Africa: Increased growth rates, innovative banking sector, investment vs. development aid

The above topics were among those discussed at this year’s #AfricaFinanceForum, hosted by the Corporate Council on Africa.  The annual event featured high-level speakers, such as Rhoda Weeks-Brown, IMF General Counsel, who pointed to increased expected economic growth rates of 3.5% in 2019 (half a point higher than in 2018) and a faster per-capita income rise in Africa  than in rest of the world.  “Also up for debate was the dichotomy of investment vs. development assistance as the key driver of economic development on the continent,” notes Andreas Stargard, who attended on behalf of Primerio Ltd.

Ms. Weeks-Brown noted the rise of pan-African (vs. purely domestic) banks, observing the added benefit of improved competition, as well as the steady rise of fintech on the continent. The latter is especially important as the continent is still under-banked and relies heavily on the informal sector (less than 20% of sub-Saharan Africa’s population has a bank account).  Yet Africa leads the world in mobile money.  Mr. Stargard noted that “[s]he and many other speakers on subsequent panels agreed that there was a delicate balance to be struck by regulators and legislators of weighing innovation against the proper level of FinTech regulation and its integration benefits against anti-competitive effects thereof.  The IMF attorney was careful to point out that banking & financial integration must grow in conjunction with, and to support, economic and trade integration, as financial stability is a public good.  Africa requires strong sector regulators that must remain free from undue political or industry interference.”

Kalidou Gadio, a lawyer at Manatt, provided a sanguine assessment of the state of banking in Africa, noting that it is not up to par globally, but better than it was a decade ago, before and during the financial crisis. He also pointed to the net positive effect of banks facing increasing competition from newcomers to the space, such as Orange, M-Pesa and other telecom firms.

Dr. Maxwell Opoku-Afari, First Deputy Governor of the national Bank of Ghana observed the difficulties in setting proper licensing rules for fintech companies by central banks, and commented on the concentration risk in banking.

Phumzile Langeni, special investment envoy of the RSA, gave an objective speech on the investment opportunities in South Africa, including the President’s FDI incentive programme.  She answered difficult questions with aplomb — for example those about the country’s land reforms, infrastructure troubles, and unemployment — and spoke of the enormous growth potential and the “youth dividend” in South Africa and the continent in general.

The half-day event was rounded out by a panel focussed on central banks’ handling of the unique foreign-exchange problems faced by certain African nations, notably Mozambique and Angola, whose central banks had representatives on the panel, including the issues of ForEx reserve allocation and pegged rates.

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Financial Times: Africa “most exciting”; FT hosts inaugural investment summit

First-ever FT African Investment Summit to be held in London

In October, the Financial Times will be hosting a timely “FT-Live” London symposium on investment in Africa.  The Oct. 6th FT Africa Summit (agenda) is expected to draw a global audience from various industry sectors, limited to 150 attendees.

Whether or not the conference will spark a wave of M&A activity (and hence antitrust scrutiny) on the continent remains to be seen.  For now, the paper’s event PR proclaims optimistically:

The continent’s economic growth is the second fastest in the world, underpinned by a virtuous cycle of improved governance, Chinese-led investments in infrastructure, high commodities prices, and the growth of a nascent, even if fragile, middle class. Yet, risks abound, from rising inequality to the potential of setbacks in governance.

The inaugural FT Africa Summit will provide a global platform to hear and discuss the views of finance ministers, investors and businesses leaders from around the region. Altogether the first Summit and the special report will be a unique opportunity to gain insights into one of the world’s most exciting markets.

Today’s edition also reports, fittingly, that large-scale investors (such as Atlas Mara’s head and  former Barclays CEO Bob Diamond) are looking increasingly to the African continent for high-growth financial investment opportunities.  Diamond is reported to have raised $1/3 billion for his “African war chest” of Atlas Mara to invest in African bank acquisitions, and is said to plan another $400m round of fund-raising later this year.

Bob Diamond

As the FT points out, the growth potential for financial services in sub-Saharan Africa is theoretically immense, as the majority of the region’s 1-billion-plus population does not yet have bank accounts.  However — and the FT omits this crucial fact — as we reported elsewhere, the dearth of access to brick-and-mortar banks in Africa has led to the pioneering use of GSM mobile technology, such as M-Pesa, for retail financial transactions at a record-setting adoption rate in Africa; see our M-Pesa reporting and other stories.