Why African banking’s future is in its own hands
From digital banking to the retreat of international firms, the future of African finance will be determined within its own borders. That gives the region a much better chance of success.
Fifty years ago, the idea of Africa as a country, rather than a continent of nations, was held by much of the international investor community. That impression mostly dissolved as each country gained its independence. Today African countries are setting their own agenda, free from the shackles of colonialism.
Binta Touré Ndoye, Oragroup’s chief executive – one of Africa’s few female bank CEOs – tells Euromoney that she has watched how coverage of the continent evolved alongside independence.
“Today we read country-specific stories that don’t just focus on [the] Aids [epidemic] or famine. Everything is a lot more nuanced,” she says.
Politically and socially, African countries have become more intertwined with the international community. At the same time, the perception of local risk has fallen.
“All banks are converging towards international norms because globalization requires standardization across the board,” says Mike Brown, chief executive of South Africa’s Nedbank.
“African banks are no different, although some may take a little longer, given the phase of development of each country,” he says.
After initial forays into the international capital markets in the 1970s and 1980s, African countries entered the Eurobond markets in the 2000s, raising debt at unprecedented low cost and integrating into the global financial markets. Money flowed into Africa following the global financial crisis, when excess liquidity in developed markets looked for an attractive place to invest.
Much more money is needed to make sure that Africa’s development continues. Benedict Oramah, president of the African Export-Import Bank, tells Euromoney that the continent requires $1 trillion over the next decade to update its infrastructure.
The diaspora, educated at the business schools and universities of Europe and the US, has rushed back to the continent to be part of the change. It has been part of the mobile money revolution that has leapfrogged much basic banking infrastructure and driven financial inclusion.
The idea that international banks are leaving Africa is a form of exclusion - Sim Tshabalala, Standard Bank
Bob Collymore, chief executive of Safaricom, tells Euromoney about the evolution of mobile money in east Africa. From simple deposits, withdrawals and transfers, mobile money users can now access overdrafts and loans with a connection and a Sim card.
“It is banking for the rural masses,” he says.
Africans have become part of the formal banking sector and African countries have become part of the global financial system.
But the investor community is fickle. And once again, risk associated with ‘Africa as a country’ has emerged. Some characterize the last decade as one of retrenchment by the international community rather than engagement.
“The idea that international banks are leaving Africa is a form of exclusion,” Standard Bank’s Sim Tshabalala tells Euromoney. “If they don’t want to take part in the African value chain – that’s exactly what it is – exclusion.”
There are even signs that the diaspora too has been turning away from the potential of the continent.
“People fled back to Nigeria when oil prices were high,” says Segun Agbaje, chief executive of Guaranty Trust Bank in Nigeria. “But as commodity prices began to fall, when things got a little tougher, I think the number of diaspora returning to Africa also fell.”
If there is one thing we have learnt over the last 50 years, however, it is that Africa is resilient. With the development of a regional trade area through the Africa Union, the rise of regional banks and continuous innovation in mobile money, Africa has taken matters into its own hands once again.