Banking in Africa can be a profitable business for those stout-hearted enough to withstand occasional volatility. In recent years, the South African banks have begun expanding elsewhere in the continent and other well-established international banks – Barclays, Standard Chartered, Citibank – have been building out their networks there.
Standard Chartered, which operates in 14 African countries, has enjoyed record results in 2002, notably in Botswana, Cameroon, Ghana, Kenya and Zambia. Africa now accounts for 8% of the bank’s total profits and Standard Chartered has introduced some impressive technical innovations to business banking on the continent. It established an internet banking site for wholesale banking customers in east Africa that allows full access to its cash management and trade finance products. This is due to be rolled out across the rest of Africa in 2003.
Its global markets operations enjoy high markets shares in forex and money markets, notably in Botswana, The Gambia, Ghana, Kenya, Sierra Leone and Tanzania. It is growing fast in Nigeria, a market it re-entered in 1999. It is a regular participant in and arranger of local currency syndicated loans and bonds from sub-Saharan Africa. And it is soon set to fill a key gap in its network – South Africa – where its application for a banking licence is now pending.
But it is Citigroup that continues to stand out as the leading bank in Africa. Its network spans 17 countries from the Arabic-speaking north through francophone and anglophone west Africa, the East African Economic Union and the southern regions. And it offers corporate and investment banking services to clients across the continent in another 30-odd countries.
This January, Citibank signed a $125 million lending facility for Africa with the Overseas Private Investment Corp that will provide guarantees to loans and project financing in dollars and local currencies that Citibank will originate and structure, initially focusing on Angola, Botswana, Cameroon, Ethiopia, Kenya, Mali, Mozambique, Nigeria, Senegal, Tanzania and Uganda. As part of a programme to stimulate economic growth a portion of this will be devoted to small and medium-size enterprises. It’s a keynote transaction for the entire region, as OPIC president and CEO Peter Watson, points out. “Access to long-term capital among entrepreneurs in sub-Saharan Africa is at odds with the vitality and capability they possess,” he says. “This partnership between OPIC and Citibank will help close that gap.”
Citigroup has been an arranger on many well-structured commercial financings across Africa, including straight loans, limited recourse project financing and credits drawing in multilateral development bank and export credit agency support.
It has arranged financing in Nigeria for various projects as part of a $1.6 billion global facility on which it was sole adviser to Nigeria Liquefied Natural Gas (NLNG). It has also arranged $250 million in financing for the GSM network roll-out of MTN Nigeria and $460 million for Bonny Gas Transport. It has also led a string of pre-export working capital financings for western oil companies in Nigeria. The bank is now a licensed issuer and underwriter in the local Nigerian capital market.
In South Africa it has been lead arranger on syndicated loans for Old Mutual, the South African Reserve Bank, ABSA Bank, Steinhoff International and Cell-C. The $252 million nine-year project and structured financing for Cell-C’s roll-out of a GSM network was typical of the kind of complex, multi-layered deals that Citigroup specializes in. It was the largest telecom financing in sub-Saharan Africa of the past year. It is the largest foreign bank and sixth largest bank overall in South Africa.
The list of large complex deals rolls on. Equally impressive are some smaller ones. In a year of food shortages in Zambia, Citibank used innovative products such as warehouse financing to assist local millers to finance purchases of maize. And it arranged a $30 million short-term loan for the Reserve Bank of Malawi as it met repayments for maize imports. It arranged a $20 million pre-export facility for Sonacos, the Senegalese national groundnut oil products company.
