African Business 2020 edition

OVERVIEW
Banks
Kanika Saigal, writing in
Euromoney in 2019, describes
the evolution of Africa’s
banking sector as “colonialism
to consolidation”. After
listing the actual or mooted
departures of former colonial
or international banks from
Africa since 2015 (Barclays, BNP
Paribas, Credit Suisse, HSBC
and RBS), Saigal notes that
larger local banks have bought
up smaller entities. This came
about largely because of new
rules about capitalisation and
had quick results in Nigeria
where 24 banks were left
standing out of 89. Results
have been slower in other
regions, most notably in Kenya
where 40 licensed banks serve
a population of 45-million.
However, innovation
and profitability seem to be
combining in the banking
sector. Saigal quotes Kenya
Commercial Bank CE Joshua
Oigara saying, “The continent’s
overall banking industry is the
second-fastest growing, the
second-most profitable of any
global region and a hotbed of
innovation.”
Standard Bank’s history
involves both colonial and
African components, but its
current ownership reflects a
major modern trend. The bank’s
market capitalisation at the end
of 2018 was $20-billion and the
group’s largest shareholder is
the Industrial and Commercial
Bank of China (ICBC), the
world’s largest bank, with a
20.1% shareholding.
Development and trade finance
The African Development Bank (AfDB) is the principal funder of
development projects on the continent. In 2019 the bank’s capital was
increased by $115-billion to $208-billion.
AfDB is strongly focussed on infrastructure development and
energy is the most important priority within that brief. In announcing
the capital increase, the bank reported that since 2015, its projects had
connected 16-million people to electricity, provided 70-million with
agricultural technologies, given 55-million better access to transport,
nine-million people access to finance and 31-million people with
access to water and sanitation.
The New Development Bank, a relative newcomer arising out
of the establishment of BRICS, is another infrastructure funder. The
International Finance Corporation, the private-sector focussed
member of the World Bank Group, now has 21 offices in Africa and
singed long-term financing deals worth $3.5-billion in 2017. The IFC
intends to grow new markets by reducing risk.
The Export Credit Insurance Corporation of South Africa (ECIC)
provides export credit and investment guarantees, stepping in where
commercial banks might be risk-averse to support private investment.
The European Investment Bank is the investment arm of the
European Union and often partners with African institutions.
China has a wide range of financial entities who are active across a
range of sectors in Africa. These entities include the China Development
Bank (CDB), the China International Trade and Investment Corporation
(CITIC), China Export and Credit Insurance Corporation (CECIC), China
Export Credit Insurance Corporation (Sinosure) and the China Export-
Import Bank.
Exchanges
There are 27 stock exchanges in Africa, 25 of which are members
of the African Securities Exchanges Association. Ethiopia intends
launching a stock exchange in 2020. The African Exchanges Linkage
Project (AELP) aims to assist cross-border trade and the settlement
of securities, increase continental investment flows and to add
depth and liquidity to African financial markets. Seven exchanges
are currently participating, representing 85% of the continent’s
securities market capitalisation. ■
Online Resources
Africa Financial Markets Initiative: www.africanbondmarkets.org
African Securities Exchanges Association: www.african-exchanges.org
Association of African Central Banks: www.aacb.org
Financial Action Task Force: www.fatf-gafi.org
Making Finance Work for Africa: www.mfw4a.org
67 AFRICAN BUSINESS 2020