Banking Expansion Heralds Era Of Growth

One of the principal yardsticks used to gauge the health of an economy is the state of its financial services, especially banking. As we enter the second quarter of the year, we are pleased to be able to say that Africa’s banking sector is in robust health and reflects fairly accurately the general state of African economies – give or take the odd exceptions.

HSBC, the world’s largest bank, has been steadily expanding its footprint over the continent and has now established a presence in Kenya, no doubt as a forward position from where to expand further into the sub-region. Where the big boys lead, others follow and we are already seeing an increase in the amount of foreign funds dedicated to the African financial sector.

Banks, by and large, do not function in isolation from the economies in which they are located. The expansion of the banking sector usually presages an expansion of the domestic economy; and the presence of global giants such as HSBC is a clear indication that foreign multinationals are targeting Africa today much in the manner in which they aimed for the Chinese market some 15 or 20 years ago.

Equally encouraging has been the performance of local banks. The sector has been quick in adapting technology to its own particular needs and in many ways the industry is some way ahead of the rest of the economy. Over recent years, the organisational, management and innovative skills displayed by the local banks have been outstanding. This is particularly so in a region where the business environment still has a long way to go before it can reach parity with other emerging nations but the lead given by the banks is slowly but surely changing the climate for the better.

In this issue, we focus on the very exciting developments taking place in East Africa. Regional integration of the five countries (Kenya, Uganda, Tanzania, Rwanda and Burundi) is progressing at a rapid pace but nothing is integrating faster than in the banking sector. There has been a slew of expansions, acquisitions and mergers as the industry positions itself to service the anticipated acceleration in growth for this region.

Uganda is now all set to become an oil-producing state and South Sudan, another oil producer, is on schedule to become the world’s newest nation in a few months’ time.

It seems certain that South Sudan will look more to East Africa rather than Khartoum for development partners. After almost half a century of war, the country’s infrastructural needs, if nothing else, are enormous, thereby presenting mouthwatering opportunities for the manufacturing, construction and financial industries in the neighbouring states.

While capital markets in ‘middle Africa’ are still small and sometimes rudimentary, considerable progress is also being made in this area. Many African exchanges now have state-of-the-art platforms that speed up trading by a very significant factor and an increasing number of companies are listing on hitherto sluggish exchanges. We look at the newly established Rwanda Stock Exchange – a welcome addition to the African family of bourses.

Drama and excitement
There is always plenty of drama and excitement when it comes to Nigerian banking but no one has generated more controversy in recent times than the mild-mannered, soft-spoken and thoroughly cultured central bank governor, Maalam Lamido Sanusi. When he took the big axe to some of the country’s worst-performing banks and hauled household names into court, what a furore erupted. For his act of courage in the teeth of ferocious opposition, Sanusi has received several international citations, the latest coming from The Banker magazine. We look at the man behind the myth.

Some of the massive infrastructure projects around the world would not have been possible without recourse to the huge pools of finance that sovereign wealth funds provide. But these funds remain something of a mystery to many, especially in Africa. Our lead feature this month sets out to explain these funds and why they are becoming more relevant to Africa.

As always, we present a broad sweep of African stock markets – including in Egypt, where the market, shut down during and immediately following the revolution, is now open for business. Finally, the ‘African Banker’s World’ section of shorter items reflects a busy first quarter for the continent’s industry. If this trend persists, 2011 will be something of a watershed for Africa’s banking industry.