Smelling Of Roses (African Banker Magazine)

Despite global financial chaos all around it, the African banking sector came up smelling of roses during 2010. Make no mistake – Africa’s financial sector, as well as its economy, took heavy body blows during the global economic crisis but picked itself up and, touch wood, will remain robust for the near future.

The total consolidated assets of Africa’s top 100 banks finally broke through the $1 trillion barrier – in spite of the need to bail out eight Nigerian banks which had accumulated debts up to their necks. This plunged the Nigerian Stock Market into free fall, wiping off billions of naira of bank stocks and precipitated a hasty withdrawal of funds by foreign investors.

Bank regulators across the continent paid heed to the alarm bells and tightened up mandatory legislation. Sheaves of reforms swept the continent.

But the downside was that African banks, still fighting shy of lending to smaller enterprises, squeezed credit as far as they could, thus putting a brake on the pace of organic growth that many countries have exhibited over the past five years.

However, innovative approaches have seen a heart-warming growth in micro-lending, and mobile banking – dubbed ‘the democratisation of banking’ – has brought millions more into the system.
But with the growth of electronic money transactions, there has been an equal growth of fraud and other criminal activities. These span the world and Africa is no exception.

Our Cover Story this month analyzes bank security and offers tips on how to thwart the criminals. We also look at Ethiopia’s banking system, which is only just beginning to enter the modern era, and wonder what it can learn from the mistakes made elsewhere.

Nigeria’s soft-spoken but tough-as-steel central bank governor Lamido Sanusi held the US Congress in thrall when he testified on the reforms he had instituted to halt the downward slide of the sector in his country. We report on the reaction he received in the US and also present a background to the events that led to his reforms.

We look at Citigroup’s decision to substantially expand its operations in Africa and ask what implications this move is likely to have on established players in the region.

After a harrowing period during which Zimbabwe broke all devaluation records, it is much more pleasant to be able to now report that the multicurrency system adopted by the central bank seems to be paying off and the country is slowly but surely returning to economic viability.

We also take a detailed look at the obstacles that the continent’s small and medium-sized enterprises face when trying to access finance. Given that the SME sector is the backbone of all economies, it is encouraging to see that the industry and private funds are working out modalities to overcome this serious handicap.

While in Southern Africa, we pay a visit to Zambia, where we learn that mobile banking has transformed the relationship between banks and customers and how this has encouraged the previously unbanked to eagerly join the formal sector.

We look at India’s growing interest in the continent by focusing on the decision of two of the subcontinent’s biggest banks to set up shop in Botswana – a country that has already attracted Indian jewellery and energy investors.

Why did HSBC keep South Africa’s Nedbank waiting at the altar after all the signals that a tie-up between the two was all done bar the shouting? We had reported on ‘the imminent’ buy-out of Nedbank by HSBC in the last issue of African Banker so we felt we had to do a follow-up and try to discover why the South African banking group was jilted.

While the global financial system remains rocky and growth in the developed world is still faltering, we discover that Asia and Africa are now regarded as saviours.

As usual, we present a round-up of the quarter’s activities in various African bourses, including the announcement that the Nairobi Stock Exchange is most likely to be demutualised during the early part of this year.

Finally, the publisher and staff of African Banker magazine wish all our readers and advertisers a very happy and prosperous new year. Long may the sector continue to thrive and help drive Africa’s economies relentlessly forward.