutional mandates. All these services are available to the different markets we serve.
What opportunities do you see for investment for the rest of 2017 and onwards? With an increase in investment expected on the domestic front, we expect a pick-up in credit. International business segment will definitely be called upon to contribute more this year particularly in respect of Africa trade and investment. Looking further ahead, with the growth of HNWIs and UHNWIs in Africa, our private wealth business is set to expand further. Moreover, our India and Kenya operations should, in the medium term, contribute more significantly to the bottom line in view of the good
prospects for the economy and the banking sector in these countries.
How have the needs of your customer base changed over the years? Over the years, we have witnessed that customers are becoming more sophisticated and technologically savvy. Hence, they are going beyond the traditional banking services, and are looking increasingly towards investment and advisory solutions.
The only way to address those challenges is to stay prudent by keeping the greed away and to be selective in risk exposure. – Kee Chong Li Kwong Wing – At the same time, they are expecting rapid service delivered anytime, anywhere. This is why we are investing in technology, product development and capacity building to be able to propose a comprehensive and fully digital offer.
Does SBM have any plans to help contribute to Mauritius’ role as a gateway for investment to Africa? Through the acquisition of a Kenyan bank which is our baby-step in Africa, SBM has positioned itself as the preferred partner for Mauritian companies wishing to invest into Africa. SBM shall be a balanced player between financial intermediation and financial services. Moreover, SBM is diversifying its segments in order to serve a
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greater portfolio of clients and also is concentrating on its regional expansion. Due to the fact that Mauritius lies in the Asia and Africa corridor, SBM participates in the development of Mauritius as a platform between these two continents by having its footprint in these two areas. Also, SBM is well-positioned to support the government’s initiatives in investment development in Africa.
How does technology play a role in SBM’s overall growth strategy? Customers are becoming more demanding with time. As said before SBM priority for this year is to become a fully digital bank. This strategy will enable us to become handy to our customer through internet, mobile phones, and tablet. Through digitalisation we shall attain our objective of being more accessible to different audiences.
What is your personal management philosophy? Since assuming Chairmanship, I have always favoured an open-door policy and the disruption of the topdown approach. I have introduced a participative strategy where I get the opportunity to meet staffs and discuss any new ideas and opinions so that we come up with new strategic plans. While individual brilliance is important, I believe that sustainable success is dependent on establishing collective excellence. My personal agenda here is to set up an efficient top and senior management talent who manage the teams around them. The agenda is to build strong sales orientation at client facing levels and robust risk management mechanism to avoid revenue slippages and credit cost. My personal philosophy is to widen the gate of revenue inflows and stitch holes that would cause leakages.
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Rwanda has been very successful in its financial inclusion efforts in recent years (CREDIT: SARINE ARSLANIAN).
Resurgent Rwanda The East African country looks to set to recover from its 2016 losses
R
wanda has been achieved impressive growth in recent years, underpinned by strong governance and government-backed developments. Indeed, in the 2016 Ibhrahim Index of African Governance noted that Rwanda is the only country to have featured both amongst the 10 highest scoring and the 10 most improved countries over the past 10 years—as of the release of the 2016 edition of the study, Rwanda currently ranks ninth. Furthermore, the country ranks fifth in
overall positive trending improvements in the last 10 years. Political power in Rwanda remains concentrated in the leadership of President Paul Kagame, and this is unlikely to change in the near-term. Following a constitutional amendment supported by referendum in late 2015 Kagame will be allowed to stand for a third term in the Rwandan election this year. Kagame is widely expected to win the election and carry out his third term as President. Although risks exist, including the ongoing crisis in
neighbouring Burundi, it is unlikely to affect the economic and political process, which is supported by Kagame’s popularity and the administration’s use of security measures.
A RETURN TO STRONG GROWTH In growth terms, 2016 saw 5.9 per cent GDP growth, down from 2015 but still impressive when considered in the context of subcontinental growth of 1.4 per cent, the lowest figure in two decades. Primary causes of this
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growth deceleration can be found in the drought that affected Rwanda’s agricultural sector, in addition to the completion of large construction projections and adjustments in policy to address growing external imbalances. Rwanda has sustained real GDP growth of 7.2 per cent over the last five years, although this dipped in 2016. Fitch Ratings in a ratings release stated that despite growth slowdown in 2016, the agency expects growth to pick-up to 6.2 per cent in 2017 and 6.6 per cent in 2018 as the construction of the Bugesera airport commences and
and expanding domestic production,” said Laure Redifer, whom led an International Monetary Fund (IMF) staff team visit to Rwanda in May this year. “Food-driven inflation peaked in
the impact that the drought had on the agricultural sector fades. This falls in line with the IMF World Economic Outlook Database (April 2017) which projects 6.1 per cent growth in 2017 and 6.8 per cent growth in 2018. Food-driven inflation over the course of 2016 and early 2017 was also primarily driven by drought conditions rather than domestic production issues. Historically, inflation has remained relatively close to the National Bank of Rwanda’s (BNR) five per cent target. In a release S&P stated that this is likely to continue in the future, despite inflation growth in 2016, whilst Fitch also commented that inflation is likely to moderate to an average of six per cent in 2018, from 9.2 per cent in 2017. “The IMF team anticipates that growth should recover gradually over the course of 2017, owing to good rains
early 2017, and should decelerate as food supply constraints recede.” In order to sustain the countries growth, Redifer commented that the IMF team focuses on three key policy areas, the first of which is Rwanda’s development policies under Vision 2020 and Economic Development Poverty Reduction Strategies I and II. These policies have enabled the country to, “make nascent but tangible progress in moving from lower value-added to higher value-added economic activities, fostering structural transformation.” More investment is needed in infrastructure to foster private sector activity, which will ultimately lead to job creation and an improvement of living standards. Secondly, the IMF team pointed to the gender inclusive stance the government has taken which has
6.25% Benchmark Interest Rate
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resulted in growth for the country. Further growth can be achieved via increasing inclusion of women in higher productivity jobs, the Fund added. Finally, Rwanda’s process in financial inclusion, seen most acutely in the embracement and expansion of microfinance and mobile banking technology, is a key driver of growth. There is, however, room for improvement with progress needed in lowering the barriers, and costs, to entry of the financial system, in addition to deepening both the financial and security markets.
DEFICIT STABILISATION The country’s current account deficit worsened to 14.3 per cent of GDP in 2016, up from 13.4 per cent in 2015, on the back of lower commodity prices such as coffee, tea and minerals, according to Fitch. This is, however, not a trend that is likely to continue. Fitch expects the current account deficit to narrow to 11.1 per cent of GDP in 2017 following the government’s initiative to support export diversification up the value-chain and the import substitution strategy. The current account deficit has been financed mainly through sovereign external borrowing, foreign grands and direct investment inflows. S&P stated that the agency expects to see a gradual narrowing of the current account deficit to eight per cent of GDP cont. on page 27
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by 2020, but that a larger part of deficit financing will now come from external borrowings, partly on commercial terms, than had done so historically. The agency added that the flexible exchange rate arrangement, maintained by the BNR, prevented Rwanda’s external position from deteriorating further in 2016 in the face of lower import volumes on the back of a weaker RWF. Falling commodity prices also led to a 9.7 per cent depreciation of the RWF against the USD in 2016, although the RWF has since stabilised following an easing of external pressures in the first quarter of 2017. Estimates released by Fitch state that official reserves will be some 4.2 months of external payments by the end of 2017. This is further supported by $200 million in standby credit facility loans from the IMF, of which $100 million was disbursed in 2016 with the remainder to be disbursed by the end of 2017. Rwanda is also engaged in the G20 programme ‘Compact with Africa’. The programme provides a framework for supporting sustainable private investment, investment in infrastructure, employment and economic participation which could help restrict further depreciation pressures on the Franc—if the programme is successful in improving FDI inflows. Redifer commented that, “The IMF team also welcomed Rwanda’s participation in the G20’s ‘Compact with Africa.’ The compact has good potential to leverage ongoing and new work by the government and development partners to attract and increase private investment in strategic sectors of the economy, for example, development of industrial parks and infrastructure, in the context of a stable economy and a welcoming business environment.” Overall the banking sector remains generally stable, although some
vulnerabilities remain. S&P notes that there is some concentration risk through the banks’ exposure to the hotel and construction sectors. Large construction projects in Rwanda often involve foreign-funding, but domestic banks are indirectly involved via smaller companies that they have provided credit to taking part in construction works.
Credit: World Bank
MACROECONOMIC INDICATORS
Real GDP growth Real GDP per capita growth CPI inflation
2015
2016(e)
2017(p)
2018(p)
6.9
6.0
6.2
6.8
4.6 FocusEconomics3.6 Credit:
3.9
4.5
5.5
5.0
2.5
7.2
Budget balance % GDP
-5.3
-3.2
-5.0
-6.3
Current account % GDP
-13.1
-13.2
-13.6
-13.7
Credit: Domestic authorities/Africa Economic Outlook 2017. Estimates (e) and projections (p) based on African Economic Outlook calculations
AfDB to support Rwandan gender inclusion and honey production The African Development Bank (AfDB), in partnership with the Organisation pour la Promotion de la Contribution Active de la Femme Rwandaise au Developpement (SERUKA)—a national women’s organisation focusing on women’s economic empowerment in Rwanda— has launched the Rwanda Honey Value Chain Project, which aims to enhance honey production in the country. The AfDB has approved a grant of approximately $343,000 to implement the project. The project will work directly with grassroots businesses. The overall goal of the Rwanda Honey Value Chain Project is to enhance the capacity of honey production cooperatives to access formal markets. The project targets 1,000 beneficiaries in Rulindo District, 80 per cent of whom are women. It will support the targeted cooperatives through provision of simple equipment to improve production; training in honey production in accordance with the Apiary Code; and in basic business skills. “Agriculture is one of the sectors identified by the Rwandan Government to drive growth. In line with this, the Rwanda Agriculture Board is promoting the apiary sub-sector—including bee and bee products, and silkworm production under the category of commercial insects. This project will also support women’s empowerment in the apiary sub-sector by effectively participating in the value chain,” said Halima Hashi, Principal Country Program Officer at the Bank’s Country Office in Rwanda.
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Robin Amlôt, CEO, CPI Financial
Accessing Africa Banker Africa shares its conversations from the Africa Financial Services Investment Conference (AFSIC) 2017
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he scale of the challenge is matched only by the scale of the potential, seems to be Africa’s tagline; it’s certainly a phrase which echoed around the Africa Financial Services Investment Conference (AFSIC) 2017, which took place in London in May. Banker Africa was in attendance to air the frustrations, opportunities and gossip back to our readers. AFSIC set the scene by reiterating exactly what those challenges and the
opportunities are. With the exception of 2016, the growth rate of Sub Saharan Africa has been higher than the global growth rate for the last 15 years. However, GDP per capita is low compared to other regions. With low income comes low capacity to raise domestic resources. There is huge demand for capital and debt; however, this capital is not available to deepen the capital markets, which would unlock much of Africa’s potential.
Africa houses just three financial centres— Mauritius, Casablanca and Johannesburg— the lowest number in the world. DISTANT RELATIONSHIP This makes Africa a difficult continent for investors to have a long distance relationship with. “Because we’re based in Ethiopia, we can see the realities,” said Graham Parrott, Managing Director of Ethiopia Investments Limited. “Investors’ key concerns are repatriation of cont. on page 30
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Celebrating the best of the best in West Africa!
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 simon.motwali@cpifinancial.net
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people. It’s not an economy you can understand from googling at a desk in London.” Many African governments are all too aware that they must do more to attract foreign investors if they are to nourish the sectors they need to grow, such as agriculture and tourism. “In Uganda, 75 per cent of equities are public; only 10 per cent of equities are held by foreigners, which is a very small percentage,” said Keith Kalyegira Chief Executive Officer of the Capital Markets Authority Uganda. “We would like 40 per cent of equities to be held by foreigners, as we believe this will increase liquidity and reduce the cost of borrowing for the government of Uganda.” Parrott is hopeful that governments’ needs to attract foreign investors will spur change and make African countries more attractive in the future—although he admits that progress is slow. “There’s always going to be a positive and a negative list; the negative list is quite big,” he said. “You can’t invest in banks or insurance companies. Telecoms were off limits for many years. These things are off limits now but in the future will slowly start to open up. To sustain long-term economic growth, the government knows it can’t do the same things which have worked well in the past.”
K.C. Li, Group Chairman of SBM Holdings was interviewed by Banker Africa’s Isla MacFarlane cont. from page 28
dividends from birr into US dollars, and how quickly they can exit an investment; these are key questions, especially for private equity investors. There is no secondary market or stock exchange, so there is no IPO availability and you are reliant on other funds coming in.
Long-term investors can cut through this. To de-risk this, you have to spend time in the country. A lot can change a lot in six months. “Being based full time in Ethiopia gives you the chance to understand what the government is thinking before other
SPENDING NEEDS For the patient investor, the best investment opportunities are aligned with what governments want for their countries. “There are many opportunities in Ethiopia; you have to look at what the government has prioritised as part of their long-term vision for Ethiopia; how they see the economy developing,” said Parrott. “Their vision is very much along the lines of industrialisation. As a foreign investor, if you choose to look at agroprocessing or pipe manufacturing—
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the government has opened financial services to foreign investors through lease financing—this is a sector we’ve been monitoring for around a year and a half. “I think the final investment opportunity would be in real estate. There is a huge demand for high quality apartments. Addis is the political centre and home to a lot of UN staff, NGOs and diplomats. The quality of the accommodation is so-so, and we feel there is a gap in the market.”
Hoda Atia Moustafa, Africa Regional Head, World Bank
these are the key areas that are very useful for the government in terms of value addition. “In terms import substitution, there is a trade deficit operating in Ethiopia right now so any investment in local production is welcome; the inputs required for some of these sectors are very interesting.” In Uganda, Kalyegira also advises investors to consider sectors the government is keen to develop. “It’s mostly oil and gas,” said Kalyegira. “Right now, we are trying to build a refinery which we have short-listed investors for. There is a pipeline right down to the coast via Tanzania. We are also looking at auxiliary or downstream industries; agro processing and agro exports are two areas of growth. One of our competitive advantages is the potential to invest in tourism infrastructure. We’re still the largest exporter of coffee in the world. Any investment that would boost our coffee output would be welcome.” “We think retail and logistics are interesting,” added Parrott.
“Certainly, there is enough to focus on in manufacturing, with a huge push for industrial parts. The government does want industrialisation to be turbo-charged in the country; they’re very keen on becoming a lower-middle income economy by 2025, which equates to $12,000 per capita; it’s currently around $7,000 so there is a gap to be closed. If you, as a foreign investor can operate in that gap and push some of the metrics—some of the ideas that support their vision—then you will be given huge incentives to invest in businesses or start businesses from scratch. Three main sectors in Ethiopia currently stand out for Ethiopia Investments Limited. “We made our first investment two weeks ago in business process outsourcing—it’s a technology company,” said Parrott. “This is interesting because we have all our costs denominated in birr and all our profits denominated in dollars, so that hedges a lot of risk that investors have around earning birr. “The second investment is around capital leasing. So for the first time ever,
LESSONS FROM MAURITIUS According to K.C. Li, Group Chairman of SBM Holdings, African governments can learn a lot from how Mauritius developed its now enviable economy. Li believes Mauritius’ success story stems from strong regulation, an independent central bank and world class regulations. “We had to industrialise our economy, encourage financial inclusion and develop SMEs so that our economy wasn’t lopsided,” he said. “We didn’t want an economy where everything was concentrated on sugar and the sugar landowners would dictate the growth of the country. We started a new model based on export development through manufacturing and tourism to develop our capacity, generate foreign resources and fuel our growth.” However, this initial diversification relied on cheap labour and a weak currency. “In order to have a high-growth, broad-based economy we had to diversify in a way which was sustainable,” Li said. “In this context financial services became a very important pillar for growth. “The government started liberalising the financial services centre and got rid of credit and interest rate control. In its place, it developed a stock market to promote share ownership so small savers could directly benefit in the growth of an economy. We promoted the participation of foreign capital into the country and cont. overleaf
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cont. from page 31
we gave foreign investors tax incentives, so there was no tax on repatriation of capital. This made Mauritius very business friendly. “We created a low tax environment, strong regulations and legislation to attract foreign capital into specific sectors that the government wanted to develop. All these created an ecosystem conducive to grow.” So what can the rest of Africa learn from Mauritius? Above all, according to Li, governments have to think globally and think hard about how to draw capital and talent from the rest of the world. “On the incentive side, the government made it possible to have free entry and exit of capital flows and also they made
that are offered to investors and businesses. Incentives must be offered with predictability, so there’s no reversal of any policy—this is very important to give certainty to investors.” THE RIGHT TRACK? Other African countries are beginning to follow in Mauritius’ footsteps. Kalyegira is hopeful that Uganda’s recent upgrade to the International Securities Commission will show the world that their money is safe in Uganda. “It shows investors that we are a credible regulator, and we are now a better partner to other regulators,” he said. Meanwhile, Parrott believes Ethiopia is on the right track towards becoming
differently. You could argue they’ve borrowed some elements from post-war Japan or South Korea in the 60s and 70s; it’s very much the Ethiopian way.” There is, however, a need for local investment as well as foreign capital. “We want to make businesses more aware of the need to access other forms of funding, as opposed to the traditional forms of debt funding,” said Kalyegira. “We want more local funding in infrastructure; especially in energy. Right now, it’s heavily dominated by dollar debt.” BOOTY FROM WITHIN According to Hoda Atia Moustafa, Africa Regional Head at the World Bank, local funding should be prioritised
All our economies develop through local money being invested in that economy. Africa shouldn’t be different.” – Hoda Atia Moustafa, Africa Regional Head at the World Bank – business more friendly to investors,” said Li. “Incentives are very important for attracting foreign investors. Mauritius is the only country on the global stage to try and increase its domestic capital through external sources. “The third element is the political stability, the rule of law and a social environment where everyone is on board and realises that to survive in this competitive world we need to scale up our capabilities to have more training. We need to attract talent and we need to be more competitive on a global level. “The example of Mauritius shows we’ve taken the necessary levels required to remove these bottlenecks and irritants. If there are more difficulties and challenges in Africa, it’s because these obstacles were not addressed: the governance; the enforcement of regulation; the incentives
an international player. “The government is very forward-thinking,” he said. “We love the success they have in terms of understanding the needs of manufacturers, which will be a key sector within the next 10 to 15 years. “The government realises there are some issues in terms of logistics; getting products in from overseas and exporting to the wider world economy. We very impressed with updates such as the Addis Ababa railway which will be completed this year. There are huge infrastructure developments such as the industrial parks which will be built within the next three or four years. All of these developments are very exciting; the government has put its hands in its wallet. “The government understands that to grow, they need to do things a bit
over attracting foreign investors. “I believe what we need is, first of all, the awareness that we have the money within,” he said. “Money from outside may not be ‘hot’ money, but it isn’t stable money. People can always run out when there’s a problem. However, local money is always there. All our economies develop through local money being invested in that economy. Africa shouldn’t be different.” However, Africa faces a mammoth financial inclusion challenge; 1.2 billion of its people are underserved—a figure that is set to double in the next 30 years. Without access to funding, businesses wither before they’ve had a chance to take root. “One challenge is linked to the lack of formality of people’s IDs,” said Moustafa. “People don’t have the paperwork to go to a bank. cont. on page 34
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cont. from page 32
Keith Kalyegira Chief Executive Officer of the Capital Markets Authority Uganda
They don’t find that the services a bank provides are relevant to them. Microfinance institutions are very short term. That summarises their contact with financial institutions, so that’s why they don’t use them—they’re not interested.” According to Wayne HennessyBarrett, Founder & CEO of 4G Capital, solutions need to be designed by the informal sector, 80 per cent of which lies outside the salaried economy. “The informal sector is thought to be worth $966 billion, or 55 per cent of total GDP,” Hennessy Barrett said. “Global markets are underpinned by local markets making it critical to support local entrepreneurs. Local enterprises are driven by individuals with the creativity and resilience to create value. They need access to networks and channels to connect to wider markets and realise their potential.” CHARGING FINANCIAL INCLUSION The tools for making this happen are already in people’s hands.
“Mobile phones have completely changed the game,” Moustafa said. “It shows that people are interested and they want to have the right tools to be able to engage in the finance. “Even to have a mobile phone now requires more paperwork because of the terrorist issues. However, in rural areas, fortunately mobile phones are still allowable so there has been a real growth of financial inclusion through the use of phones and through the agency banking model that goes alongside it. That means that local shop keepers become the financial intermediary, by cashing in what people have on their mobile phones. That’s a real breakthrough.” “Fintech is on point, with increasing collaboration with banks and institutional investors who recognise the potential of the African markets,” said Hennessy-Barratt. “Near universal phone ownership provides the missing infrastructure to reach those previously thought unreachable. Mobile money systems allow this sector to connect
to the wider economy with security, transparency and speed.” “Mobile technology enables delivery of relevant products and services. To be scalable, solutions must work with the existing technology base. Feature phone use remains the norm and will continue to do so for the largest segment of the underserved. Client data verification and structural challenges have seen traditional banking models struggling to meet the needs of the financial sector.” According to Moustafa, the next step is to connect with bigger agencies. “On the financial inclusion side, we are focussing on payment systems,” he said. “We’re working with the telecommunication agencies, the banks and the financial ecosystem to try and make mobile phones become a tool for banking. We have to work very closely with consumer protection organisations and financial literacy organisations so people can trust this possibility to save, invest or pay through your phone. “We have to make sure that we have the right instruments. However, what will really make it happen is the awareness of the authorities, alongside the governments and the bankers because they still have a very important role controlling the economy and there’s a lot of money for them in this transformation. Banks make a lot of money from capital markets—they could do this in Africa, but they’re not looking to. Bankers are part of the solution as well.” There are many parts to the solution of financial inclusion in Africa; as these slowly piece together, entrepreneurs, businesses and investors should begin to reap the rewards of a resource-rich continent with a young population. Investors should be hammering on the door of a region which has bucked sluggish global growth for over a decade; and yet, a large portion of Africa’s resources remain sealed off from the world. For now.
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All eyes to port
Ports projects are on the rise in West Africa, with new expansion, construction and modernisation efforts underway
Investment is needed for West African countries to take advantage of its geographic links to sea-trade routes (CREDIT: DONVICTORIO).
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ountries in West Africa have begun to experience an increase in port development projects to expand, modernise and interlink their shipping infrastructure over the course of the next five years, according to a report entitled State of West African Ports and Intermodal Projects: Expansion, Modernisation and Intermodal Construction, released in advance of the Ports & Intermodal West Africa Conference. Seaborne trade shows no signs of slowing down, with trade volumes surpassing 10 billion tonnes in 2015 and shipments expanding 2.1 per cent, according to UNCTAD. In order to take advantage of this giant industry, huge investment sums are necessary to transform West Africa’s port infrastructure. Fortunately, Chinese
investment on the continent in recent years has fuelled interest in large infrastructure projects. Major Chinese construction groups have been providing the capital for infrastructure growth in a way that was not possible previously as African projects have historically been unable to obtain similar amounts from world markets. The other crucially important fact is a change in policy of West African governments moving towards a ‘build, operate, transfer’ (BOT) model of port development, noted the report. This would see countries taking over a role more similar to that of a landlord and shifting the costs of construction and initial operation to international port operators. This change will allow ports in West Africa to be built and operated with the latest equipment, drastically improving the
competitiveness of the ports on the international stage. In the report Ports & Intermodal West Africa suggest that the addition of several multi-billion dollar projects, in combination with a number of smaller developments, will allow West Africa to carve out a larger share of the regional and international shipping markets. If realised, this change will bring provide a significant economic bounty for the region. EXPANSION Expansion in the region is already underway. Year-on-year the average size of a container ship on the AsiaWest Africa shipping lanes increased 38 per cent to 4,178 TEU in January 2014. The Mediterranean Shipping Company added Post Panamax vessels, huge ships known as such due to their size impeding the ability cont. overleaf
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• This evidence suggests that the demand is there, but West African ports will need to rapidly expand their capacity.
cont. from page 35
to fit through the Panama canal, to its Africa Express service in 2015— something the report suggests would have been inconceivable as little as five years prior. This evidence suggests that the demand is there, but West African ports will need to rapidly expand their capacity. Major dredging works are underway in ports to increase the depth of the harbour in order to accommodate Post Panamax vessels. The report highlights Ivory Coast’s Abidjan II and Ghana’s Tema as examples, where teams from China Harbour Engineering are aiming to carve a 19–metre deep channel in the port. Likewise to improvements being made off-land, on-land ground improvement works have also been undertaken in order to accommodate the loads that large cargo ships entail. These improvements are important in ensuring the long-term viability of both port expansions and greenfield site projects. In relation to this, greenfield construction is on the rise in areas which authorities have found existing ports too difficult to expand—normally due to close proximity to tightly packed cities. Of projects currently in the pipeline, the largest is that of Lekki in Nigeria, located 60km east of Lagos’s business centre. The placement of the port is no accident, and care must be taken in choosing additional projects to take advantage of existing transportation infrastructure whilst avoiding the
problems of trying to expand in urban areas. MODERNISATION In line with expansion plans, designs have been put in place to modernise infrastructure, and bring West Africa’s ports in line with international standards. Lengthy ship turnaround, delays and high cargo delay time are three of the major issues that have plagued the region’ ports in the past. For the trade and economic trade advantages to be reaped from updating port infrastructure this image needs to be lost and systems updated. The report lists three key developments and solutions that are necessary in order for West Africa’s port expansion project to succeed. The first of which is that crane and terminal infrastructure improvements need to be made. Some positivity can be found here, with the region attracting higher degrees of investment and financing. The aforementioned Nigerian Lekki project, and Ghana’s Tema harbour, each with an investment cost of $1.5 billion, are examples in which efforts are being made to keep international standards in place and facilitate smooth operation. Efficiency increases are also being made via a greater focus on instituting higher levels of port automation. Ports & Intermodal West Africa suggest that productivity gains of up to 30 per cent can be realised through the use of terminal automation technologies.
Finally, in order for these changes to succeed, security of West Africa’s ports must be maintained. Port operators in the region are equipping advanced security equipment in order to halt problems that plague doing business, such as corruption, smuggling or terrorism-related activities. If the security problems can be alleviated then further increases in productivity and efficiency are likely to follow. However, upgrading port infrastructure is not enough to take full advantage of West Africa’s trade links. More focus needs to be made on solving logistical and transportation related issues. The report points to logistical issues as one of the biggest factors that are holding back growth on a continental level, with transportation costs placed at some of the highest in the world. Fortunately, investment is already underway to improve intra-African links. For example, Ghana’s Tema port development plan includes investment in inland transportation to help ensure efficient movement of goods to and from the port. An allencompassing approach is required on a regional level, linking sea, road and rail links, for the benefits of port investment to be harvested. The report adds that this will require a long-term sustained investment plan, with support on both a public and private level across the continent in order to realise long-term success.
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Scoping new opportunities Corporate banking growth remains a focus for Emirates NBD Egypt, says Amr Azab, Head of Corporate Banking, Emirates NBD Egypt
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mirates NBD Egypt has moved into the corporate banking scene as a market challenger over the last few years since the acquisition of BNP Paribas Egypt in December 2012. What are your ambitions for the next five years? The last few years have definitely been exciting for corporate banking at Emirates NBD Egypt. When the acquisition of BNP Paribas’ Egyptian operations was being finalised with Emirates NBD in late 2012, understandably we were not in a position to grow our business until the deal went through. When it did and when Emirates NBD’s growth agenda became clear, it meant we could finally
put our foot on the accelerator and that is exactly what we did. Between 2013 and 2016, we tripled our corporate loan portfolio and grew our corporate banking revenues by 180 per cent whilst keeping our nonperforming loans ratio below two per cent. Looking forward, we are aiming to maintain our growth strategy while focusing on asset quality as well. Our growth so far has been underpinned by getting the fundamentals of banking right. That means having a very clear expansion strategy based on Egypt’s broader economic development plan and growth segments, underpinned by the right credit risk policy. It also means having the right structure in place. To ensure this, we reorganised ourselves
Amr Azab
internally for growth with a sectorial approach for our larger corporate clients, based on our top ten markets.
With continued growth clearly being your focus, following the liberalisation of the Egyptian pound have you had to adjust your strategy in Egypt? November’s currency free-float was definitely a game changer for the country. For us as corporate bankers when you add to the mix, the introduction of VAT and subsidy cuts in key industries, it is safe to say that the environment has changed quickly. The currency liberalisation has presented both opportunities and challenges. There is a lot of optimism in the market and clear signs that it is working.
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banking Exports are up, with the weaker pound increasing their competitiveness. Foreign currency reserves are improving, as are remittances. Meanwhile, the government is investing heavily in key sectors like infrastructure as part of its “Vision 2030” economic plan launched last year and we are keen to help make this happen. Foreign investment is also growing and whilst a lot of this has been centred on government bonds and treasury bills, we are expecting an uplift in foreign direct investment and there is a lot of renewed interest coming from China. It is these types of growth opportunities that we are targeting and we too are optimistic. Exporters are a big focus for us and many Egyptian exporters work across the Gulf so we are well positioned to help with this given our UAE-based parent company. The Emirates NBD Group also has a strong correspondent bank network to help our exporters move even further abroad into Europe and other lucrative markets through preferential trade tariffs. Because of this, growth is still the key agenda for us. At the same time, there is still uncertainty in the market so it needs to be carefully managed with a focus on asset quality, as I mentioned previously. Our clients are still adjusting to the new market conditions and we are helping them do this. Their concerns are centred on challenges related to fluctuating exchange rates, maintaining sufficient liquidity and inflation growth. Of course, for some clients this is a bigger challenge than others.
You mentioned that the government is investing in Egypt in key economic development areas, so where do you see Emirates NBD Egypt’s role in supporting this? As I mentioned briefly before, the Egyptian government launched
Vision 2030 last year that spells out its long-term economic plan for Egypt. It covers lots of important development areas and we are interested in many of them, ranging from telecommunications to food manufacturing, but the front-runner for us is definitely its investment in critical infrastructure like electricity, oil and gas, and transportation. These types of investments are essential because when you get these core industries right in terms of reliability and efficiency, the economic implications are far-reaching. It directly unlocks the growth potential of other downstream sectors and they are prerequisites for encouraging more foreign investment in Egypt too. Let me use electricity as an example, as the government wants to double its energy capacity to address existing shortages. In doing so, this helps other industries previously constrained by such shortages, particularly heavyweight sectors like building materials, aluminium and steel manufacturing. These of course, are the exact production materials you need to build more infrastructure, which is another key goal from Vision 2030, so you can see how improving these core industries can make a big impact. In this specific sector, we have already done a lot in terms of partnering with our key clients to meet their financing needs and fund new electricity projects. Last year, we did the largest deal in the history of Emirates NBD Egypt for EGP 2 billion with the Egyptian Electricity Holding Company to finance two new power plants in the New Capital and Borollos. More recently we also participated in an EGP 1.8 billion syndicated loan deal for the Egyptian National Gas Holding Company (EGAS). We are now in a good position to help make these important national projects happen, following Emirates NBD Egypt’s recent capital injection in the form of a $125 million
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loan from the European Bank for Reconstruction and Development.
You also said that following the currency liberalisation, there has been renewed interest in Egypt from Chinese investors. How do you see this trade relationship panning out over the next few years? In 2013, China launched its “One Belt, One Road” (OBOR) initiative and which basically involves them underwriting billions of dollars of infrastructure development in countries along the old Silk Road to stimulate global trade. We have a long-term relationship with some of China’s leading industrial developers that already have a long history of working in Egypt and who are currently setting up their operations along the Suez Canal corridor’s industrial zones. To ensure we can become a first point of reference for these developers and for subsequent incoming Chinese business, we are also in the process of setting up a dedicated corporate banking branch there. This will definitely be a big milestone for us later this year. Geographically, Egypt is critical because it is the gateway to the Middle East, Africa and Europe and the Suez Canal specifically is a major artery link for the project. The way Chinese investors are looking at it, despite Egypt’s short-term challenges, assets are currently cheap, the location is strategically good, there is a large domestic market and the country’s long-term outlook is positive. Combined with the fact that the Egyptian government is keen to reduce investment obstacles, it explains why they have become firstmovers to invest more aggressively following the currency liberalisation. For us here at Emirates NBD Egypt, all of these developments are in their relatively early stages but we are looking forward to strengthening our relationships with our Chinese clients. In doing so, we can also play a role in facilitating a positive and long-term trade between Egypt and China.
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Leverage flash storage to accelerate digitalisation while inverting IT spend Data storage is a key factor in achieving economic business value, says Christian Putz, Director, EEMEA, Pure Storage
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t’s difficult to think of a force that’s having a more revolutionary impact on the service industry, particularly in banking, healthcare, insurance and retail, than digitisation. It’s materially changing everything in this sector: the way processes work; the way services are offered; the customer experience; and the speed at which business is executed and where it happens. Digitisation is driving the innovation edge to exciting new horizons. For example, ‘robo-advisors’ can now aggregate data on markets and customer preferences to generate automated investment advice on behalf of wealth management firms. Even in the ultra-conservative nonlife insurance segment, digitisation is impacting competition.
Here customer demands are making traditional players vulnerable to datarich, analytic-centric new entrants. For instance, who would have thought that customers would be the ones asking insurers to generate more data about their lifestyle habits? Yet a PwC study reveals some 50 per cent of consumers surveyed would be prepared to provide their insurer with additional personal and lifestyle information in order to get more relevant services and better deals. Sixty-seven per cent said they would be willing to have a sensor attached to their car or home if it could reduce their premiums. Whatever innovation is happening at the customer frontline, it all boils down to one question for IT leaders in the service sector: “How can we help our organisations win in the digital
Christian Putz
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economy—and do so with less IT complexity, less cost and absolutely minimal risk?” In other words, how can IT leaders invert IT spend and ‘have it all’? Experience tells us that the answer is data storage—how you architect and scale your storage, how you flex that storage to work at lightning speeds in both physical and virtual environments, and how you cost storage to deliver more business value, for less of your precious budget. This is because data is the currency of the digital economy. If it’s not serving the applications and systems that are driving your digital business, you’ll lose out in the race to customer intimacy and therefore profitability.
DRIVE STORAGE PERFORMANCE TO KEEP THE LID DOWN ON COSTS
In no other business era has time been so critical an influence on success. In years past customers were happy to spend a few hours in the face-to-face company of their bank manager or insurance broker. Today, telephone banking isn’t quick enough, and online comparison sites aren’t tailored enough to deliver the rapid, highly-personalised answers customers are seeking. Speed is of the essence. The speed at which your front-end works is utterly reliant on your storage performance. But you can’t keep adding storage capacity to individual databases, or application workloads— that’s just adding cost. And even if that’s not a problem now, what about the time it will take to manage a sprawling storage estate? The answer is all-flash storage. Depending on the vendor you choose to partner with, all-flash solutions are 10x faster on both IOPs and latency. They’re also 10x more efficient in terms of power, space and cooling. With the right all flash storage solution in place, you can
improve customer experience, increase operational efficiency and transform existing business processes without breaking the bank (pun intended)!
BUILD IN ROCK SOLID PERFORMANCE FROM THE GROUND UP
In today’s always-on economy where business never stops and the speed of transactions and interactions are accelerating exponentially, the technology that stores your data must be absolutely rock-solid. The way your storage works in the background, the way software updates, the way upgrades are implemented—all of it must be executed rapidly, but more importantly, without impacting your production environments. At the same time, given the rising number of data theft and ransomware attacks, it is imperative that the storage solution you deploy includes inline, always-on encryption for data at rest. With this, in addition to delivering the ultra-robust, high availability that is the lifeblood of your organisation and powering customer demand for digital services, your data will also be incredibly secure, in line with local and industry regulations.
FOCUS ON VALUE TO BRING DOWN COSTS
By centralising your storage around one type of Flash technology, not only will you simplify data centre IT and add incredible flexibility to deal with both physical and virtual environments, you will also make some incredibly important savings. By partnering with vendors that offer perpetual upgrade programmes that are designed to guarantee your effective capacity with flash media that can consolidate and modernise as your organisation grows, you can avoid vendor dictated upgrade cycles, downtime and cumbersome data migrations.
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With these ‘Evergreen’ programmes, there is continually refreshed software and an extended value lifecycle—with no requirement to re-purchase TBs you already own, and exceptional performance and value for more than 10 years. Things are just as straightforward when it comes to maintenance. You just pay one, simple flat renewal to update performance, scale and add features.
MAKE STORAGE THE FRONT SEAT DRIVER OF INNOVATION
Like most organisations in the region, there is a good chance that you are working through your own personal journey to the cloud which is why it is imperative to partner with a vendor that offers you a twoproduct route to building your own All-Flash cloud platform. Freeing you to develop such a scalable, simple, high-performance storage environment can help you underpin your front-office innovations in customer experience, productivity tools and business processes, with a storage system capable of driving transformation. As we have already seen, with new profit-thirsty competitors entering all areas of the services sector, it’s absolutely crucial that IT leaders have sensible, practical and cost-effective answers to the question of how to ride the innovation curve by using data more effectively than anyone else. Quite simply, the time has now come to consider storage to be one of your most strategically powerful assets. With all-flash you have the means to create a high performance, highly resilient, highly affordable foundation on which to succeed in the digital economy. With the right all flash solution, you can drive more business value—achieving considerable ROI in just a few short weeks—while inverting IT spend.
www.bankerafrica.com
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Halal hospitality Khalid Vawda, MD, Islamic Travels & Tours South Africa gave an exclusive interview on what it’s like working in the burgeoning Halal tourism market
The company receives further global inquiries originating in Singapore, Indonesia, the Arabian Gulf states, and others from South East Asia.
HALAL SOUTH AFRICA
One of the company’s tours stopping off at Oriental Plaza in Fordsburg.
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ome three years ago Khalid Vawda, MD, Islamic Travels & Tours South Africa opened shop to deliver tourism packages exclusively for Muslim travellers looking to explore South Africa. “Having travelled South Africa extensively and being quite familiar with the country I started looking into [setting up the business], and did a lot of homework and research,” said Vawda. “There isn’t anyone that
is specialised in dealing with Halal tourism, so we looked at the market and realised that it’s a market that can be serviced and being Muslim myself I know something about catering for the needs of Muslim travellers.” Vawda receives queries from all over the world for his packages aimed at the Muslim market. To date the bulk of his clientele have originated from countries such as the UK and Germany, the USA, Saudi Arabia and Malaysia.
Muslim travellers have specific needs unlike that of others. The most important element is that of Halal food, says Vawda, “We have delicious food in South Africa.” South Africa is well suited to meeting the Halal needs of Muslim travellers, with four organisations working on Halal certification in the country—Halal foods can be found in most major supermarkets. Vawda went on to add that access to clean prayer facilities and ease of prayer are also important components in easing the travel experience for a Muslim traveller. In terms of the content of the trip itself, due to restrictions on alcohol in Islam itineraries need to be made to suit a Muslim traveller in a way that might be different from a conventional tourism package. “We cater for itineraries full of activities that would suit them. You not only visit sites of interest in South Africa, of which there are many, but also visit sites in which there is a Muslim element.” There is a long history of Islam in South Africa, added Vawda, beginning
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with imported Indonesian slaves in the 1600s, and arrival of Indian labourers in the 1800s. “You have both a diverse and rich history of Muslims [in South Africa] and wherever their struggle has taken them are places that many of our clients will visit as well,” said Vawda. Other than Islam-themed areas of interest, one of the bigger attractions for travellers is South Africa’s wildlife. Islamic Travels & Tours South Africa often include a trip to Kruger National Park in their packages. “Wildlife is a big part of [South Africa’s attraction], so we do the Kruger National Park.
Elephant bath time at Kruger National Park.
The park is huge in terms of the species with over 100,000 species, and the area of the Kruger Park is huge. It’s something that people rarely get to enjoy because the animals are in their natural habitat, unlike zoos or certain types of game reserves.”
THE HALAL INDUSTRY
“The worldwide Muslim population, and particularly those with disposable income, is on the rise—wherever they may be,” said Vawda. “It’s not something that can be ignored, and whoever ignores it will be at a loss. Whoever is able to offer the services that Muslims require, in whichever area of life it is, will obviously benefit immensely.” This dynamic has already
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become self-evident in Islamic banking, with new Islamic banks setting up shop across the continent and conventional banks looking to offer Shari’ahcompliant products. In the South African tourism industry Vawda has found the environment helpful in regard to setting up Islamic Travels & Tours South Africa. “All of my guides that do the tours are non-Muslim but they are, however, extremely sensitive to Muslim needs and so understand the needs of the Muslim travellers. It’s a new experience for the guides as
He pointed to Kenya and Tanzania as examples of countries looking to invest in the Halal tourism industry whilst offering important wildlife experiences. Although North Africa has traditionally been a hub for Halal tourism, due to the rich Islamic history of the region, the image of tourism in the region has been dented by regionally upheaval in recent years, Vawda added. For the future he is optimistic. Whilst growth is the main objective he is also hoping to be able expand his offerings to as many Muslims abroad as possible. The North American
Islamic Travels & Tours South Africa also offer whale watching and other adventure activities.
Cango Caves near the town of Oudtshoorn is one of South Africa’s attractions.
well—they love lapping up this new information and meeting new types of people. I think that’s why the guides do what they do—they enjoy meeting new people and they’re proud of their country.” Further assistance in streamlining the business was found from the umbrella agency for tourism in South Africa, the South African Tourism Services Association (SATSA), said Vawda. “The advice and training we received there was invaluable. It helped us streamline a lot of the ideas we had, to chip away the rough edges and be able to offer something more viable and polished.” Across Africa, Vawda is expecting to see a rise of Halal tourism.
market was highlighted as an area that the company has left largely untouched and now represents significant opportunities for growth. Vawda also added that the company is busy with increasing numbers of inquiries from South East Asia, a region the company already has experience of dealing with. “We’re looking at moving into servicing large companies who might want to send their employees for a break, or for airlines—we’re looking to try and service airline staff as well when they do business in South Africa, so there’s a lot of work to get done, it’s exciting and it’s something that we’re really looking forward to over the next couple of years.”
www.bankerafrica.com
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Promoting excellence in East Africa’s financial sector Banker Africa’s East Africa Awards 2017 concluded last month, with winners announced over 46 categories
Equity Bank proved to be the top winners, with four awards.
Gerald Warui, Director of Operations and Customer Experience for Equity Bank accepted the Banker of the Year award on behalf of James Mwangi, CEO, Equity Ban.
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An address was given by Habil Olaka, CEO, Kenya Bankers Assocation during the course of the evening.
he winners of the fourth Banker Africa East Africa Awards were revealed at a Gala Dinner held at the Crowne Plaza, Upper Hill, Nairobi, Kenya, on 18 May 2017. Among the 160 bankers in attendance at the Banker Africa East Africa Awards was guest of honour Habil Olaka, CEO, Kenya Bankers’ Association. The top individual award went to James Mwangi, CBS, Managing Director and CEO of Equity Bank, who was named Banker of the Year. The winners of the corporate Awards were the result of a stunning
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77,000 votes cast by the financial services community in East Africa, the largest number in the four-year history of the Banker Africa East Africa Awards and three times the number of votes cast in the previous year! Among the big winners identified by the readers of Banker Africa and the online community of financial news website www.cpifinancial.net, it should come as no surprise that Equity Bank leads the way with four Awards. Different units of Barclays and Stanbic won recognition with those two groups each taking three Awards. Bank M won two Awards and its subsidiary M Oriental won one. Institutions picking up two Awards each included Citibank, Commercial Bank of Ethiopia, CRDB, Kenya Commercial Bank, KWFT and NIC Bank. In total, 30 institutions across seven countries–Ethiopia, Kenya, Mauritius, Rwanda, Sudan, Tanzania and Uganda–shared 46 corporate Awards (see below for a full list of winners). “Each year, the Banker Africa East Africa Awards identify and reward excellence in financial services. We aim to promote best practice and offer recognition to the key players working to help create a prosperous diversified future for the region’s economies,” said Robin Amlôt, Chief Executive Officer of CPI Financial. “Winning one of our awards reflects the opinion of the financial services industry across East Africa and our winners may be justly proud of their achievements and also that their peers see them as market-leaders,” added Amlôt. The annual Banker Africa Awards are continent-wide programmes open to all banks and financial institutions in Africa. The aim of the Awards programme, split into four individual regions (North Africa, East Africa, West Africa and Southern Africa), is to recognise outstanding performance and excellence in the financial services industry.
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THE WINNERS IN FULL
Banker of the Year
James Mwangi, CBS – Managing Director & CEO, Equity Bank
Best Corporate Bank - Mauritius Best Emerging Bank - Tanzania Best Corporate Bank - Tanzania Best Customer Service - Tanzania Best Investment Bank - East Africa Best Commercial Bank - Tanzania Best Corporate Bank - Uganda Best Bank in Rwanda Best Corporate Bank - Kenya Best Investment Bank - Tanzania Best SME Bank - East Africa Best Retail Bank- Ethiopia Best Corporate Bank - Ethiopia Most Socially Responsible Bank - Kenya Best Diaspora Offering - Kenya Best SME Bank - Tanzania Judges’ Choice: Most Socially Responsible Bank - Tanzania Most Innovative Bank - Kenya Judges’ Choice: Best Technology Provider Best Retail Bank - Kenya Best Digital Bank - Kenya Best Retail Bank - East Africa Best CSR - East Africa Best Retail Bank - Tanzania Best Corporate Bank - Sudan Best SME Bank - Kenya Best Islamic Bank - East Africa Most Innovative Technology Provider Best Commercial Bank - Kenya Best Commercial Bank - East Africa Best Microfinance Institution - Kenya Best Microfinance Institution - East Africa Innovation in Financial Inclusion Best Emerging Bank - Kenya Best Customer Service - Kenya Best Customer Service - East Africa Best Compliance Technology Best Fraud Detection Technology Best Retail Bank - Mauritius Best Merchant Payment Technology Best Investment Institution - Kenya Best Corporate Bank - East Africa Best Retail Bank - Uganda Best New Online Platform - Kenya Best Digital Banking Solutions
AfrAsia Bank BancABC Tanzania Bank M Bank M Barclays Africa Barclays Bank Tanzania Barclays Bank Uganda BPR Atlas Mara Citibank Kenya Citibank Tanzania Commercial Bank of Africa Commercial Bank of Ethiopia Commercial Bank of Ethiopia Co-operative Bank Foundation Co-operative Bank Kenya CRDB CRDB Diamond Trust Bank Entersekt Equity Bank Equity Bank Equity Bank Equity Bank Exim Bank (Tanzania) Faisal Islamic Bank Family Bank Gulf African Bank Infosys Finacle (Edgeverve) Kenya Commercial Bank Kenya Commercial Bank KWFT Bank KWFT Bank Mastercard M-Oriental NIC Bank NIC Bank Oracle SAS Institute SBM Spire Payments Stanbic Bank Stanbic Bank Stanbic Bank Uganda Standard Chartered Kenya Temenos
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Malta: the gateway to Europe Malta adopted the Euro as its official currency in 2008, replacing the Maltese Iira (CREDIT: MARKUS MAINKA/SHUTTERSTOCK).
For African firms, Malta could provide a jumping point into the European market
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s a long-standing member of the European Union (EU), Malta offers unique investment opportunities for companies looking to expand into Europe. Situated between North Africa and Europe, the island nation has historic links between both continents. The country’s entry into the EU in 2004 means that Malta offers a way for African companies to access Europe’s market of approximately 500 million people. Evidence can be seen to support this, with a number of foreign institutions having already
set up shop in Malta, taking advantage of its geographic advantages to open up business in the Mediterranean and North African markets. “We are blessed with an excellent geographic location. Malta can act as a conduit to the North African market and vice versa to the European market,” said Dr. Christian Cardona, Minister for the Economy, Investment and Small Business, Malta. “Over the past ten years, Malta’s financial services industry has developed from one that was primarily led by the domestic market into a truly
international financial services centre, attracting many top-rated financial services firms,” added Kenneth Farrugia, Chairman, FinanceMalta. In combination with this, Malta has also engaged in multiple international agreements, boasting some 70 double tax treaties, and has an Englishspeaking staff. This is further supported by a sound legal framework—the fiscal framework of the country is both approved by the OECD and the EU. English is an official language, alongside Maltese, with corporate law heavily influenced by British models.
www.bankerafrica.com
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This can provide further comfort to companies looking to do business in the island nation as the local laws are published in both English and Maltese, making negotiating the legal landscape a relatively simple affair. In recent years, Malta has also made significant strides in updating its finance centre to attract worldwide recognition. This is part of the country’s efforts to increase the depth and breadth of its financial services industry. One aspect of this is in
Malta can act as a conduit to the North African market and vice versa to the European market. – Dr Christian Cardona, Minister for the Economy, Investment and Small Business, Malta
Malta’s Performance Overview in Relation to the MENA Region 1st pillar: Institutions 12th pillar: Innovation
2nd pillar: Infrastructure
7 6 5
11th pillar: Business sophistication
3rd pillar: Macroeconomic environment
4 3 2
10th pillar: Market size
4th pillar: Health and primary education
1
5th pillar: Higher education and training
9th pillar: Technological rediness 8th pillar: Financial market development Malta
Middle East and North Africa
7th pillar: Labor market efficiency
6th pillar: Goods market efficiency
Credit: The Global Competitiveness Report 2016-2017.
GDP (current US$) Billion
Malta’s growing fund inventory of more than 600 funds licenced by the Malta Financial Services Authority (MFSA), a business in which the country has some history. Banks have had an involvement in a variety of different investment vehicles, ranging from mutual funds to real estate funds and pension funds. Malta has traditionally had a conservative approach to banking which has supported the sector’s stability. This is reflected in the lack of systemic shocks the sector underwent during the financial crisis. Bank funding in the country relies on retail deposits rather than wholesale borrowing and funding, with banks maintaining substantial liquidity and adequate capital ratios based on
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1 1960
1980
Credit: World Bank Database
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prudent lending practices.Throughout the financial crisis, Malta emerged as a relative safe haven despite turmoil in financial markets globally. An argument could be made for Malta to become the gateway to North Africa and the continent at large, in a similar approach to the way in which Dubai has become a funnel for Asian investment into the Middle East and Africa. Even so, its prime geographic location, EU membership, and cultural roots provide an opportunity for African companies looking to expand their presence into Europe.
FinanceMalta is a non-profit public-private foundation that was set up to promote Malta’s Business & Financial Centre, both within, as well as outside Malta. The organisation aims to bring together the resources of both the finance industry and the government to help ensure Malta can maintain an efficient and modern legal, regulatory and fiscal framework for the financial services sector to continue to prosper and grow.
www.bankerafrica.com
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A West African gem A new report points to Côte d’Ivoire as a key investment destination in Africa
Abidjan is home to the country’s only free zone and is limited to biotechnology, IT and communications companies (CREDIT: ROMAN YANUSHEVSKY/SHUTTERSTOCK).
C
lyde & Co have released its second annual Africa Investment Guide. In it the firm argues the case in favour of the many business opportunities present in Côte d’Ivoire. Despite having faced a coup d’état in 1999, a civil war from 2002 to 2003 and a political crisis following election in 2011, reconstruction efforts have created an environment for opportunities. The West African country has seen strong growth over the past three years, estimated at nine per cent, and has made headways in developing its business environment more conducive to foreign direct investment.
Côte d’Ivoire’s Investment Code is an example of this, and provides some protections to foreign investors. A foreign investor is entitled to receive treatment identical to that of an Ivorian natural or legal person. Investors also can’t be deprived of their property investments, except for public purposes in which case the investor is entitled to prior compensation. The country has also signed several investment protection agreements with countries such as the United Kingdom, China, Germany and the United States, added the report. This is in addition to the multiple trade agreements that Côte d’Ivoire is a member of.
ECOWAS, the Economic Community of West Africa States, is an economic and free trade agreement with a variety of West African countries. In addition to this, Côte d’Ivoire also has agreements with the European Union since 2007, Sweden since 1965 and Brazil since 1979. Furthermore, in 2012 the country became eligible for the African Growth and Opportunity Act (2012), which aims at improving economic relations between the United States and eligible countries and allows these countries to benefit from trade preferences for quota and duty-free entry into the United States with certain goods. The report notes that incumbent President Alassane Ouattara has spent billions of dollars already on improving infrastructure in the country with the aim of improving infrastructure and encouraging development—over 200 miles of new roads have been built by the Ministry of Infrastructure. The Côte d’Ivoire economy is based primarily around agriculture and is the world’s largest producer and exporter of cocoa beans, in addition to significant exports of coffee, palm oil and bananas. Overall the economy has done well to weather economic downturns that many other Africa nations have seen due to reduced Chinese demand and falling oil prices. Furthermore, the country has also avoided currency depreciation issues, unlike many other well-performing economies in Africa. The CFA peg to the EUR has been key in avoiding this pitfall, with inflation standing at around one per cent. Dawda Jawara III, Legal Director, Clyde & Co added that, “Côte d’Ivoire is emerging as one of the continent’s economic giants, with growth expected to be the highest in Africa this year.” The prospects for Côte d’Ivoire look good, the report concluded, and the nation has a path towards attaining the status of Emerging Market by 2020.
www.bankerafrica.com
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PICTURE OF THE MONTH UN Women, the African Union Commission, and the Permanent Mission of Germany today launched the African Women Leaders Network, a groundbreaking initiative that seeks to enhance the leadership of women in the transformation of Africa with a focus on governance, peace and stability. The Network was launched following the three-day HighLevel Women Leaders Forum for Africa’s Transformation, which took place at the United Nations Headquarters in New York from 31 May to 2 June. Pictured: Scenes from the launch event, held in the ECOSOC chamber at United Nations Headquarters on 2 June 2017.
(CREDIT: UN WOMEN/RYAN BROW)
African countries with the most endangered languages NUMBER OF ENDANGERED LANGUAGES SUDAN CAMEROON NIGERIA CHAD ETHIOPIA SENEGAL KENYA TANZANIA SOUTH AFRICA
15 13 12 10
29 29 28
36
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Data: Atlas, Quartz, UNESCO, Atlas of the World’s Languages in Danger, 2010
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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
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