Johannesburg - Up to 90% of Africa’s people do not have
access to banking services. With almost a billion potential clients living on
the continent this holds enormous potential - and unique risks.
South Africa's four big banks are attempting to exploit the
opportunities in varying degrees, but because fewer than 50% of South Africans
have access to banking services, expansion should not be at the cost of SA’s
principal market, warns Afrifocus Securities analyst Johann Scholtz.
In its report for the financial year to June 30 FirstRand
[JSE:FSR] says the case for expansion in Africa is convincing: economies in Africa are
strong, political risk has improved and the business climate is continuously
Africa south of the Sahara has been growing at 5.6% a year
in recent decades and since 2000 six of the 10 fastest growing economies are in
Africa represents a huge market of 840m people with buying
power of $1 900bn, says the report.
Chief executive Sizwe Nxasana says FirstRand does not wish
to plant a flag in every African country. The banking group will therefore
focus on countries that it believes can deliver outstanding returns.
Africa is not a "single continent", says the report. In
Africa south of the Sahara there are 46 countries, including South Sudan, with
vastly differing populations, income levels, growth rates and industrial
Through First National Bank, FirstRand has operations in
Namibia, Botswana, Swaziland and Lesotho.
It also continually invests in new subsidiaries in Zambia,
Mozambique and Tanzania. Expansion in Nigeria and Ghana is also being
The size and growth of the market are principal
considerations for FirstRand when it considers countries for expansion. In this
respect the top countries south of the Sahara are Nigeria, Ghana, Tanzania,
Botswana, Kenya, Uganda, Angola and Zambia.
Standard Bank Group [JSE:SBK] has operations in 16 other African countries,
including Zimbabwe, Malawi, Mozambique, Namibia, Democratic Republic of Congo,
Swaziland and Lesotho.
In its report on the six months to June 30, Standard Bank
said Africa was its “core” and it focused only on Africa.
Better regulation, continuing reforms and financial
strengthening had improved the economic fundamentals of Africa's largest
economies, it said.
But higher food and energy prices, the drought in East
Africa and the political unrest in North Africa were factors marring the
In presenting its interim results to June 30 Nedbank Group [JSE:NED] said it
had a longer-term increased focus on expansion.
This bank is already operating in Namibia, Swaziland,
Lesotho and Malawi, but has increased its presence through its alliance with
Ecobank, which has operations in 32 African countries.
Absa Group [JSE:ASA] has an 80% stake in Barclays Bank Mozambique and a 55%
stake in the Tanzanian National Bank of Commerce. It also has representative
offices in Namibia and Nigeria.
The bank’s parent company, Barclays, is however more active
in Africa. Through the Barclays offices Absa can therefore offer its clients
Scholtz says there is possibly too much hype about Africa.
“Yes, there is growth, but at the moment it is not profitable growth.”
He points out that African operations reduce banks’ return
on capital. “Banks should therefore be very careful in terms of the specific
countries they enter and determine whether they can get benefits of scale and
He says it surprises him that people forget that South
Africa is also a developing country with poor banking service penetration.
“Expansion in Africa and South Africa does not have to be at
the expense of either, but banks should not take their eye off the ball in
“South Africa still offers many opportunities, which have
been exploited by banks like Capitec and African Bank,” he says.
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