#56 December 2018

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DECEMBER 2018 | ISSUE 56

DECEMBER 2018 | ISSUE 56

RENEWED SUCCESS Egypt’s reforms bear fruit A CPI Financial Publication

RENEWED SUCCESS Egypt’s reforms bear fruit Dubai Technology and Media Free Zone Authority

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EDITOR’S NOTE

H

ello and welcome to the December issue of Banker Africa.

For this month’s cover we feature the North African nation of Egypt. The country has experienced a period of sustained economic and political instability from which it now appears to be emerging. Reforms that were set in place proved to be a difficult pill to swallow but have now begun to bear fruit.

Our full analysis of where we are, how Egypt got here and what’s to come can be found on page 22 onwards.

“President El Sisi and I discussed the good progress under Egypt’s economic reform programme supported by the IMF’s $12 billion Extended Fund Facility.

Egypt’s economy is showing strong signs of recovery, and its economic growth is among the highest in the Middle East,” said Christine Lagarde, Managing Director, IMF, earlier this year following a meeting with Egypt’s President El Sisi.

Kenya’s large banking sector may soon be in for a shake-up as news emerged that NIC Bank and Commercial Bank of Africa are in talks for a potential merger.

The new institution would become the third-largest bank in Kenya, usurping Co-operative Bank of Kenya’s current position. The Kenyan Treasury Cabinet Secretary welcomed the move, arguing that it would help the country’s banking sector compete with the large West African banks which have opened operations in the region. We have covered this in more detail on page 8.

In early October this year Morocco launched its first ever sovereign Sukuk.

Islamic finance is the fastest growing area of banking in the world and Morocco has now prepared the legal framework necessary to issue this and coming Sukuk. “The launching of participative (Islamic) finance products in Morocco complements and expands the range of products offered by the domestic banking sector and opens it to new financing capacities… It will strengthen the attractiveness of Casablanca as a leading financial hub in Africa,” a statement from the Central Bank said at the time. You can get the full story and our analysis on page 34.

According to new research, overall i n ve s t m e n t a c t i v i t i e s h ave f a l l e n throughout the continent over the first nine months of 2018. Indeed, equity and equity-related issuance across Sub Saharan Africa were down 43 per cent year-on-year. This report, from Refinitiv (formerly Thomson Reuters Financial and Risk Business), we have covered in detail on page 46.

With that I’ll let you get to reading.

Until our next issue, Matthew Amlôt

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CONTENTS

DECEMBER 2018 | ISSUE 56

22

14

18

IN THE NEWS

8

News analysis: Kenya’s consolidation to begin?

around the continent

MARKETS

18 Redefining the cycle

10 Essential financial news from

COUNTRY FOCUS

11 Spotlight: South Africa

OPINION

22 Renewed success

Painful short-term austerity seems to be paying off for Egypt

14 Africa’s integration into the global

RISK

economy attracts NGOs

By Robert Blood, Managing Director of NGO tracking and issues analysis firm SIGWATCH

16 How Nigeria can attract and keep the

right kind of foreign direct investment

By Tolu Olarewaju, Lecturer in Economics, Staffordshire University

30 Elections ahoy

Political change will continue to mark the continent throughout 2019

ISLAMIC FINANCE

34 Morocco issues first sovereign Sukuk

TECHNOLOGY

38 Disrupting fossils 42 The business of information 44 Countering future threats AWARDS

47 Banker Africa—North Africa Banking Awards 2018 results announced

INVESTMENTS

48 Faltered appetite THE VIEW

50 Photo and chart of the month

The North African nation continues on its Islamic finance path with a major milestone

36 Seize the day

By Eng. Hani Salem Sonbol, Chief Executive Officer, ITFC

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ISSUE 56 | DECEMBER 2018

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DECEMBER 2018 | ISSUE 56

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EDITOR - BANKER AFRICA MATT AMLÔT matt@cpifinancial.net Tel: +971 4 391 3716

RENEWED SUCCESS Egypt’s reforms bear fruit

EDITORS NABILAH ANNUAR nabilah.annuar@cpifinancial.net Tel: +971 4 391 3726 WILLIAM MULLALLY william@cpifinancial.net Tel: +971 4 391 3718

A CPI Financial Publication

RENEWED SUCCESS Egypt’s reforms bear fruit

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PROMOTING GROWTH MOHAMED BERRO, Chief Executive Officer, Emirates NBD Egypt

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A CPI Financial Publication

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NEWS ANALYSIS

KENYA’S CONSOLIDATION TO BEGIN? With the announcement of a potential CBA, NIC tie-up, we may be on the cusp of overall industry consolidation

I

n early December it was announced that merger talks had begun between NIC Bank and Commercial Bank of Africa (CBA). This would create a major shake-up of the Kenyan banking landscape, altering the balance of power between the country’s largest banks and increasing competition across the board.

Henry Rotich, the Kenyan Treasury Cabinet Secretary, said that the plans to merge the two banks would create a lender that would be able to adequately compete with the West African banks that are expanding into the region. The combined NIC, a mid-sized publicly traded Kenyan bank, and CBA, the largest closely held lender in Kenya, would rank amongst the country’s top three lenders.

The combined entity would become the third-largest bank in Kenya (CREDIT: SOPOTNICKI/SHUTTERSTOCK).

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Guaranty Trust Bank, Nigeria’s largest lender by market value, and United Bank for Africa (UBA), its third-largest by revenue, have already begun operations in East Africa. NIC and CBA already have operations in Uganda and Tanzania, with CBA having a stated aim to operate in 16 nations.

The Standard reported Rotich as saying, “One of the biggest constraints we have seen is that Kenyan banks have not been able to play a big role because of their size.”

Currently the East African nation s home

to around 43 commercial banks, a higher number per capita than both South Africa and Nigeria, the continent’s two largest economies. The suggestion, therefore, is that the sector is ripe for some consolidation and that it would help improve the country’s banks in competing across Africa, in line with Rotich’s statement.

The question as to whether the new entity would be listed on the Nairobi Securities Exchange, as CBA is non-listed whilst NIC is listed, will depend on the deal struck between the two lenders.

“That is a decision to be made by the two entities. They have just started discussions and we have not heard from them yet. There are a lot of procedures, consultations and processes to be followed. But it is our desire that they be listed,” The East African reported NSE chief executive Geoffrey Odundo as saying.

NIC’s shares jumped over 30 per cent following the announcement with investors anticipating higher returns following a merger with CBA. The bank’s shares have been experiencing a decline since its high in mid-2014, losing some 70 per cent in value.

SUCH A GROUP WILL BE BETTER PLACED TO SEIZE EMERGING OPPORTUNITIES IN KENYA AND THE REGION. – Joint statement from both banks

In a statement, signed by NIC chairman James Ndegwa and Commercial Bank of Africa Ltd’s Destario Oyatsi, the banks said, “It is the view of the two boards that a potential merger would bring together the best in class retail and corporate banks with strong potential for growth in all aspects of banking and wealth management.”

“Such a group will be better placed to seize emerging opportunities in Kenya and the region.”

The total assets of NIC and CBA would reach about KES 452 billion, according to 2017 annual reports. This would be larger than Co-operative Bank of Kenya, currently the third-largest lender. KCB is East Africa’s largest bank, with assets totally KES 646.7 billion.

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IN THE NEWS

RATINGS REVIEW BANKS AND BUSINESSES Fitch Ratings has revised the outlook on the Long-Term Issuer Default Ratings (IDR) of FBN Holdings Plc (FBNH) and its primary operating company, First Bank of Nigeria (FBN) to positive from negative and affirmed the IDRs at ‘B-’.

Fitch Ratings has assigned Uganda Development Bank Limited (UDB) a Long-Term Issuer Default Rating (IDR) of ‘B+’ with a stable outlook.

Fitch Ratings has upgraded United Bank for Africa Plc’s (UBA) Long-Term Issuer Default Rating (IDR) to ‘B+’ from ‘B’. The outlook is stable. UBA’s Viability Rating (VR) has been upgraded to ‘b+’ from ‘b’.

Fitch Ratings has revised the outlook on Zenith Bank’s (Zenith) Long-Term Issuer Default Rating (IDR) to stable from negative and affirmed the rating at ‘B+’.

Moody’s Investors Service has assigned B3/Not Prime local currency longterm and short-term deposit ratings and Caa1/Not Prime foreign currency long-term and short-term deposit ratings to Banco de Fomento Angola, S.A. (BFA). The outlook on the deposit ratings is stable.

SOVEREIGNS

ON THE RECORD Senegal: digitising payments could add FCFA 104 billion to GDP every year

By digitising 50 per cent of all national payments, Senegal’s economic growth would increase by over FCFA 104 billion (over $177 million) per year, according to a new report produced in partnership with the UN Better Than Cash Alliance programme.

East African countries agree to strengthen regional integration through the continental free trade area

Representatives of 14 countries in East Africa have agreed that the African Continental Free Trade Area, the AfCFTA, represents a unique opportunity to promote regional integration at the closing session of a three day regional meeting held in Kigali, Rwanda.

Democratic Republic of the Congo sanctions extended for one year

The Council of the European Union extended the restrictive measures currently in place against the Democratic Republic of the Congo until 12 December 2019. The sanctions comprise an asset freeze and a ban on entering the European Union and are targeted at 14 individuals.

Orange and MTN launch pan-African mobile money interoperability to scale up mobile financial services across Africa

Orange Group and MTN Group have announced a joint venture, Mowali (mobile wallet interoperability), to enable interoperable payments across the continent. Mowali makes it possible to send money between mobile money accounts issued by any mobile money provider, in real time and at low cost.

Fitch Ratings has affirmed Cabo Verde’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a stable outlook.

S&P Global Ratings affirmed its ‘B/B’ long- and short-term foreign and local currency sovereign credit ratings on Ethiopia. The outlook is stable.

Moody’s Investors Service has changed the outlook on the Government of Morocco’s long-term issuer ratings to stable from positive and has affirmed the Ba1 issuer ratings.

Moody’s Investors Service has affirmed the Ba1 long-term issuer and senior unsecured ratings of Government of Namibia and maintained a negative outlook.

Mowali will bring together over 100 million mobile money accounts and mobile money operations in 22 countries in Sub Saharan Africa (CREDIT: SLAVOLJUB PANTELIC/ SHUTTERSTOCK).

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NEWS SPOTLIGHT SOUTH AFRICA

Gupta’s South African mining assets attract $215 million bid

Africa ‘extremely important market’ for South Africa

A South African consortium called Project Halo has submitted the winning bid of ZAR 3.05 billion ($215 million) for three major assets of Tegeta Exploration & Resources (Pty) Ltd., the Gupta family-linked mining company under administration since February.

Project Halo will buy Optimum Coal Mine (Pty) Ltd., for a maximum of ZAR 2.8 billion, Koornfontein Mines (Pty) Ltd. for ZAR 200 million and Optimum Coal Terminal (Pty) Ltd. for ZAR 50 million, according to the term sheet seen by Bloomberg. Bouwer Van Niekerk, a lawyer for the business rescue practitioners, confirmed the winning bid.

Optimum supplies coal to Eskom Holdings SOC Ltd., the state-owned power utility at the centre of an official investigation into claims that members of the Gupta family used their friendship with former President Jacob Zuma and his son Duduzane to secure business contracts.

They all deny wrongdoing.

Glencore Plc sold Optimum to Tegeta Exploration and Resources in 2015, and it was placed under business rescue after Eskom refused to renegotiate what it said was an unprofitable coal-supply contract and issued penalties.

Halo, with directors who include Mbongiseni Duma and Paul Buckley, will also provide ZAR 600 million financing over the next six months to ensure continued business at the Tegeta operations in Mpumalanga province and the Richards Bay Coal Terminal, according to the term sheet.

The deal is opposed by Oakbay Investments (Pty) Ltd., another Gupta-linked company, which has also applied to the Pretoria High Court to remove the business rescue practitioners, Kurt Knoop and Johan-Louis Klopper. [BLOOMBERG]

The Minister of Trade and Industry of South Africa, Dr Rob Davies says South African business people should consider the continent as an extremely important market, especially for trade in value added products. Minister Davies was speaking at the launch of the South African pavilion in Cairo, Egypt during the Inaugural of Intra-Africa Trade Fair (IATF).

“When we look at trade with the continent from the South African point of view, there is an easy way of telling the big story. The story is that two-thirds of South Africa’s trade are with the world, whilst a third of the trade is with the African continent. Of the latter, twothirds comprise trade in value added products,” said Davies.

The Gupta family has been accused of using friendships with former President Zuma and his son to secure business contracts (CREDIT: SUNSHINE SEEDS/SHUTTERSTOCK).

Ramaphosa noted that the new wage is still below the ideal level (CREDIT: ZERBOR/SHUTTERSTOCK).

South African minimum wage to take effect 1 January Legislation that will force companies to pay their workers a minimum of ZAR 20 ($1.42) an hour will take effect on the first day of 2019, Ramaphosa said Friday in a speech in Soweto, west of Johannesburg, that was broadcast on television.

While the wage is “far below” the ideal level, it must help create jobs in

a country where 27 per cent of the labour force is unemployed and will provide an economic stimulus, he said.

The implementation of the law has already been delayed from the initial planned date of 1 May. Ramaphosa brokered the accord when he was still deputy president. [BLOOMBERG]

Davies added that even though total trade among African countries is still lower than those compared to other continents, he is still hopeful that platforms such IATF will pave the way to increase trade in Africa.

“We believe that during the course of the Intra-African Trade Fair, South African exhibitors will find trading partners with the Egyptian business community and hopefully with other African countries too. And I am also glad to see in particular that so many of these companies are here under the banner of the Export Councils because I think we realise that through these councils, we are able to get our business people to export into other markets,” he said.

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IN THE NEWS

A QUICK WORD

Nothing is changed or developed on its own. People must get up, speak, have discussions and change the dialogue.

— Nana Akufo-Addo, President, Ghana, speaking on the importance of putting the right policies in place at the Tony Elumelu Foundation Entrepreneurship Forum.

For these stories and more, visit www.bankerafrica.com

MALI

CAMEROON

IMF Executive Board completes 10th review under the ECF Arrangement for Mali

Completion of the review enables the immediate disbursement of SDR 31.65 million, bringing total disbursements under the arrangement to SDR 186.6 million.

The near term macroeconomic outlook remains favourable, although there are considerable downside risks from the fragile security conditions, commodity prices changes, and weather conditions; programme implementation is broadly on track. On 10 December 2018, the Executive Board of the International Monetary Fund (IMF) completed the Tenth Review of Mali’s performance under an economic programme supported by an Extended Credit Facility (ECF) arrangement.

Completion of the review enables the immediate disbursement of SDR 31.65 million (about $43.85 million), bringing total disbursements under the arrangement to SDR 186.6 million (about $258.53 million) or 100 per cent of quota. The ECF arrangement for Mali was approved on December 18, 2013 for SDR 30 million (about $46.2 million, or 32 per cent of quota at the time).

Cameroon: African Development Bank approves EUR 17.96 million Ring-Road Project

The African Development Bank has approved a EUR 17.96 million loan to the Republic of Cameroon to finance the construction of a Ring-Road Project in the North-West Province of the country.

The Ring Road project, which falls under phase three of the country’s Transport Sector Support Programme, aims to improve the movement of goods and people. It will also strengthen the foundations for strong and sustainable growth by promoting domestic and regional trade.

The loan for the 365km Ring Road is the Bank’s third intervention in the implementation of this important road network rehabilitation and upgrading project. The loop road crosses five of Cameroon’s seven divisions of the North West Region and includes several links to the Nigerian border.

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Smaller African nations should not fear but embrace AfCFTA, says ECA Executive Secretary

LIBYA EGYPT

SOUTH SUDAN CAMEROON

KENYA

Smaller African economies should not fear the African Continental Free Trade Agreement (AfCFTA) but rather embrace the accord for the benefits it will bring to the continent through expanded intra-African trade, says Economic Commission for Africa’s (ECA) Executive Secretary, Vera Songwe.

In a speech read on her behalf at the seventh meeting of the African Union Ministers of Trade (AMOT) at the on-going Intra-African Trade Fair in Cairo, Egypt, by David Luke, Coordinator of the ECA’s African Trade Policy Centre (ATPC), Ms. Songwe said there was nothing for smaller nations to fear.

“Beyond central technical considerations in relation to the design of AfCFTA modalities, ECA’s assessment reveals that smaller economies should certainly not fear the AfCFTA reforms but rather embrace it; particularly, as African LDCs would be those getting the largest increase in intra-African exports of industrial products,” she said.

“And of course, it must be underscored that such benefits will only materialise if the AfCFTA reforms are properly designed and effectively implemented.”

She continued, “Our analysis shows that the AfCFTA is win-win for all countries, big and small, agricultural and industrial, landlocked and coastal, in regard to both increases in exports and overall welfare or GDP.”

Kenyan bank tie-up creates bigger rival for West Africa lenders

ZAMBIA

NIC Group Plc, one of Kenya’s mid-sized publicly traded banks, is in merger talks with Commercial Bank of Africa Ltd., the nation’s biggest closely held lender, the two said in early December. The combined entity would rank among the country’s top three lenders.

Kenyan Treasury Secretary Henry Rotich welcomed the move, saying the stronger bank would avail more credit in East Africa’s biggest economy and take on rivals from West Africa that have made forays into the region.

Guaranty Trust Bank Plc, Nigeria’s largest lender by market value, and United Bank for Africa Plc, its third-largest lender by revenue, have operations in East Africa.

Both NIC and CBA already operate in Uganda and Tanzania, and CBA has ambitions to operate in 16 African nations.

“One of the biggest constraints we have seen is that Kenyan banks have not been able to play a big role because of their size,” Rotich told reporters in the Kenyan capital, Nairobi.

Kenya has about 40 lenders, more per person than South Africa and Nigeria, Africa’s two biggest economies. [Bloomberg]

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OPINION

NGOs have had a major impact on how financial institutions act on the African continent, says Blood (CREDIT: CHRUPKA/SHUTTERSTOCK).

AFRICA’S INTEGRATION INTO THE GLOBAL ECONOMY ATTRACTS NGOs 14 page 14-15 Opinion 056.indd 14

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By Robert Blood, Managing Director of NGO tracking and issues analysis firm SIGWATCH

I

n June this year, Britain’s largest asset manager Legal & General announced that it would remove Japan Post Holdings (JPH) from its $6.7 billion Future World index funds. It added that any of its funds that still held shares would be instructed to vote against the re-election of JPH’s chairman. L&G justified the move by saying that JPH had ‘shown persistent inaction’ to address climate risk.

L&G’s move did not come out of the blue. It was the result of pressure on global financial institutions generated in the last few years from American college campuses and subsequently by allies across the US and Europe. They demanded that university endowments and major banks, insurers and pension funds prove they are serious about climate change by exiting ‘extreme carbon’ such as coal and Canadian oilsands.

These campaigns were deliberately modelled on the politically charged and effective campus divestment battles of the 1980s, intended to undermine the economy of apartheid South Africa. These campaigns helped make South Africa a pariah investment in the US for a decade.

The ‘pariah’ strategy has worked even better this time round. In the US, JP Morgan Chase, Bank of America, Wells Fargo, Citi, Morgan Stanley and Goldman Sachs have all announced coal exits. Meanwhile in Europe, BNP Paribas, AXA, Allianz, RBS, Munich Re, ING, Rabobank, Standard Chartered and HSBC are among the institutions that have made similar moves.

This is how an NGO campaign made in America and endorsed by a financial institution in Britain, can end up punishing a major institutional investor in Japan.

As Africa is increasingly integrated into the global economy, it has not escaped the wrath of climate activists.

Robert Blood

Development banks have long been put under pressure to stop financing coalrelated developments in Africa. Now we are seeing Western banks and global multinationals such as GE also being pressed to walk away from African fossil fuel projects. Export banks are being lobbied not to support major project finance deals, with the result that in April this year South Africa’s Nedbank became the first Global South bank to announce an end to coal financing.

However, it is unlikely that the ‘global ripple’ of NGO campaigning will stop at carbon. Western activists have learnt from the climate divestment movement that support from sympathetic financial institutions is a highly effective way to give a campaign ‘bite’. In the last two years we have been tracking campaigns targeting investments in African palm oil, logging, mining, water privatisation, private education, eucalyptus plantations, biofuels, mobile phone networks—even wind farms (which most NGOs support). Many of these campaigns are trying to put pressure on foreign or local investors to pull out of projects of which the NGOs disapprove.

One explanation for the greater role of financial institutions is the ‘mainstreaming’ of ethical and sustainability concerns by investment funds and banks. Once the

preserve of SRI and clearly denominated ethical funds, most leading financial institutions have started to adopt exclusion policies on climate change and carbon, the environment and social governance.

Just last month, the world’s largest asset manager BlackRock announced a range of exchange-traded ESG-focused funds in the US and Europe. Meanwhile in the vanguard of this movement, investment funds are behaving increasingly like activists, actively lobbying companies to raise sustainability standards and threatening to vote down managements or divest should they refuse.

It is also now commonplace for financial institutions, especially those in Europe but increasingly in the US too, to consult with NGOs before drafting or revising policies on environmental and social issues. NGO support for reforms is actively sought and NGO criticism is taken seriously, right up to board level.

Much of this change in attitude by financial institutions is in reaction to pressure from political stakeholders and customers. The 2008 crash left banks bereft of public sympathy and deserted by political friends. Beefing up ESG policies and engaging with NGOs was an obvious way to recover some of their reputation. African financial institutions need to start doing the same, if they too are to avoid being caught on the wrong side of increasingly fierce arguments concerning rapid economic development, such as export agriculture encroaching on virgin forest, impacts on watersheds and biodiversity, and failure to take into account the wishes of local communities or indigenous populations.

Sustainability, human rights, labour standards and even animal rights will become more important for global financial institutions, as they develop ever more expansive policies and standards under pressure from NGOs and other stakeholders.

This will have big implications for the firms and industries in which these institutions invest, wherever they are in the world.

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OPINION

HOW NIGERIA CAN ATTRACT AND KEEP THE RIGHT KIND OF FOREIGN DIRECT INVESTMENT

FDI fell $480 million in H1 2018 compared to H1 2017 in Nigeria (CREDIT: VKILIKOV/SHUTTERSTOCK).

By Tolu Olarewaju, Lecturer in Economics, Staffordshire University

T

wo of the largest banking and financial services institutions in the world, HSBC and UBS, have recently closed their local representative offices in Nigeria.

There’s also trouble brewing elsewhere in Nigeria’s business world that’s

prompted fears about the climate for foreign direct investment in the country.

Foreign direct investment is an investment made by a firm or individual in one country into business interests located in another country.

For instance, Nigeria’s Government in September accused HSBC of money laundering after an analyst working for the lender said a second term for President Muhammadu Buhari may stall

economic recovery in Africa’s biggest oil producer.

There are also tensions between Nigeria’s central bank and the South African telecom company MTN. In 2015, MTN was fined about $5 billion for failing to cut off unregistered SIM cards. This was later reduced to $1.7 billion after a long legal dispute and the intervention o f S o u t h A f r i c a’s t h e n P r e s i d e n t Jacob Zuma.

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Recently, the central bank has ordered MTN to repatriate $8 billion it said has been taken out of the country illegally.

Analysts are concerned that the Nigerian Government’s attitude towards MTN and the two banks may erode the confidence of foreign direct investors.

Their fears seem to be well founded: foreign direct investment in Nigeria fell to $1 billion in the first half of 2018, from $1.48 billion in the first half of 2017.

Foreign direct investment is crucial for any economy. So how can Nigeria attract and keep the right kind of investment from global companies? Compromise will be key, both for the Government and foreign firms.

Why foreign direct investment?

Foreign direct investment is often preferred to exporting. That’s because while exports merely involve moving goods from one country to another, foreign direct investment actually involves an investor establishing foreign business operations or acquiring foreign business assets.

This often includes establishing ownership or controlling interest in a foreign country (for instance an American business establishing a physical business presence in Nigeria). Many emerging economies like China, Brazil, Vietnam and India have built their growth on FDI flows.

The trick is to attract ‘quality foreign direct investment’ that links foreign investors into the local host country economy. The International Growth Centre, a British-funded research centre that aims to promote sustainable growth in developing countries, characterises “quality” here as contributing to: • Decent and value-adding jobs and enhancing the skill base of host economies; • T ransfer of technology, knowledge and know-how; • Boosting competitiveness of domestic firms and enabling their access to markets.

What Nigeria can do There are a few things Nigeria can do to boost foreign direct investment. For starters, it must play fair. Foreign and domestic businesses should be treated equally. They should be open, transparent and dependable conditions for all kinds of firms.

Another area that needs attention is infrastructure. Businesses need easy access to ports, an adequate and reliable supply of energy and relative certainty that the country will be good to invest in. Good institutions also promote FDI. The Government should encourage partnerships between foreign and local businesses. Foreign firms might be familiar with global good business practices, but local firms will be more familiar with the indigenous context. This synergy could be very beneficial.

It’s also critical that Nigeria gets its regional governments involved: there are many regions in Nigeria, and these regions all have unique opportunities and challenges. Our latest research shows that when the central government of Nigeria ran out of ideas and foreigners wanted to exit the agricultural sector, the regional government of Kwara state stepped in to create a positive business climate based on the cooperation of local banks, community members, and the foreigners themselves culminating in the Shonga farms publicprivate venture.

This has kept the firm in Nigeria. It’s also brought private investors to the table, bolstering the firm and the local economy.

Nigeria should also tap into its huge diaspora. There are many Nigerians living outside the country who understand its challenges. They should be encouraged to help, or asked to work with their networks to invest in the country.

What foreign firms can do Foreign firms also have a role to play. They can enhance their success in Nigeria (and elsewhere on the African continent) in several ways.

First, they need a long-term strategic plan. This means thinking carefully about what sectors or activities to target. Many foreign firms come to developing countries when things are rosy but leave when conditions change. They don’t properly consider that solving such problems will gain them a competitive advantage in the long run.

If they stay and follow a learning curve, foreign firms will better understand the local business context. They’ll also gain credibility among ordinary people and possibly get more customers and support that way.

In the same vein, foreign businesses should create local solutions that meet ordinary people’s needs. The banks leaving Nigeria have been accused of only catering to the needs of wealthy Nigerians, who are perceived as corrupt. A more diverse portfolio that catered to the needs of ordinary Nigerians would have nullified this claim.

Foreign firms must also work closely with credible and strategic local firms, and be willing to enter into dialogue with the Nigerian government where necessary.

This is crucial especially as administrations may change or government policy may evolve. Dialogue could ensure that all parties are on the same page.

Act local, think global It’s unfortunate that these banking institutions have decided to leave Nigeria.

Hopefully both the Nigerian Government and other foreign investors can learn from this.

The main takeaway for both foreign investors and governments involved in foreign direct investment is that it would be prudent for all parties to act locally but think globally.

This article originally appeared on The Conversation Africa.

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MARKETS

REDEFINING THE CYCLE

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Mark Burgess, Deputy Global CIO and CIO, EMEA at Columbia Threadneedle Investments shares his outlook for 2019

G

Burgess notes that the firm expects middling economic growth globally (CREDIT: VICW/SHUTTERSTOCK)

lobally, we expect middling economic growth. This will allow firms to continue generating healthy profits and profit growth, but this is likely to benefit equity holders rather than credit holders. Valuations are currently fair, so we see 2019 as likely to provide a continuation of 2018’s benign environment, all things being equal.

While in the US growth will moderate during 2019 as the impact of fiscal stimulus rolls off and the Fed raises rates in line with market expectations (keeping inflation in check), we expect the relatively good economic growth generated in Europe to continue into next year.

Rising interest rates could impede both equities and credit: prompting negative returns from duration on the credit side and hurting equities as investors search for yield from less risky assets. That said, we maintain a preference for equities (as well as commodities and commercial property) over credit as we move into the new year but remain fairly neutral from a risk appetite perspective. We continue to hold a positive stance towards European, Asian and, particularly, Japanese equities within this favourable allocation to equities overall.

We see core bond markets as looking somewhat more attractive than they have done for some time. Credit looks averagely valued and, although core bond yields

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MARKETS

comes of age, those companies that are able to innovate should continue to grow.

C o r p o r a t e p r o f i t s a r e g r ow i n g , companies are behaving in an equityfriendly way, valuations are supportive, and bond yields should not rise aggressively— in short, we can expect more of the same in 2019.

However, we remain aware of the potential risk to equity markets, whether it’s ongoing rhetoric around trade, inflationary concerns or the UK’s exit of the European Union. Investors should therefore be prepared for further equity volatility in 2019.

have risen a little, absolute bond yields look more attractive as it stands today.

Asset class outlook for 2019 Equities As we approach 2019, equity markets have experienced a bout of volatility of the type not seen for several years. Rising inflationary expectations prompted a widespread sell-off across the globe as investors priced in the prospects for monetary tightening. This carried with it implications for valuations of the long duration growth stocks that have dominated markets post-GFC and which have led to what some have termed as value’s lost decade.

The question is whether this marks the end of the current cycle, ushering in a change in market leadership. As discussed previously, we do not believe the end to be imminent. Corporate earnings growth continues to come through across the globe with valuations looking attractive compared to historic averages and economic data supportive.

The recent market pullback, therefore, represents opportunity.

With the reset in the valuations of attractive, secular growth stories, this backdrop is an ideal hunting ground for bottom-up investors capable of identifying stocks trading at below their intrinsic value. Any widening in the dispersion of returns brought about by a sustained rise in volatility should further increase opportunities for active managers.

We continue to favour capital-light, high-return businesses capable of growing market share and sustaining pricing. While the technology sector has garnered much of the focus during in recent years, this phenomenon is present across industries, with the profit dispersion between the highest quality companies and the lowest becoming ever more pronounced. As value chains continue to evolve, traditional business models are challenged, and technology

Mark Burgess

AS WE MOVE INTO 2019, WE EXPECT THE FED TO MOVE FROM THE FRAMEWORK OF ‘FORWARD GUIDANCE’ IT HAS USED IN RECENT YEARS (MARKED BY PREDICTABLE, QUARTERLY RATE INCREASES) TO A FRAMEWORK OF ‘DATA DEPENDENCE’ IN WHICH MORE RECENT DEVELOPMENTS IN DATA WILL ALTER THE PATH OF POLICY. – Mark Burgess, Deputy Global CIO and CIO, EMEA at Columbia Threadneedle Investments

Fixed income There is widespread belief that investing in bonds today carries a greater degree of risk than in prior years because we are ‘late in the cycle.’ That belief is not helpful from an investment perspective and is also inaccurate when we look closely across industries, sectors and regions.

Monetary policy is diverging globally, US interest rates look more attractive as yields have risen meaningfully, and the Fed’s reaction function is likely to change. Meanwhile, we remain defensive on interest rates in other developed markets as the rate hiking cycle is just getting started. In corporate credit, we are concerned at the elevated level of leverage among US companies, but we are finding opportunities across the industry and regional divergence in corporate bonds.

The consumer credit cycle is a bright spot, and there are attractive opportunities to generate income in the structured products market. Sovereign credit—specifically emerging markets— presents an interesting opportunity in 2019 following a sharp rise in yields but will likely see tremendous divergence across countries. So, while 2018 was a bad year for bonds, 2019 is poised to produce much more attractive outcomes for investors who can navigate divergent monetary policy and credit cycles.

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WE SEE CORE BOND MARKETS AS LOOKING SOMEWHAT MORE ATTRACTIVE THAN THEY HAVE DONE FOR SOME TIME. CREDIT LOOKS AVERAGELY VALUED AND, ALTHOUGH CORE BOND YIELDS HAVE RISEN A LITTLE, ABSOLUTE BOND YIELDS LOOK MORE ATTRACTIVE AS IT STANDS TODAY. – Mark Burgess

We believe there will be opportunities to generate attractive risk-adjusted returns in 2019 and these areas are best identified by understanding where markets are diverging in relation to monetary policy and credit cycles.

Monetary policy cycle In the US, the Federal Open Market Committee is three years into an interest rate hiking cycle, and arguably five years into a tightening cycle that began with the tapering of asset purchases in 2013.

With real (after inflation) yields the highest in the developed world, the Fed is now close to what it describes as a neutral rate.

Thus, as we move into 2019, we expect the Fed to move from the framework of ‘forward guidance’ it has used in recent years (marked by predictable, quarterly rate increases) to a framework of ‘data dependence’ in which more recent developments in data will alter the path of policy. Barring an accelerating inflation backdrop, we expect the Fed to pause its quarterly rate hiking cycle in 2019 and take a wait-and-see approach.

The European Central Bank is likely to begin raising interest rates next year, while the Bank of England may reconsider its low interest rate policy should a reasonable Brexit outcome be reached. In emerging markets, there are several central banks already raising rates, and others are likely to join in next year as well.

As a result, US interest rates look more attractive as yields have risen meaningfully and the Fed’s reaction function is likely to change. Meanwhile, we remain defensive on interest rates in other developed

markets as the rate hiking cycle is only just getting started.

Corporate credit cycle The corporate credit cycle is often cited as an area of concern, understandably so given aggregate levels of leverage are higher today than they were five years ago. However, while many companies increased leverage in recent years to fund strategic acquisitions, they are now reducing debt. The energy, metals, and mining industries endured a full credit cycle three years ago marked by declining prices, industrial slowdown, and rising defaults, but corporates in this space are now seeing a rebound in earnings along with declining leverage.

Credit metrics in Europe look somewhat healthier than in the US, while other areas, such as China, have more concerning debt loads. With credit spreads on the rich side of historical averages, it’s our belief that the better performers in 2019 will be those companies and industries committed to keeping balance sheets strong to withstand potential volatility ahead. Energy, telecom and food & beverage are industries that have previously increased leverage but now have a number of companies reducing their debt levels.

Sovereign credit One of the notable characteristics of 2018 has been the degree to which growth has exceeded expectations in the US, yet growth in other developed markets and emerging markets has decelerated. We expect 2019 to be a year where this relationship normalises,

leading to stability in Europe and a rebound in emerging markets. Countries that show a commitment to credible institutions and prudent fiscal policy will be rewarded. The growth and policy disappointments of recent years have pushed yields higher in many countries such as Brazil, Mexico, Turkey, Argentina, and even Italy. Many of these may prove to be sound investments if policymakers can put debt on a sustainable track.

Risks There are a number of risks that we are watching for closely which could affect this outlook. An overstimulation of the US economy, in order to continue its strong growth, could become inflationary, causing the Fed to tighten monetary policy more aggressively than is currently expected, unsettling markets. Geopolitical concerns also continue, and this includes the escalation of the trade war, or rising tensions between the US and Saudi Arabia.

Within Europe, a key risk is if the European Union fragments in some way, either due to Italian budget, the rise of Right-wing politics, or ripples from whatever Brexit deal is agreed.

While the uncertainty of the Brexit outcome poses risks, arguably a Corbyn-led Labour government would have a greater impact on the domestic UK market.

Finally, we continue to be concerned about the levels of debt in the world, particularly sovereign and corporate debt, with net debt to GDP in the likes of China looking increasingly unsustainable.

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COUNTRY FOCUS

RENEWED

SUCCESS

Painful short-term austerity seems to be paying off for the North African country

H

(CREDIT: PATRICE6000/SHUTTERSTOCK)

osni Mubarak left Egypt a complicated legacy. While he is credited with reforms that spurred economic growth to highs of eight per cent, by keeping the spoils to himself he sparked a costly revolution and left financial carnage in his wake. Following his ousting, annual growth declined to 3.1 per cent in 2011-16 from an average of 6.2 per cent in 2005-10.

In late 2016, waning foreign aid and diminishing reserves saw Egypt run cap in hand to the IMF. The result was a threeyear, $12 billion loan programme that came with stringent conditions. To secure the deal, Egypt was forced to float its currency, introduce new taxes and slash energy

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The Central Bank of Egypt is committed to reducing inflation to single digits over the medium term (CREDIT: EFESENKO/SHUTTERSTOCK).

subsidies—all of which sent inflation galloping above 30 per cent for most of 2017, a high that had not been seen in a generation.

Egypt’s people have borne the cost of austerity, enduring endless price rises and punishing tax increases. However, the IMF says that while it may be a bitter pill to swallow, the tough economic reforms are for the greater good.

THE EGYPTIAN ECONOMY HAS CONTINUED TO PERFORM WELL, DESPITE LESS FAVOURABLE GLOBAL CONDITIONS, SUPPORTED BY THE AUTHORITIES’ STRONG IMPLEMENTATION OF THE REFORM PROGRAMME.

IT CAN ONLY GET BETTER Almost half way through the term of the loan, the reforms have started to pay off for Egypt’s long-suffering population. Since the currency float, foreign investment in Egypt’s high interest treasury bills has rocketed, plugging holes in the Central Bank’s reserves.

– Subir Lall, Assistant Director in the European Department, IMF

Growth now stands at the highest rate since 2008, inflation has been beaten back, foreign exchange reserves are at record levels, exports are growing, and unemployment has declined.

Fitch Ratings and S&P both upgraded their outlooks on Egypt to stable earlier this year, and the country has been enjoying some positive press. Heritage Foundation’s 2018 Index of Economic Freedom advertised the fact that Egypt’s economic freedom has increased, and Harvard University’s Centre for International Development ranked Egypt as the thirdfastest growing economy in the world. “ Th e E g y p t i a n e c o n o m y h a s continued to perform well, despite less favourable global conditions,

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supported by the authorities’ strong implementation of the reform programme,” said Subir Lall, Assistant Director in the European Department of the International Monetary Fund. “The government continues to make efforts to implement reforms that aim to help the private sector invest and create the jobs needed to achieve more inclusive and sustainable growth for Egypt’s young and growing population.”

While the end result sounds p r o m i s i n g , r e h a b i l i t a t i n g E g y p t ’s economy will be far from easy. The IMF’s plan to modernise the economy includes steps to support exports and reduce non-tariff barriers; support small and medium enterprises; strengthen public procurement; improve transparency and accountability of state-owned enterprises; and tackle corruption.

The reforms have been designed to attract vital private investment. High rates and the reform programme have already attracted a surge of foreign participation in the local debt market, according to Fitch Ratings.

MATE’S RATES Egypt’s improved macro stability coaxed the Central Bank into cutting rates for the first time since the 2011 revolution. In February, the Central Bank of Egypt (CBE) cut its overnight deposit and lending rates by 100 basis points (bps) to 17.75 per cent and 18.75 per cent, respectively. Its main operation and discount rates were also cut by 100 bps, to 18.25 per cent. The CBE had increased rates by 700 bps since devaluing the Egyptian pound in November 2016.

Interest rates on domestic government debt started to fall before February’s rate cut, with the 91-day T-bill rate 450 bps lower than its July peak and the one-year T-bill rate close to its pre-devaluation rate of around 16.5 per cent.

“With rates falling, we think the CBE will be mindful of the risk of some outflows, even though its stock of FX reserves has risen to $38 billion and it has other reserve

Pedestrians pass among market stalls in Cairo, Egypt on March 31, 2018. Egyptian President Abdel-Fattah El-Sisi was set to sweep to victory with more than 90 percent of the vote in this week's election, crushing his one token challenger after credible competitors were eliminated before the contest. (CREDIT: SIMA DIAB/BLOOMBERG)

EGYPT’S ECONOMY IS SHOWING STRONG SIGNS OF RECOVERY, AND ITS ECONOMIC GROWTH IS AMONG THE HIGHEST IN THE MIDDLE EAST. – Christine Lagarde, Managing Director, IMF

assets linked to its portfolio repatriation scheme,” the rating agency said.

At its monetary policy meeting held on 15 November, the Central Bank of Egypt left the overnight deposit rate at 16.75 per cent, the overnight lending rate at 17.75 per cent and the main operation rate at 17.25 per cent. FocusEconomics in its Consensus Forecast Middle East & North Africa—December 2018 report noted that these decisions were in line with market expectations and came after

the CBE cut all rates in March with the aim of supporting economic activity.

“The Central Bank of Egypt’s prudent monetary policy helped bring down annual inflation from 33 per cent in July 2017 to 11.4 per cent in May 2018. However, inflation increased again to about 16 per cent in September 2018, reflecting the pass-through from energy price increases in June and a stronger than expected increase in volatile food prices in September,” Lall said. “In the medium term, the CBE aims to reduce inflation to single digits. Meanwhile, in the current external environment of tighter financing conditions for emerging markets, the CBE’s commitment to a flexible exchange rate policy will help enhance competitiveness, protect Egypt’s foreign reserves, and cushion against external shocks.”

The CBE’s decision to hold its rate needs to be taken within the context of rising price pressures, with inflation hitting 17.7 per cent in October. At its November meeting, the Bank noted that its inflation target of 13

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EGYPT

by the numbers GDP GROWTH

POPULATION

COMPETITIVENESS

10 8

Ranked

100 overall

6

97.0 million

4 2 0

Source: IMF World Economic Outlook Database (October 2018)— estimated

% % 5.5 5.3 Projected in 2018 Projected in 2019

Source: IMF World Economic Outlook Database (July 2018)— estimated

LONG-TERM TRENDS I 3-year averages 2018-20

2021-23

91.3

99.2

106.2

300

290

420

3,300

2,914

3,952

4.3

5.2

5.0

Fiscal Balance (% of GDP)

-11.2

-8.4

-5.6

Public Debt (% of GDP):

100.8

88.8

77.1

Inflation (%):

17.6

12.6

8.9

Current Account (% of GDP):

-5.2

-1.9

-0.8

External Debt (% of GDP):

21.5

34.6

28.1

GDP (USD bn) GDP per capita (USD) GDP growth (%)

out of 137 Source: Global Competitiveness Report 2017-2018/World Economic Forum

GDP by Sector I share in % 100

2009-11 2012-14

80 60 40 20 0

GDP by Expenditure I share in %

2015-17

120 Agriculture

2008-10

2011-14

2015-17 Net Exports

90

Manufacturing

60

Investment

Other Industry

30

Government Comsumption

Services

0

Private Consumption

-30

Source: FocusEconomics Consensus Forecast Middle East & North Africa – December 2018

Source: FocusEconomics Consensus Forecast Middle East & North Africa – December 2018

TRADE STRUCTURE

EASE OF PAYING TAXES

Primary markets I share in %

Ranked 167 out of 189

EXPORTS

USA 9% Other EU-28 23% Italy 11% Asia ex-Japan 6%

64

for institutions

ECONOMIC STRUCTURE

2015-17 Population (million)

Ranked

Other MENA 13% United Arab Emirates 11% Other 26%

IMPORTS

EU-28 27.7% Other Asia ex-Japan 9.7% China 7.2% Other MENA 13.2%

Source: FocusEconomics Consensus Forecast Middle East & North Africa – December 2018

Saudi Arabia 6.3% Russia 5.2% Other 30.9%

45.3% total tax rate

Source: PwC Paying Taxes 2018 analysis

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per cent plus or minus three percentage points now faces upside risks, although it also provided assurances that “current policy rates remain in line with achieving single digit inflation as soon as the effects of fiscal consolidation measures dissipate.”

Since exchange rate reform, the OUR NUMBERS Banker Africa’s analysis of the top banks in Egypt has revealed some interesting results. In this chart we rank the ‘Best Banks’ in Egypt. The ranking is based upon a methodology which weights eight key financial metrics in order to provide a comprehensive view of the country’s ‘Best Bank’.

BEST BANKS NAME

RANK

National Bank of Egypt

1

Banque Misr

2

Commercial International Bank

3

QNB Al Ahli

4

Credit Agricole Bank

5

Bank of Alexandria

6

National Bank of Kuwait - Egypt

7

Arab African International Bank

8

Housing and Development Bank

9

Emirates NBD Egypt

10

Source: Banker Africa

Similarly, to the above chart we have also ranked Egyptian financial institutions in terms of fastest growth through four weighted financial metrics.

FASTEST GROWING BANKS NAME

RANK

Banque Misr

1

Housing and Development Bank

2

Bank of Alexandria

3

Export Development Bank of Egypt

4

Suez Canal Bank

5

Emirates NBD Egypt

6

Union National Bank - Egypt

7

National Bank of Kuwait - Egypt

8

Abu Dhabi Islamic Bank - Egypt

9

Egyptian Gulf Bank

10

Source: Banker Africa

CBE has set out to control inflation expectations. In delivering the rate cut, it said that it would “not hesitate to adjust its stance to achieve its mandate of price stability over the medium term.”

The IMF seems impressed with the Egyptian Government’s progress, as reserves have risen, and the current account deficit has started to narrow. It cheerfully noted that Egypt is on track to achieve a primary budget surplus excluding interest payments in 2017/18, with government debt as a share of GDP expected to decline for the first time in a decade. The budget for 2018/19 targets a primary surplus of two per cent of GDP, which would keep public debt on a firmly downward path.

“President El Sisi and I discussed the good progress under Egypt’s economic reform programme supported by the IMF’s $12 billion Extended Fund Facility.

Egypt’s economy is showing strong signs of recovery, and its economic growth is among the highest in the Middle East,” said Christine Lagarde, Managing Director, IMF, earlier this year following a meeting with Egypt’s President El Sisi.

“We agreed on the importance of capitalising on Egypt’s macroeconomic gains to advance the authorities’ homegrown structural reforms. These reforms will help achieve more sustainable, inclusive and private-sector led growth which will help create jobs for Egypt’s young population, while also ensuring adequate resources are available for social protection.

I reiterated the Fund’s commitment to support Egypt and its people.”

Exchange rate reform has proved a turning point for Egypt’s external finances and the economy, with a growth of around five per cent in the first half of the current fiscal year, notwithstanding the tight monetary and fiscal stance.

“GDP growth accelerated from 4.2 per cent in 2016/17 to 5.3 per cent in 2017/18 while unemployment declined to below 10 per cent,” said Lall. “The current account deficit narrowed to 2.4 per cent of GDP in

2017/18 from 5.6 per cent the year before, primarily driven by strong remittances and a recovery in tourism,” said Lall. “Gross general government debt declined from 103 per cent of GDP in 2016/17 to about 93 per cent of GDP in 2017/18, supported by fiscal consolidation and higher growth.”

WISH YOU WERE HERE Reviving tourism is vital to Egypt’s recovery.

At its peak in 2010, the sector employed about 12 per cent of Egypt’s workforce and raked in revenues of nearly $12.5 billion, as well as contributing more than 11 per cent of GDP and 14.4 per cent of foreign currency revenues, according to Reuters data.

Thankfully, tourists are edging back to Egypt’s ancient charm. The numbers climbed to nearly 780,000 per month in the first four months of the current fiscal year from about 550,000 per month in 2016/17, according to figures from Bloomberg.

Tourists also appear to be staying longer—the average number of nights almost doubled to 12 in July-October 2017 compared with the same period a year earlier. This is aided by an improved security set-up which has prompted many countries to resume flights to Egypt or announce intentions to do so.

Egypt is also stepping up domestic gas production, which should benefit its current account even further. Egypt has begun production from Zohr, a supergiant gas field. Production is expected to reach 1.7 billion cubic feet per day in June 2018 before rising to 2.7 billion cubic feet per day by the end of 2019, Bloomberg reported. This could make Egypt selfsufficient in gas and may even help the country export it in the future.

The government also remains committed to continuing energy subsidy reforms to achieve cost-recovery prices for most fuel products by 2019. Together with raising revenues through tax policy reforms, this will help create fiscal space for important infrastructure projects, targeted social protection measures and essential spending on health and education.

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Reforming subsidies and bringing down the government debt ratio is a multi-year process, warned Fitch. However, the reforms have not prompted a visible social backlash, and the authorities have minimised the potential for opposition figures to build political momentum ahead of the presidential elections. “ We we l c o m e t h e a u t h o r i t i e s ’ comprehensive efforts to improve the living standards of the most vulnerable,” said Lall.

“These efforts include: Takafol and Karama, which has expanded to cover around 10 million individuals; Forsa, which has created job opportunities for graduates of the Takafol programme; and, Mastoura, which provides microfinancing to women for sustainable income generation. These programmes are being complemented with the Sakan Karim programme to provide clean drinking water and sanitation to rural areas.”

L A U G H I N G A L L T H E WAY TO THE BANK If these positive predictions play out, Egypt’s banking sector will reap the rewards. The IMF noted that Egypt’s banking sector remains liquid, profitable and well-capitalised. Moody’s has also given its nod of approval, issuing a positive outlook for the sector in October this year.

“Increased domestic private sector investment, large infrastructure projects, as well as higher exports will drive economic growth and credit demand,” said Melina Skouridou, Assistant Vice President and Analyst at Moody’s.

In fact, Egyptian banks have stood up remarkably well. While corporate profits declined, their debt repayment capacity has been supported by relatively low overall levels of debt, as well as government initiatives to help tourist companies and importers. It helps that retail loans are confined to wealthier households.

However, banks’ continued success relies on a continued economic recovery.

Moody’s warned last year that delinquency rates could increase as new loans mature, particularly if interest rates rise

INCREASED DOMESTIC PRIVATE SECTOR INVESTMENT, LARGE INFRASTRUCTURE PROJECTS, AS WELL AS HIGHER EXPORTS WILL DRIVE ECONOMIC GROWTH AND CREDIT DEMAND. – Melina Skouridou, Assistant Vice President and Analyst, Moody’s

or economic growth falters. The banks’ high exposure to low-rated government securities—accounting for 33 per cent of their assets—will continue to be a key concentration risk and links banks’ credit profile to that of the government. Moody’s adds that loan quality will remain stable, as new lending is tested. The ratings agency expects the formation of non-performing loans (NPL) to remain steady, and the NPL ratio to remain broadly unchanged from current levels of around 4.5 per cent of total loans as of March 2018, as the improvement in asset quality from legacy exposures dwindles.

Fitch: Egypt tax law may weaken banks' profits, capital ratios Egyptian banks' profitability and capital ratios could be weakened as a result of a new law affecting the tax treatment of their sovereign debt holdings, Fitch Ratings says. The new law could encourage banks to allocate their excess liquidity away from sovereign debt and into growing their loan books. Banks with a high proportion of sovereign debt holdings would be the most affected by the proposed law.

Fitch does not expect the law to affect banks materially until at least 2020, even if it is passed in 2019, as it will only apply to banks' new purchases of sovereign securities, with no retroactive impact on their existing holdings.

Egyptian banks deploy most of their excess liquidity into sovereign debt, as demand for credit is subdued by high interest rates. Sovereign debt represents a significant part of Fitch-rated banks' balance sheets and banks' profitability is highly dependent on sovereign yields. Interest from sovereign debt accounts for about 40 per cent of total interest income for Fitch-rated banks, on average.

The proposed tax law requires banks to separate the interest income (and associated expenses) on their sovereign securities from income related to their core banking activities. Banks will pay 20 per cent tax on interest income from sovereign securities and 22.5 per cent corporate tax on income from core banking activities.

The separation of expenses related to sovereign holdings will result in higher core banking income and therefore a higher effective tax rate.

Fitch expects banks to reduce sovereign debt holdings and increase lending to the private sector to protect their margins, which could result in a weakening of their capital ratios.

The agency notes that the impact of the proposed law on profitability could be substantial unless banks divert significant amounts from sovereign portfolios to private lending. Fitch estimates that if banks maintain their balance-sheet structures with no shift to extra lending, net income would drop by 20 per cent in some cases.

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While capital buffers for Egyptian banks are weaker than those of their rated regional peers, Moody’s expects them to improve over the coming two years as banks retain more of their profits. Furthermore, the firm expects profitability in the sector to remain strong, as rising fees and commissions on new lending will support banks preprovision profit.

RISKY RECOVERY While the green shoots of recovery can be seen in Egypt, root problems remain.

Relatively weak governance, security and political risks continue to weigh on Egypt’s recovery.

“The story of Egypt is positive in the short term,” said Ziad Daoud, Chief Economist at Bloomberg. “However, most of the factors behind the expected recovery are temporary, and as these fade or reach their limit, Egypt will need to find new drivers for growth.”

The absence of a level-playing field— especially in sectors where there are state-led activities—might stifle the private sector and job creation, the World Bank warned in a report. Additionally, regional and domestic security risks threaten the recovery of foreign investments and economic growth.

Fiscal reforms slippage or unfavourable external conditions, for example in the form

of sustained increases in global oil prices, pose risks that may negatively impact the consolidation trajectory, said the World Bank.

Social conditions remain difficult with doubledigit unemployment rate and the absence of a notable acceleration in employment.

Egypt will need to make a sustained effort to implement a range of business reforms, including selling the idea of privatisation to a public which associates the very word with corruption, price rises and unemployment.

Egypt has been enjoying a fair economic wind, but it needs to harness that while it can. If Egypt’s people do not see any reward for their sacrifice, they may decide that reform comes at too high a cost.

INFLATION I CONSUMER PRICE INDEX

ECONOMIC GROWTH 6

8

40

6

30

4

20

%

%

2

10

5

4

3 Q1 15

Q1 16

Q1 17

Q1 18

0

0

Q1 19

Month-on-month (left scale) Year-on-year (right scale)

GDP, real annual variation in %, Q1 2015Q4 2019

-10

-2 Oct-16

Source: FocusEconomics

Apr-17

Source: FocusEconomics.

Real GDP growth

Real GDP per capita growth

6

8

4

4

2

2

Oct-17

Apr-18

Note: Year-on-year and month-on-month variation of consumer price index in %.

CPI inflation

Budget balance (% of GDP)

20

-2

-5

15

-4

10

-10

-6

5 2016

2017

2018

2019

0

2016

2017

2018

2019

0

Current account (% of GDP) 0

0

10

0

Oct-18

2016

2017

2018

2019

-15

2016

2017

2018

2019

-8

2016

2017

2018

2019

Source: Data from domestic authorities/African Economic Outlook (AEO); figures for 2017 are estimates; 2018 and 2019 based on AEO calculations.

28 page 22-28 Country Focus 056.indd 28

23/12/2018 18:15

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20/12/2018 09:28

RISK

ELECTIONS AHOY

G

rowth in Sub Saharan Africa has remained subdued over the course of the past two years, falling to 1.4 per cent in 2016, the lowest rate since the early 1990s, and remaining low at 2.7 per cent in 2017.

However, research points to the continent returning back to overall growth. In the Africa Risk-Reward Index November 2018, Control Risks and Oxford Economics state that in line with steady global economic growth, the continent is likely to see improved growth over the next few years.

However, the report does point out that the recovery will not b e driven by the usual suspects. In particularly the IMF warned that the poor performance of the continents’ traditional giants, namely Nigeria, South Africa and Angola, where holding back Africa’s economic growth.

All three countries have seen only minor Fig.1 Africa Risk-Reward Index Fig.1 Africa Risk-Reward Index improvements in November’s Risk-Reward 9 Index, in comparison to June. Dramatic 9 political changes in South Africa and Angola 8 were highlighted in that edition as providing 8 the groundwork for broader long term political 7 growth. However, political change does bring 7 increases in uncertainty in the short term 6 6 whilst situations on issues are being resolved.

The Africa Risk-Reward Index plots 5 5 each country’s performance relative to African peers and highlights how some of 44 Africa’s largest economies are outshone by smaller rivals. The position of each country 33 is defined by its risk and reward score; the size of its bubble represents the size of the 2 2 country’s GDP. This edition’s index can be seen in figure 1.

11 The report argues that reform agendas 00 being pushed by new leaders across the 10 10 continent, such as in Angola and Ethiopia, 11 22 33 44 5 5 6 6 7 7 8 8 9 9 represent positive steps towards future Risk Risk growth. Indeed, the wide changing Ethiopia Algeria Angola Botswana Cameroon Congo DRC Egypt Ethiopia political landscape in Sub Saharan Africa Algeria Angola Botswana Cameroon Congo DRC Egypt throughout late 2017 and early 2018 has Gabon Ghana Côte Kenya Malawi Mauritius Gabon Ghana Côted’Ivoire d’Ivoire Kenya Malawi Mauritius Morocco Morocco resulted in a number of new challenges on Mozambique Namibia Nigeria Rwanda Senegal South Africa Mozambique Namibia Nigeria Rwanda Senegal South Africa the ground. With regards to the Index, only Tanzania Tunisia Uganda Zambia Zimbabwe Tanzania Tunisia Uganda Zambia Zimbabwe Zimbabwe’s change in political leadership has resulted in a significant improvement Source: Source: Control Control Risks Risks and and Oxford Oxford Economics Economics 2018 2018 in the risk-reward score.

Source: Control Risks and Oxford Economics 2018

Reward Reward

Political change will continue to mark the continent throughout 2019

30 page 30-32 Risk 056.indd 30

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THE BUSINESS OF BANKING Read by senior banks, financiers and business leaders across the continent, Banker Africa is the most informative source of news, developments and strategic thought from within the financial community.

Banker Africa 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 Untitled-1 1 BA 21x27_Issue 44-46.indd 1

23/12/2018 09:34 18:02 31/07/2017

RISK

THE NIGERIAN EXAMPLE In February 2019 elections will pit President Muhammadu Buhari against long-time contender Atiku Abubakar, who is running on the ticket for the main opposition. Buhari became President in 2015 on a wave of democratic optimism with a platform based on his strong anticorruption stance and economic reform.

The peaceful transition in power with his predecessor Goodluck Jonathan was a significant milestone in Nigeria’s democratic history.

However, Buhari’s presidency has since been marked by problems related to his health and economic recession. Control Risks and Oxford Economics argue that Nigeria’s upcoming elections are a risknegative from an economic perspective. The key weakness of the Buhari administration has been policy, “illustrated by successive fiscal budget delays, recurrent fuel shortages ascribed to Abuja’s indecisiveness regarding subsidies, the slow progress of the Petroleum Industry Bill through the legislature, and the implementation of foreign exchange policies that still serve to deter direct investment.”

The report states that this issue of policy implementation is unlikely to be solved in the short-term due to political infighting in the leadup to the polls. Investors, and

Fig.2

Upcoming elections 19-2018 Senegal

Tunisia

Presidential Feb19-

Presidential/ Legislative Nov19-

Guinea-Bissau** Legislative Nov18-

Namibia*

Togo

Guinea-Bissau

South Africa*

Presidential/ Legislative 2019

Legislative Dec18-

Legislative between May & Aug19-

Presidential May19-

Mauritania

Botswana*

Cameroon

Benin

Legislative 2019

Legislative Oct19-

Legislative Mar19-

Presidential Mar19-

DRC

Algeria

Presidential May19-

Malawi

Presidential/ Legislative Dec18-

Libya*

Presidential/ Legislative Dec18-

Presidential/ Legislative May19-

Nigeria

Presidential/ Legislative Feb19-

Mali

Legislative Jun19-

Mozambique Presidential/ Legislative Oct19-

Madagascar Presidential Nov18-

Fig.3 Index Index in Nigeria Sep 2017–- Nov Fig.3 Risk-Reward Risk-Reward in –Nigeria Sep2018 2017

Jun 2018 SepSep 2017 Nov 2018 Nov 2018 Jun 2018 2017

Control Risks and Oxford Economics argue that the take way from these results in the index is that political change will have an adverse impact in the short term for investors as they may be caught in battles within the political landscape along with the potential for hostile legislation to take root, damaging investment potential.

Despite political change potentially being good in the long term, legislative and structural challenges can not so easily be assessed or so quickly. As such it is important to remember that although any upcoming election may result in an increase in risk in the short term, what is of ultimate importance is as to whether the election result will lay groundwork for future growth.

0

1

0

0

2

1

1

0 0 Risk

3

2

2

1 1

5

3

3

2 2

4

4

4

7

6

4

5

3 3

- Nov 2018

5

5

Reward

5 6

9

8

9

8

9

8

9

10

8

9

10

10

7

6 7

10

7

6

7

6

4

8

10 Source: Control Risks and Oxford Economics 2018

Source: Control Risks and Oxford Economics

subsequently FDI, low until4 0 1 will remain 2 3 policy direction becomes clearer after the Risk Reward in political risk election.

Further increases could also result in portfolio outflows, Source: Control Risks and Oxford Economics which would place further pressure on

already strained foreign reserves.

Control 5 6 7 8 9 Risks and Oxford Economics sees economic growth reaching 1.8 per cent in 2018, down from an earlier projection of 2.1 per cent.

10

32 page 30-32 Risk 056.indd 32

23/12/2018 17:40

WEALTH ARABIA

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23/12/2018 18:03

ISLAMIC FINANCE

Central Bank of Morocco

MOROCCO ISSUES FIRST SOVEREIGN SUKUK 34 page 38-39 Islamic Finance 056.indd 34

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The North African nation continues on its Islamic finance path with a major milestone

O

n 5 October, Morocco issued its first sovereign Sukuk valued at MAD $1 billion, or $105 million.

In a phone conversation with Reuters ahead of its launch, Morocco’s t h e n Fi n a n c e M i n i s t e r M o h a m e d Boussaid said that the move came after much preparation.

“The legal framework is now prepared for Morocco to issue its first sovereign Sukuk in the coming weeks,” Boussaid told Reuters.

In August, Morocco’s King Mohammed sacked Boussaid, three days after the monarch urged action to tackle social and economic problems, according to local newswire, Agence Morocaine De Presse.

“This Royal decision is part of the implementation of the principle of accountability which His Majesty is keen to apply to all officials, whatever their ranks or affiliations,” said the statement.

Nonetheless, Morocco’s Sukuk was issued as planned.

“We view Morocco’s tapping of the Sukuk market as a way for the Government to access an alternative source of longterm financing via a diversified investor base,” said Elisa Parisi-Capone, VP, Senior Analyst at Moody’s.

The move comes after years of planning, and more than a year after five Islamic banks began operations in Morocco.

“The launching of participative (Islamic) finance products in Morocco complements and expands the range of products offered by the domestic banking sector and opens it to new financing capacities,” a statement from the Central Bank said at the time. “It will strengthen the attractiveness of

Casablanca as a leading financial hub in Africa, in accordance with the will and guidance of His Majesty the King, may God assist Him.” “We are delighted by the news that we will be able to positively impact the Moroccan consumer finance market,” said Khaled Elsayed, President and CEO of Guidance Financial Group, USA. “It is also nice to know that this achievement is yet another positive result of the remarkable success our distinctive US Islamic home finance program has had since it was introduced over 15 years ago to the US Muslim consumer market,” Elsayed continued.

Ratings agency Fitch applauded the move.

“We expect growth of participation banks will be high initially, as was the case following the introduction of Islamic banking in Turkey and Indonesia. The ability to access Islamic products will ensure that customers have access to a more comprehensive range of services.

Customers who have avoided transacting with conventional banks for Shari’ahrelated reasons can now move into the formal banking sector,” said Bashar Al Natoor, Head of Islamic Finance for Fitch Ratings.

The move to utilise Sukuk furthers the development of Islamic finance in the nation, as well as in the broader region.

“Morocco’s first sovereign Sukuk issuance is in line with our expectations for African Sukuk issuance, outlined in our report published last month.

We forecast further Sukuk issuances in Africa to reach at least $1 billion over the next 18 months,” added Akin

Majekodunmi, VP, Senior Credit Officer at Moody’s.

The banking sector has seen development in that time. Recently, one of the Islamic banks, Attijariwafa Bank Group in Morocco, has pushed to develop their technology in partnership with Path Solutions.

Under the terms of the agreement, Path Solutions will provide and implement its interest-free core banking platform iMAL across the 31 branches of Attijariwafa Bank participative subsidiary Bank Assafa, including Shari’ah-compliant financing, delivery channels and trade finance.

Morocco-based Attijariwafa Bank is a leading bank in North Africa with a presence in 25 countries and with over eight million customers. The bank decided to acquire iMAL among many other vendor solutions, to run the operations of its new participative subsidiary Bank Assafa.

“The launch of our new participative banking subsidiary is part of Attijariwafa Bank’s long term vision to diversify its product offering. We looked at a number of solution providers for our new Shari’ah-compliant core banking system and we turned to Path Solutions following good references from several leading Islamic banks and because we simply wanted the best. We needed a core-banking platform in full compliance with the Sharia, which could be implemented quickly and cost effectively, whilst providing the breadth of functionality that will allow us to achieve our ambitions. The iMAL solution fulfilled all these criteria,” Youssef Baghdadi, Chairman of the Management Board of Bank Assafa, commented.

Bank Assafa launched in July 2017, seven months after Islamic banking was approved.

bankerafrica.net

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ISLAMIC FINANCE

Eng. Hani Salem Sonbol

SEIZE THE DAY

By Eng. Hani Salem Sonbol, Chief Executive Officer, ITFC

T

he rationale for building powerful trade and economic ties between the Arab and African regions is relatively straightforward but extremely compelling. A cursory glance at the agricultural sector illustrates the point. Agriculture in Africa is the region’s largest employer by sector and contributes around 15 per cent (OECD)

to the region’s entire GDP. Most Arab member countries of the Organization of Islamic Cooperation (OIC)—including geographically close members like GCC Countries—are unable to produce very much of their own agricultural needs.

Yet trade between the two regions barely impact global agricultural trade.

An International Trade Center (ITC) study commissioned by the International Islamic Trade Finance Corporation (ITFC) stated that in 2016, Sub Saharan Africa (SSA), North Africa and the Middle East

together accounted for 15.1 per cent of world agricultural trade. However interregional trade between Arab and African countries accounted for only 0.3 per cent of total volume of global agricultural trade.

It also shows the huge difference in export capabilities between the two regions, with Arab OIC markets exporting $1.06 trillion to the world in compared to Sub Saharan Africa’s $0.16 trillion, of which 70 per cent is oil and oil products.

The reality is that the level of trade between the two OIC regions does not

36 page 40-41 Islamic Finance 056.indd 36

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reflect the existing potential between both markets and more broadly, the SSA region is falling behind the Arab world in the value of its exports. Considering the regions’ burgeoning youth populations and its impending needs in terms of job creation, food security and economic diversification, OIC member nations have a collective role to play in enhancing inter Arab-Africa trade now more than ever.

Opportunities in low hanging fruit The most apparent areas of collaboration can be found in sectors that have high potential for commercial and investment partnerships between the two regions.

The ITFC-ITC study shows that Arab OIC countries have potential to export polymers, cement, iron/steel structures and prefabricated buildings, which the SSA region needs to support the high levels of infrastructure development taking place.

The agro-processing industry such as sugar cane, wheat flour, milk and cream, canned sardines and non-alcoholic beverages also have high export potential to SSA markets but is not being fully tapped into at present.

On the other hand, SSA countries have high and proven potential to export livestock, coffee and sesame seeds to the Arab OIC region. There is also some scope for growing exports of agroprocessing goods, like cocoa-based and fisheries products, which are currently mostly exported within the SSA region itself. What is evident is that agro-food industries, health and pharmaceutical, building materials, construction supplies, machinery and electrical equipment have high potential for greater Arab-Africa trade.

Yet the inter-regional trade volumes between Arab and African OIC nations comprise of a mere fraction of trade with European, and more recently, Asian markets.

Practical solutions to boost intra ArabAfrica trade In response to this, in 2017, ITFC launched a trade promotion programme called the Arab Africa Trade Bridges Program (AATB).

The programme is aimed at addressing some of the many challenges that prevent business communities in Arab and SSA OIC nations from fully taking advantage of the existing trade potential between the two regions.

The programme aspires to facilitate new partnerships for trade, investment and technology transfer between the two regions. Amongst the ways in which the programme will achieve this is by improving the overall business and

THE ITFC-ITC STUDY SHOWS THAT ARAB OIC COUNTRIES HAVE POTENTIAL TO EXPORT POLYMERS, CEMENT, IRON/ STEEL STRUCTURES AND PREFABRICATED BUILDINGS, WHICH THE SSA REGION NEEDS TO SUPPORT THE HIGH LEVELS OF INFRASTRUCTURE DEVELOPMENT TAKING PLACE. – Eng. Hani Salem Sonbol Chief Executive Officer, ITFC

investment climate and strengthening public-private cooperation at a regional level and supporting inter-regional value chains in strategic economic sectors.

Since its launch, the AATB has been implementing programmes that increase commercial and business exchanges between SMEs from both regions. It has also rolled out initiatives that provide opportunities for trade finance and credit insurance to exporters from both regions.

By facilitating cooperation among trade and investment support institutions and

by engaging the private sector directly, the AATB programme aims to enable information sharing on a range of business-critical issues, such as markets and trade regulations. Partnerships with the private sector and public sector institutions provide technical assistance to build human and institutional capacity in trade and investment. More importantly, the programme is opening new doors to Islamic trade finance.

Islamic trade finance and ArabAfrica trade Given that its mandate to promote intratrade among OIC member countries and that with the world, ITFC, through the AATB programme, has established partnerships with financial institutions within the Arab and SSA region to offer incentivized financing lines that support trade flows between the regions.

Amongst them include the Arab Africa Trade Finance Program (AATFP) offers a wholesale approach to trade finance through the provision of risk mitigation facilities and liquidity support. It consists of short-term lines of credit and risk sharing facilities offered to financial institutions operating in SSA and Arab countries in order to facilitate their own trade finance operations.

In 2017, IT FC establish ed n ew partnerships with Banque Centrale Populaire du Maroc (BCP), in order to support their West African subsidiary, Banque Atlantique, for an amount of EUR 40 million. It also set up a twostep Murabahah for an amount of $150 million with AFREXIMBANK, dedicated to financing commodities exports from 13 Sub Saharan Africa countries and imports of three Arab countries.

Ultimately, the provision of practical solutions like finance, trade promotion, market intelligence, capacity building, and networking is opening new doors and leading the way for enterprises that want to take advantage of two neighbouring regions with huge export potential.

bankerafrica.net

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TECHNOLOGY

DISRUPTING FOSSILS Implementation of digital technologies has helped improve Africa’s oil and gas industry outlook, says CPI Financial’s Kudakwashe Muzoriwa

38

O

il provides nearly half the world’s energy, powers the majority of vehicles and machinery, and is a base ingredient for many industrial chemicals. Oil is the essence of industrialised countries, most manufacturing, technologies, as well as plastics and fertilisers would not be possible without it. The concept of alternative energies and electric vehicles is already a near-future scenario in many developed economies, however, the situation is different in the developing world.

THERE IS A HUGE DEMAND FOR POWER IN AFRICA, FOR OIL AND HYDROCARBONS WILL PLAY A HUGE ROLE IN SATISFYING THE CONTINENT’S ENERGY NEEDS DUE TO PROJECTED POPULATION GROWTH.

Professional accountants can bring a myriad of benefits to organisations and Government in Kenya, says the ACCA (CREDIT: ANDREY_POPOV/SHUTTERSTOCK).

The majority of African countries are lagging behind when it comes to the adoption of alternative energies and electric vehicles because of the lack of proper infrastructure and transmission networks.

PwC in its Taking On Tomorrow: Africa Oil & Gas Review 2018 report said that Africa does offer plenty of opportunities in the form of unexplored acreage and everincreasing hydrocarbon demand fuelled by population growth, urbanisation and the emergence of a growing middle class. Gas and oil continue to play a central or pivotal role as a transitional fuel in Africa both to non-producing and producing countries.

There is a huge demand for power in Africa, for oil and hydrocarbons will play a huge role in satisfying the continent’s energy needs due to projected population growth. The oil and gas industry looks more optimistic with the Brent oil price reaching the $80 mark in November after

bankerafrica.net

39

TECHNOLOGY

a global slump in hydrocarbons price in 2014. The oil price collapse in 2014 was a wakeup call for the oil & gas industry globally as well as in Africa.

National Oil Companies (NOC) and companies operating in Africa are introducing new ways of doing business in order to lower risks, focusing on high value plays as well as on reducing operational costs while eyeing technologies in a quest to further streamline their businesses. The current situation has presented African NOCs with the opportunity to exploit the abundant oil and gas acreage on the continent.

The continent’s share of global oil production has slightly increased by 0.3 per cent since last year to 8.7 per cent.

According to PwC, the main contributors continue to be Nigeria, Angola, Algeria and Egypt. Libya is said to have doubled production in 2017, promoting it to the fourth-largest oil producer in Africa with an 11 per cent share, moving Egypt to the fifth position.

The trends in global oil & gas discovery changed in 2018, recording up 30 per cent in the first six months of the year, compared to the same period last year.

In terms of discovery, the Middle East was leading the pack at 44 per cent while West Africa offshore stood at the lower end with an average of 17 per cent reduction in break-even prices since 2014.

The West African statistics is an indication that cost-cutting measures are not being implemented comparing to other parts of the world and there is likely additional possibility for optimisation measures to be applied, for instance using technology.

Although the implementation of technology such as directional drilling and hydraulic fracturing has increased yields, the industry continues to seek solutions to boost business efficiency and many oil and gas industry experts see AI as the answer. Technology and digital disruption are key enablers of growth and efficient operation. Digital disruption is here to stay, and African players must embrace this to reap the rewards, says PwC.

40

African NOCs should recruit digitallysavvy staff as well as enable their workforces to operate technologically advanced equipment to remain competitive because digital disruption is a game changer for the oil & gas industry. Across the oil and gas industry and elsewhere from the days of the industrial revolution, the implementation of technology has proved to be of great importance in achieving low-cost production plays.

AFRICAN NOCS SHOULD RECRUIT DIGITALLY-SAVVY STAFF AS WELL AS ENABLE THEIR WORKFORCES TO OPERATE TECHNOLOGICALLY ADVANCED EQUIPMENT TO REMAIN COMPETITIVE BECAUSE DIGITAL DISRUPTION IS A GAME CHANGER FOR THE OIL & GAS INDUSTRY.

Although the use of technology is still maturing, its use in oil and gas production as an enabler is very much on the radar screen. Multinational gas and oil companies, as well as NOCs, are collaborating in Africa to implement technology in areas such as exploration, production operations as well as development.

A number of NOCs and companies operating in Africa are adopting new technologies in a bid to be more efficient and profitable with low margins, AI and cognitive computing are a perfect fit. The oil and gas industry is also more about data as much as it is about hydrocarbon.

The upstream sector, usually known as the exploration and production stage, includes companies that locate and extract crude oil. Most drilling and production wells

are located in remote areas, and sending workers there is costly and in some cases not safe. Onsite operating costs can be reduced by using sensors and industrial internet of Things (IoT) powered by AI to handle data collection and system control in real time.

The application of technology also has grabbed the attention of the oil and gas industry in Africa and the rest of the world. PwC said that Algeria’s Sonatrach has identified technology as a key focus in its 2030 strategy. The use of drones to inspect remote oil and gas field facilities especially in countries along the tropics like Senegal and parts of Nigeria reduces health and safety risks and man-hours.

In South Africa, Crusade a service provider to Chevron’s Caltex uses drones to give fuel-hauling truck drivers visual cues and electronic journey plans to improve safety, fuel efficiency and customer reliability. In deep-water production wells in Angola, ExxonMobil is applying 4D seismic technology for monitoring of water and gas sweep. The use of 4D seismic technology improves the understanding of the reservoir through data that can be used to locate unproduced oil and gas.

Moreover, the Nigerian National Petroleum Company (NNPC) is said to be in the process of completing the automation of all crude oil supply and marketing operations. According to PwC, NNPC’s automation process and removal of paperwork saved $1 billion in 2018.

The use of robots to undertake monitoring and safety checks reduces safety risks for human operators at the same time boosting efficiency.

Virtual reality is impacting greatly on oil and gas production in Africa. In the upper stream sector, simulation of drilling reduce costs for many companies, Shell used VR to drill a simulation well for $5.4 million down from $15 million.

According to Baker Hughes GE, the average off-shore rig generates 50TB of data a year from sensors as well as operational and financial operations.

Digital technology in oil and gas has aided firms on the continent looking to lower risk and reduce operational costs (CREDIT: PAND P STUDIO/SHUTTERSTOCK).

Baker Hughes GE provides products and services for oil drilling, formation evaluation as well as completion, production and reservoir consulting.

In January 2018, the firm announced a collaboration with Nvidia, saying it was using AI technology and tools to make data more valuable to operations.

Additionally, US-based DataCloud, developed MinePortal, a cloud-based platform for real-time management and analysing of the geosciences data. The service integrates exploration drill data, block models and control measures into a single platform enabling better, faster drilling as well as blasting decisions to improve productivity.

The midstream sector stage deals with most of the freighting and logistics which include storage and transportation of crude oil, natural gas and liquefied natural gas. This stage is the nexus between remote oil and gas producing

A NUMBER OF NOCS AND COMPANIES OPERATING IN AFRICA ARE ADOPTING NEW TECHNOLOGIES IN A BID TO BE MORE EFFICIENT AND PROFITABLE WITH LOW MARGINS, AI AND COGNITIVE COMPUTING ARE A PERFECT FIT. fields and population centres where most consumers are located. Another US-based company, AKW Analytics, has developed machine learning and patent-pending technologies in its PALM (Petroleum Analytics Learning Machine) software product suite. The software provides big data analytics for both upstream and midstream pipeline gathering operations.

The real-time intelligent system enables forecasting and optimisation capabilities for better decisions and operating performance.

Improved safety and productivity can be achieved by automating routine manual activities, which in return can also reduce the risk to employees. The use of digital disruption can automate and optimise data-rich processes to mitigate business risks. The last stage, downstream sector, includes oil refineries, petrochemical plants as well as petroleum product distributors and natural gas distribution companies.

The downstream sector produces countless products including gasoline, diesel, jet fuel as well as lubricants, plastics and fertilisers among other products. In this category, a California-based company, Oracle Cloud, is helping downstream companies with its Oracle EPM Cloud, which can increase modelling speed and forecast financials through scenario analysis, lowering operation costs.

bankerafrica.net

41

TECHNOLOGY

THE

BUSINESS OF INFORMATION

42 page 42-43 Technology-Kapersky 056.indd 42

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By Tim Ayling, Global Head of Fraud Prevention Solutions, Kaspersky Lab

T

he relentless march of technology innovation shows no sign of halting. Recent history points to a future of technology, with the continued proliferation of social media, internet of Things, and artificial intelligence all threatening to change our landscape for good, and the winners in this new landscape will understand and prepare for the implications of this technology. The massive increase in cybercrime and fraud over the years has highlighted the challenges businesses face across all industries.

TIM AYLING ASSERTS THAT COMPROMISING ON CYBERSECURITY WILL NOT ONLY RESULT IN MONETARY LOSSES BUT CAN ALSO DAMAGE BRANDS REPUTATION AND AFFECT CONSUMER LOYALTY.

The rise of information technology in the early 1990’s promised massive efficiency savings and competitive advantages that we had not seen before.

In reality, organisations of all shapes and sizes invested heavily in technology and waited for the benefits. Undoubtedly

this investment did provide efficiencies that are rightly celebrated. Those that did not invest in technology often died, with widely quoted failures including Blockbuster not buying Netflix when they had the chance, and ToysRUs outsourcing their internet sales to Amazon—ensuring the consumer became used to purchasing toys online.

However, while efficiencies were created, competitive advantages often did not materialise. Why is that? Well, it’s because organisations ignored the fact that information technology wasn’t just about technology—in other words, they forgot the I in IT. In recent years we have seen the rise of the information age, where giants of the industry are information-based, rather than relying on technology. You’re probably thinking of Google and Facebook as good examples of this, and you would be right. However, there are other examples that are not instantly recognised.

Amazon house huge amounts of data on customer preferences, Uber know all about your movements, Airbnb know your favourite type of holiday and what you will typically spend.

Hence, people now see information as the new oil. Financial entities have also capitalised on this concept. Today online banking has become a norm, according to our Consumer Security Risks Survey 2017, 76 per cent of UAE residents regularly bank online. Consumers seem very happy to share personal information online for the convenience of being able to pay bills, transfer money and conduct other financial transactions online. This surge in online transactions bring along many online dangers with it, new Kaspersky Lab research shows that banking Trojans are actively targeting online users of popular

Tim Ayling

consumer brands, stealing credentials and other information through these sites.

Kaspersky Lab technologies detected 9.2 million attempted attacks by the end of Q3 of this year, compared to 11.2 million for the whole of 2017.

This abundance of data online is definitely not going to decrease, as internet of Things is becoming the norm, with Gartner predicting 95 per cent of manufactured goods will be connected to the internet by the end of 2020. Of course, security will not be part of the design for the majority of these goods as the rush to release new products tends to trump security. Compromising on cybersecurity will not only result in monetary losses but can also damage brands reputation and affect consumer loyalty. Companies with a strong cybersecurity strategy in place will be fit to defend themselves against any possible threats and in the end, the fittest will survive.

bankerafrica.net

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TECHNOLOGY

COUNTERING

FUTURE THREATS

McAfee Labs 2019 have released a new report on their cybersecurity threats predictions, pointing to underground cybercriminal collaboration as the thrust for threat volume and ingenuity

Raj Samani, Chief Scientist at McAfee

T

he McAfee Labs 2019 Threats Predictions Report, identifies rising trends and how they are predicted to change the cyberthreat landscape in 2019. McAfee researchers expect malware-as-a-service families to strengthen, energising the market for attack outsourcing and the evolution of increasingly innovative and agile attack methods. As a result, corporate data, home IoT devices and brand reputations will be under siege, with cybercriminals largely using social media, the cloud and mobile phones as increasingly prominent attack vectors.

“In 2018, we witnessed even greater collaboration among cybercriminals through underground alliances,” said Raj Samani, chief scientist at McAfee. “This collaborative mentality has allowed for efficiencies in underground technologies and tactics, and the evolution of bad actors into some of the most organised and agile adversaries in the world. However, while we expect the underground market collaboration to continue, the year 2019 will also see cybersecurity alliances of defenders continuing to mature and further fortify defences.”

The report reflects the informed opinions of thought leaders from McAfee Labs, McAfee Advanced Threat Research, and members of McAfee’s Office of the CTO. It examines current trends in cybercrime and the evolution of IT, and anticipates what the future may hold for organisations, consumers, and those working to protect them.

A s t r o n g e r, m o r e e f f e c t i v e cybercriminal underground Cybercriminals are quickly fortifying the malware-as-a-service market by aligning to sell modular attack components.

These one-stop shops make it easier for criminals of all experience and skill levels

to execute successful attacks. This market consolidation will continue in 2019 and cybercriminal enterprises are expected to flourish as established cybergangs partner with other top-level services such as money laundering, evasion techniques, and vulnerability exploits. As evidenced by conversations within the underground community, an increase is expected in mobile malware, botnets, banking fraud, ransomware, and attempts to bypass twofactor authentication.

Cyberattacks made simpler with easy access to technologies As security gets stronger, bad actors need to be increasingly inventive. The availability of modular attack components on the underground market is expected to enable attackers to combine and repurpose established tactics and technologies to achieve new goals.

• Artificial intelligence for improved e v a s i o n : Th e a c c e s s i b i l i t y o f technologies such as artificial intelligence-as-a-service will enable cybercriminals to develop cyberattacks with increasingly sophisticated evasion techniques. With artificial intelligence, cybercriminals will have the ability to automate target selection,

44 page 44-45 Technology McAfee 056.indd 44

23/12/2018 17:22

Which Attack Is It? Synergistic attacks involving multiple threats working together act as a smokescreen, hindering defenders from identifying an actor’s ultimate goal.

Multifaceted attacks

2019 Threats Predictions 2019 2019 2019 2019 Threats Threats Threats Threats Predictions Predictions Predictions Predictions McAfee Labs McAfee McAfee McAfee McAfee Labs Labs Labs Labs

Phishing Email

An attacker could combine common tactics— ransomware as a smoke screen, cryptojacking, phishing, fileless, and steganography—into a single attack.

Compromised Video

Reusable Components

Partners in Cybercrime

Partners Partners Partners Partners inin Cybercrime in Cybercrime in Cybercrime Cybercrime

Cybercriminals will band together, creating fewer but stronger Cybercriminals Cybercriminals Cybercriminals Cybercriminals willwill band will band together, will band together, band together, creating together, creating creating fewer creating fewer but fewer but stronger fewer but stronger but stronger stronger malware-as-a-service families.

Bad actors are developing foundations, kits, and reusable threat components to orchestrate multiple threats instead of just one.

Fake Video Codec

Stegware Polyglot

Compromised Bucket

Scheduled Task

malware-as-a-service malware-as-a-service malware-as-a-service malware-as-a-service families. families. families. families.

One-Stop One-Stop One-Stop One-Stop Attack Attack Attack Attack

Strong Strong Strong Brands Strong Brands Brands Brands Strong Brands Expand Expand Expand Reach Expand Reach Reach Reach

One-Stop Attack Shops Shops Shops Shops Shops Cybercriminals Cybercriminals Cybercriminals Cybercriminals can can buy buy can buy can buy

Expand Reach

Increasingly Increasingly Increasingly powerful Increasingly powerful powerful powerful brands brands will brands propel will brands propel willmore propel will more propel more more Increasingly powerful sophisticated sophisticated sophisticated sophisticated cryptocurrency cryptocurrency cryptocurrency cryptocurrency brands will propel more mining mining and mining and increases mining increases and increases and in increases in in in sophisticated cryptocurrency mobile mobile malware mobile malware mobile malware and malware and stolen stolen and stolen and stolen mining and increases in credit credit cards credit cards and credit cards and credentials. cards credentials. and credentials. and credentials.

malware, malware, malware, exploits, malware, exploits, exploits, botnets, botnets, exploits, botnets, Cybercriminals can buybotnets, and and other other and shady other and shady services other shady services shady services services malware, exploits, botnets, on the on underground the onunderground the onunderground the underground andmarket. other shady services market.

Criminals market.

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Criminals of launch launch attacks. launch attacks. launch attacks. varying experience andattacks. sophistication can easily launch attacks.

mobile malware and stolen credit cards and credentials.

Faster Faster Faster Faster Exploitation Exploitation Exploitation Exploitation

Underground Underground Underground Underground Consolidation Consolidation Consolidation Consolidation

Cybercriminals Cybercriminals Cybercriminals Cybercriminals will become will become will become will become more more agile. more agile.

Inmore 2019 agile.

In 2019 agile. they In 2019 they In 2019 they they will exploit will exploit willshort-lived exploit will short-lived exploit short-lived short-lived vulnerabilities, vulnerabilities, vulnerabilities, vulnerabilities, reducing reducing reducing reducing the time the time the from time from the detection time from detection from detection to detection to to to Cybercriminals will become weaponization. weaponization. weaponization. weaponization.

Malware-as-a-service Malware-as-a-service Malware-as-a-service Malware-as-a-service families families families families will actively will actively willwork actively willwork actively together. work together. work together. together.

These These alliances These alliances These alliances will flourish alliances will flourish will flourish will flourish via affiliates—such via affiliates—such via affiliates—such via affiliates—such as exploit as exploit as exploit as exploit kits boosting kits boosting kits boosting kits ransomware boosting ransomware ransomware ransomware Malware-as-a-service families (GandCrab).

(GandCrab).

(GandCrab).

(GandCrab).

Stopping One Attack Is Not Enough In Memory

Focusing on one threat may not be enough to detect or remediate an attack.

Classifying an attack into one category might miss the big picture—and be less effective mitigating it.

Ransomware

Faster Exploitation

Underground Consolidation

more agile. In 2019 they will exploit short-lived vulnerabilities, reducing the time from detection to weaponization.

will actively work together.

These alliances will flourish via affiliates—such as exploit kits boosting ransomware (GandCrab).

Evasion Evasion Evasion Evasion Techniques Techniques Techniques Techniques

TheThe prevalence The prevalence The prevalence prevalence of attack of attack of outsourcing attack ofoutsourcing attack outsourcing outsourcing willwill leadwill lead to will lead use to use lead of toartificial use oftoartificial use of artificial of artificial intelligence intelligence intelligence intelligence in evasion in evasion in evasion tactics. in evasion tactics. tactics. tactics.

Evasion Techniques

Evasion Evasion Evasion Evasion Agile Agile Agile Agile Artificial Artificial Artificial Artificial The prevalence of attack outsourcing will lead to use of artificial Tools Tools Tools Tools intelligence Evasion Evasion Evasion Evasion Intelligence Intelligence Intelligence Intelligence in evasion tactics.

Evasion Tools

PowerShell Script

Agile Evasion

Artificial Intelligence

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Data Exfiltration Attacks to Target the Cloud More Data to Steal As enterprises continue to fully adopt multiple cloud models (SaaS, PaaS, IaaS), more data resides in the cloud than ever before. Attacks will follow the data and increasingly target these cloud services.

Sensitive Information 21% of data in the cloud is sensitive— such as intellectual property, and customer and personal data— according to the McAfee Cloud Adoption and Risk Report.

when Task Manager components to evade automate target selection and runs or during a scan, detection. By employing check infected environments exploit kits using process artificial intelligence, before deploying later stages injection or manipulating cybercriminals will become and avoiding detection. memory space to insert more agile and better able to Synergistic Synergistic Synergistic Synergistic attacks attacks attacks involving attacks involving involving multiple involving multiple multiple threats multiple threats threats working threats working working together working together together together code, botnets adding circumvent protections. act act as aas act smokescreen, aas act smokescreen, aas smokescreen, a smokescreen, hindering hindering hindering defenders hindering defenders defenders from defenders from identifying from identifying from identifying identifying an an an an obfuscated code to slow actor’s actor’s ultimate actor’s ultimate actor’s ultimate goal. ultimate goal.goal.goal. reverse engineering, and APTs using stolen certificates to avoid Multifaceted Multifaceted Multifaceted Multifaceted detection.

MITM Attacks

Which Which Which Which Attack Attack Attack Attack Is Is It?Is It?Is It?It?

GhostWriter: Leveraged the cloud as a springboard for cloudnative man-in-the-middle attacks to launch cryptojacking or ransomware attacks.

attacks attacks attacks attacks

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Which Attack Is It?

act as a smokescreen, hindering defenders from identifying an actor’s ultimate goal.

Reusable Reusable Reusable Reusable Components Components Components Components

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Phishing Email page 44-45 Technology McAfee 056.indd 45

Compromised Video

Office 365 a Target KnockKnock: With the increased adoption of Office 365, there has been a surge of attacks—especially attempts to compromise email, such as the botnet KnockKnock, which targeted system accounts without multifactor authentication.

Multifaceted attacks

Stegware Stegware Stegware Stegware An attacker could combine Polyglot Polyglot Polyglot Polyglot common tactics— ransomware as a smoke screen, cryptojacking, phishing, fileless, and steganography—into a single attack.

bankerafrica.net

Voice-Controlled Digital Assistants

45

New Entry to the Home As voice-controlled digital assistants are increasingly used to manage all the IoT devices within a home, they will be a preferred entry point into a23/12/2018 17:22

Office 365 a Target KnockKnock: With the increased adoption of Office 365, there has been a surge of attacks—especially attempts to compromise email, such as the botnet KnockKnock, which targeted system accounts without multifactor authentication.

COUNTRY FOCUS

Voice-Controlled Digital Assistants New Entry to the Home As voice-controlled digital assistants are increasingly used to manage all the IoT devices within a home, they will be a preferred entry point into a home network for cybercriminals.

Connecting by Phone Malware authors take advantage of phones and tablets to take over IoT devices by password cracking and exploiting vulnerabilities.

Trusted Device Because traffic comes from a trusted device it does not appear suspicious and will make identifying attack routes more difficult.

Speaking Aloud

Botnets Recruit

Malicious activities such as opening doors and connecting to control servers could be triggered by user voice commands (“Play music” and “What is today’s weather?”).

Infected IoT devices will supply botnets, which can launch DDoS attacks, as well as steal personal data.

Source: McAfee Labs 2019 Threats Predictions Report

Identity Platforms and Edge Devices scan for target networkUnder vulnerabilities, Siege the use of a single threat, in favour of

combining several attack types to bypass a n d Large-scale a s s e s sidentity t h eplatforms p o s t uoffer r e centralized a n d secure authentication and services across IT For example, by combining defences. r e s p o n sand i vauthorization e n e s s ooff users, i n fdevices, ected focus for criminals. phishing, steganography and fileless environments toenvironments—and avoid detectionabefore malware for an attack with multiple goals. deploying later stages of attacks.

These synergistic super threats will work • Nation-state strategies repurposed together, blurring the traditional defence for corporate extortion: Bots used to panorama and complicating the process amplify deceitful messaging have already to identify and mitigate the attack. been created and are available for sale Social Media Edge Devices on the cybercriminal underground.

Despite increased security efforts by Adversaries will continue to launch Cloud, home IoT, and social media Following in the of recent platform providers, their footsteps data-rich remote attacks against edge devices— environments will continue to be a systemunder siege platforms infamous nation-state campaignsanytonetwork-enabled lucrative target for cybercriminals. hardware or protocol within an IoT This willpublic be the next big battleground. product—due to static passwordto use increasingly effective With access sway opinion, cybercriminals and limited security. will likely repurpose bots and leverage tactics and strategies, bad actors will have social media to extort organisations by the ability to focus their attacks on broader and more complicated targets. In 2019, threatening their brands.

• Synergistic super threats for attack cybercriminals are anticipated to target success: Bad actors are expected to intellectual property, Internet of Things evolve their usual strategy centred on (IoT) in the home and identity credentials Broken Trust Securing Our Systems

46

The IoT trust model is built on a weak foundation of assumed trust and perimeter-based security. Most IoT edge devices provide no self-defense by default so one successful exploit owns the device.

page 44-45 Technology McAfee 056.indd 46

via the cloud, digital assistants, and social media platforms, respectively.

• Data exfiltration attacks via the cloud: McAfee foresees a significant increase in targeted attacks on the large amounts of corporate data now residing in the cloud. As much as 21 per cent of the content now managed in the cloud contains sensitive materials such as intellectual property, customer and personal data.

Possible scenarios include cloudnative attacks targeting weak APIs or ungoverned API endpoints, expanded reconnaissance and exfiltration of data in cloud databases, and leverage of the cloud as a springboard for cloud-native man-in-the-middle attacks to launch cryptojacking or ransomware attacks.

• Home IoT attacks via smartphones, tablets, and routers: New mobile m a l wa r e w i l l l i ke l y i n ve s t i g a t e smartphones, tablets, and routers to gain access to the digital assistants and home IoT devices they control. Once infected, these devices can serve as a picklock to consumer homes while supplying botnets, which can launch DDoS attacks or grant cybercriminal access to personal data and the opportunity for other malicious activities such as opening doors and connecting to control servers.

• Identity attacks via social media platforms: In 2019, large-scale social media platforms will implement additional measures to protect customer information. However, as the platforms grow in numbers, cybercriminals will be further enticed to focus their resources on attacking the data-rich environments. Highimpact attacks, such as those targeting industrial control systems, have seen success in part due to static password use across environments. Successful social media and other identity platform and edge device breaches will provide the keys to adversaries to launch similar attacks in the future.

Multifactor authentication and identity intelligence will become the best methods to provide security in this escalating battle.

23/12/2018 17:22

AWARDS

BANKER AFRICA—NORTH AFRICA BANKING AWARDS 2018

RESULTS ANNOUNCED The results are in for the annual Banker Africa—North Africa Banking Awards 2018

T

he annual Banker Africa—North Africa Awards is a programme open to all banks and financial institutions in the region. The aim of the Awards is to recognise outstanding performance and excellence in the financial services industry.

Shortlists for the awards were compiled by our group of experts before voting opened on www.bankerafrica.com. The North Africa Awards are designed to reward innovation and the ability to gain market share. The winners were selected by the registered readers of CPI Financial products and services—in other words, your peers in the financial services industry.

THE RESULTS This year institutions were shortlisted across 17 categories, the results of which are: REWARDING EXCELLENCE The core philosophy of CPI Financial, the publisher of Banker Africa, is transparency, ensuring accurate reporting of economics and financial matters, the factors determining the future of the banking and finance community and the business deals driving the industry forward. Our Awards programmes are designed to reward and promote excellence and competition in the drive to set new standards in the industry in quality of service, best practice and financial performance.

The financial institutions that win one or more of the Banker Africa Awards in 2018 and in future years will be those offering best-in-class services that meet the needs and exceed the expectations of their customers. They will, truly, be winners.

In each of four regions, North Africa, East Africa, West Africa and Southern Africa, we hold separate awards competitions.

REGIONAL

WINNERS

Best Retail Bank - North Africa

National Bank of Egypt

Best Commercial Bank - North Africa

Attijariwafa Bank

Best Islamic Retail Bank - North Africa

ADIB Egypt

Best Islamic Bank - North Africa

ADIB Egypt

Best Corporate Bank - North Africa

Commercial International Bank

Best Digital Platform - North Africa

Attijariwafa Bank

Best Islamic SME Bank - North Africa

ADIB Egypt

Best Digital Banking Solution - North Africa Temenos COUNTRY AWARDS

WINNERS

Best Corporate Bank - Egypt

Commercial International Bank

Most Innovative Bank - Egypt

Emirates NBD Egypt

Best Online Platform - Egypt

Emirates NBD Egypt

Best Retail Bank - Egypt

Emirates NBD Egypt

Best Commercial Bank - Egypt

National Bank of Egypt

Best Investment Bank - Egypt

Arab African International Bank

Best Digital Bank - Egypt

Emirates NBD Egypt

Best SME Bank - Egypt

ADIB Egypt

Best Private Bank - Egypt

Commercial International Bank

bankerafrica.net

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47

23/12/2018 17:26

INVESTMENTS

SSA debt issuance rose for the first nine months of 2018, in contrast to other investment banking activities (CREDIT: NUMBER1411/SHUTTERSTOCK).

FALTERED

APPETITE Sub Saharan investment banking activities fall in 2018, says Refinitiv

F

or the first nine months of 2018, Sub Saharan African (SSA) investment banking fees reached an estimated $396.6 million, seven per cent less than the value recorded during the same period in 2017, according to Refinitiv’s (formerly Thomson Reuters Financial and Risk Business) new report, Sub-Saharan Investment Banking Review for Q3 2018.

Rand Merchant Bank (RMB) earned the most investment banking fees in the whole of SSA during the first nine months of 2018, with a total of $32.2 million or an 8.7 per cent share of the total fee pool. RMB also leads in the completed Mergers & Acquisitions (M&A) and Syndicated Loans fee rankings.

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23/12/2018 17:24

Th e v a l u e o f a n n o u n c e d M & A transactions with any SSA involvement reached $20.7 billion for the first nine months of 2018, down 18 per cent from the same period in 2017. Meanwhile, inbound M&A declined 42 per cent, off the back of the lowest number of deals since 2009. Domestic and inter-SSA M&A activity fell 64 per cent year-on-year to $2 billion, the lowest first nine months of any year since 2002. However, outbound M&A is up five per cent to $4.4 billion.

South Africa dominates the overseas acquisitions landscape, accounting for 81.9 per cent of SSA outbound M&A activity, with companies headquartered in Mauritius and Zimbabwe accounting for 15.3 and 1.5 per cent each respectively.

Refinitiv note that UPL Corp’s $4.2 billion transaction to acquire the entire share capital of Arysta LifeScience stands out as the biggest deal of the year, whilst UBS tops the Sub-Saharan African Involvement Announced M&A Financial Advisor League Table for the first nine months of 2018 with a 23.1 per cent share of the market.

Equity and equity-related issuance across Sub Saharan Africa was down 43 per cent year-on-year for the first nine months of 2018, totalling $4.9 billion. MTN Ghana’s $734.5 million IPO stands out as the biggest deal so far this year, PSG Group and Sanlam follow on offerings. Followon offerings accounted for 78 per cent of total ECM activity in SSA by value, with 28 transactions for the first nine months of 2018, noted Refinitiv. Meanwhile IC Securities leads the Equity Capital Markets (ECM) underwriting fee ranking and Standard Bank tops the SSA ECM league table for the first nine months of 2018 with a 19.4 per cent share of the market.

However, in a contrast to the prevailing downwind in other investment spheres, SSA debt issuance raised a total of $30.8 billion in proceeds for the first nine months of 2018, up a dramatic 39 per cent from the same period in 2017. Refinitiv add that this figure is the best recorded for the first nine months of any year since the firm’s

SUB-SAHARAN AFRICAN IB FEE VOLUMES ($Mi)

Source: Refinitiv/Thomson Reuters

records had begun. Citi led the Debt Capital Markets (DCM) underwriting fee ranking with a 14.1 per cent share and took the top spot in the Sub-Saharan African bond ranking for the first nine months of 2018 with $4.3 billion of related proceeds, or a 13.9 per cent market share.

South Africa was the most active issuer nation with $9.3 billion in bond proceeds, which accounted for 30.3 per cent of market activity, followed by the Ivory Coast and Angola.

Franita Neuville, Head of Advisory and Investment Management for Market Development for Africa at Refinitiv

(formerly Thomson Reuters), said, “According to our most recent SubSaharan Africa Investment Banking Review for 2018, investment-banking activity in SSA decreased by seven per cent in the first nine months of 2018 compared to the value recorded in the same period of 2017.”

“This decrease could be due to a number of reasons including, but not limited to, loss of investment appetite from local and international investors, companies and countries becoming more inward looking, and political instability across SSA,” added Neuville.

bankerafrica.net

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23/12/2018 17:24

THE VIEW

PHOTO OF THE MONTH

President Cyril Ramaphosa receives President Salva Kiir Mayardit of the Republic of South Sudan at his official residence in Pretoria. (CREDIT: GCIS/GOVERNMENTZA/FLICKR)

Ethiopia leads bookings for visitors to Sub Saharan Africa

Year-on-year growth (Nov. 2018 - Jan. 2019) Ethiopia

40.4%

Kenya

24.4

Zambia

11.8

Nigeria

11.5

Zimbabwe Tanzania

7.3 7

Thanks to a number of reforms and relaxed visa rules, Ethiopia has emerged as a destination and hub for long-haul travel to Sub Saharan Africa in 2018. Addis Ababa’s Bole International Airport overtook Dubai in 2018 as the leading gateway to the region. (CREDIT: FORWARDKEYS/ATLAS/QUARTZ)

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23/12/2018 17:52

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