African Business du 28-10-2019


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The Bestselling Pan-African Business Magazine Features
Africa backs Thunberg on climate action
Thomas Cook collapse shakes Gambia
Ghana’s car industry revs up
Can GM crops boost African agriculture?
Akinwumi Adesina, President, AfDB
Tony Blair, Former UK Prime Minister
An IC Publication | 53rd Year | N° 468 | November 2019 SINGAPORE-AFRICA
M 03136 - 468 - F: 5,00 E - RD
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ContentCs NONTENTovember 2019 Issue Nº 468 www.icpublications.cSom
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Saliba Manneh | Kenya’s mega banks set SENIOR PROJECT
Darren Moore | for continental expansion
Medrine Chitty, Baytir Samba,
Nick Rosefeld, Cécile Louédec
28 Chinese giant Alibaba Business intelligenceDISTRIBUTION 4 News and deals sizes up continent
PRODUCTION MANAGER from around Africa 32 Kenya Airways’ woes
Sophie Dillon
continue as CEO departs
Cover storySilvia Salvetti Ollennu
Top Reports 8 Kenya’s mega banks Countryles
Tel: +233 24 910 5995
set for continental expansion 42 Ghana car industry revs
44 Thomas Cook collapse
Star Interview shakes GambiaNéjib Ben Yedder 34 Akinwumi Adesina, President of 48 International hotel
IC EVENTS the African Development Bank chains pile in
Printers Features Special reports
Roularta Media Group
14 Protecting Africa’s forests 52 South-South InvestmentMeensesteenweg 300
8800 Roeselare 16 Africa backs Greta Thunberg’s 73 Singapore-Africa
climate call
20 Interview: Luis Alfonso de Alba, Book reviews
UN Climate Summit Envoy 96 The memoirs of Gervais
22 Interview: Tony Blair Kof Djondo
N° DE COMMISSION All pictures continues African adventures 97 The future of African oilPARITAIRE AFP unless indicated.
0419 K 89806 Registered with the 24 Can GM crops boost
Mensuel: British Library. African agriculture? Last WordNovembre 2019 ISSN 0142-9345
Dépôt légal 26 Tech hope Andela 98 Abiy’s peace prize
sheds engineers just the be ginning
©2019 IC Publications Ltd4 African Business November 2019
Business Intelligence News
South Africa’s president Cyril Kenya’s $1.5bn railway World Bank court orders Nigeria’s land border
Ramaphosa has revealed that line extension Tanzania to pay $185m closed for all goods
the debt-ridden state-owned
airline South African Airways Kenya has opened a new The World Bank’s The Nigerian Customs
$1.5bn railway extension. (SAA) is in talks with potential International Centre for Service conf rmed the
The initial $3.2bn Standard equity partners. Despite a Settlement of Investment indef nite closure of all land
Gauge Railway was launched recently approved $376m has ordered Tanzania’s borders in mid-November
in 2017 and ran from the government cash injection, the government to pay $185m for the import and export
port city of Mombasa to the airline requires R2bn ($135m) to Standard Chartered Bank of goods. The move is part
country’s capital, Nairobi. by December just to fund Hong Kong for the breach of an e fort to tackle the It’s been said that the best way to predict The new 120km extension working capital for its 2019/20 of an energy contract. The smuggling of goods, but
runs from Nairobi to Kenya’s the future is to create it. The CTICC f nancial year. Speaking at case originated with a legal critics say the ban also
western Rift Valley Province.
the 2019 FT Africa Summit in battle between the Tanzanian restricts the movement offers the ideal platform to do just that. The line, constructed and
London, the president said: government and IPTL, an of goods that are moved f nanced by China, has been Every aspect of the centre’s offering has “SAA for instance is pretty open independent power company. legally. The government had dubbed “the railway to
noto a strategic equity partner. In The East African government implemented a partial border where” as it ends in Suswa, been considered – from the more than
fact – as we speak now – we denied wrongdoing and said closure in August to tackle a small town in the Rift
are talking to a few interested it does not intend to pay the illegal trade with limited 140 000m² of fexible space across two Valley.
parties when it comes to SAA.” damages, arguing that IPTL results. The vast majority of
state-of-the-art buildings to world-class will have to pay Standard Nigeria’s oil is exported by
Chartered. sea. technology, delicious cuisine, and
servicedriven staff. Turn your knowledge and South African
vision into potential with events that
Airways open to shape your future at the CTICC.
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The airline requires
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Call +27 21 410 5000, email or visit and connect to possibilities. It’s been said that the best way to predict
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Call +27 21 410 5000, email or visit and connect to possibilities. 6 African Business November 2019
Business Intelligence Deals
Zimbabwe has cancelled a deal Algeria buys stake in CDC signs risk sharing Nigeria’s female-led
aimed at reviving the state’s pipeline facility with ABSA private equity frm
railway company, the National launches vehicle
Railways of Zimbabwe (NRZ). Sonatrach, Algeria’s state- CDC Group, the UK’s
The $400m deal struck in owned oil and gas company, development fnance Nigeria’s Aruwa Capital
2017 involved South African and Spanish utility company institution and impact Management, a
femalestate-owned logistics company Naturgy have agreed to buy investor, has announced founded and led private
Transnet, and the Diaspora the 42% stake that Abu a $75m risk sharing facility equity frm, has launched
Infrastructure Development Dhabi’s state fund Mubadala with South African banking a $20m co-investment
Group (DIDG), an association of owns in the Medgaz pipeline, frm Absa Group. The vehicle focused on closing
Zimbabwean investors. a deepwater pipeline which facility represents one the gender equality gap in
Zimbabwe’s information transports natural gas of CDC’s largest trade West Africa. The vehicle has
ministry claims the deal was from Algeria to Spain. The fnance commitments on completed its frst deal with
cancelled because DIDG missed agreement, which values the continent. The funded Nigerian personal hygiene
multiple proof-of-funding the infrastructure at $2.1bn and unfunded facility will company Wemy Industries,
deadlines. Additionally, including debt, is due be support Absa in increasing which manufacturers
diferences between the funding completed by the end of its lines of credit to other afordable products for
parties resulted in a funding March 2020. It will make banks across Africa. women. The Lagos-based
structure laid out by the DIDG Sonatrach the majority Subsequently, these banks manufacturer has around
that excluded Transnet, said the shareholder with a 51% stake can increase their trade 200 employees and six
ministry. The government will whilst Naturgy would own fnance ofering to local production lines. Wemy’s
issue a new tender that will be the remaining 49%. business clients. The facility CEO said: “The investment
open to Transnet and DIDG. will also enable Absa to will enable us [to] increase
expand its network of local our capacity signifcantly
banks, particularly into across all of our production
the harder to reach African lines and grow in both Zimbabwe cancels markets. our domestic and export
national railway
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TBWA\HUNT\LASCARIS 9221928 African Business November 2019
Cover story: Kenya’s mega banks
East Africa remains underrepresented in the league of Africa’s biggest banks, but a recent
fl urry of mergers and acquisitions could lay the foundations for big institutions that
could compete with their larger peers across the continent. Tom Collins reports
The rise of Kenya’s
mega banks
n an October evening in downtown Nai- In April, Equity Bank announced a KSh10.7bn
robi, the giant skyscrapers of the central ($106m) acquisition of f nancial institutions in
Zambusiness district f ashed iridescent blues bia, Mozambique, Tanzania and Rwanda that
beand reds as f reworks outlined their longed to Atlas Mara, a pan-African banking group
shapes against the night sky. Rather founded in 2013 by former Barclays CEO Bob Diamond O than a new calendar year or religious and entrepreneur Ashish Thakkar. In return, Atlas
holiday, this was the 35th anniversary of Kenya’s and Mara will receive a 6.27% stake in Equity Bank.
Africa’s largest bank by customer numbers: Equity In September, it announced that it is planning to
Bank. acquire a controlling stake in Democratic Republic of
Already boasting 14m customers across six East Congo’s second-largest lender, the Commercial Bank
and Central African countries, a recent spate of ac- of Congo (BCDC), adding to its 2015 market entry and
quisitions indicates that the Nairobi-based lender is acquisition of the ProCredit Bank Congo.
intent on becoming a pan-African f nancial giant. Equity Bank is not the only M&A story to emerge November 2019 African Business 9
Following the acquisitions, Kenya’s two largest A recent spate of acquisitions indicates
banks now have an asset base worth $15bn. Though that Equity Bank is intent on becoming
this pales in comparison to Egyptian, Moroccan,
a pan-African f nancial giant Nigerian and South African banks –
Johannesburgbased Standard Bank is Africa’s largest bank with
assets worth $147bn for example – the f urry of activity
from Kenya’s banking sector this year. Kenya Com- in the banking sector is creating the foundation for
mercial Bank (KCB), the country’s biggest lender large banks in the country.
by assets, completed a takeover of the struggling A merger between NIC Bank and the
CommerNational Bank of Kenya in early September – adding cial Bank of Africa (CBA) joined the list in late
Sep$1bn in assets to its balance sheet. KCB has operations tember by creating Kenya’s third biggest bank, the
in six African countries and will target four more by NCBA group. At this bigger size, NCBA is expected
next year including Somalia, Mozambique and DRC. to compete with its larger contemporaries, relegat-10 African Business November 2019
Cover story: Kenya’s mega banks
ing foreign-owned Barclays to fourth place in the ness: “The beneft will be enjoyed for years to come
Kenyan market, followed by Kenya’s Cooperative through the strengthening of the combined entity’s
Bank, Standard Chartered, DTB Bank and Stanbic deposit franchise, competitive pricing and ability
Bank. Eight banks, four of which are Kenyan, now to generate transaction revenue from synergies the
make up Kenya’s top tier and control 49.9% of the increased customer base will provide.”
market. Yet while that consolidation appears to be driven
This period of consolidation stands in stark con- by strategic intent, diferent regulatory pressures are
trast to M&A activity across much of the rest of the forcing other banks to search for growth in terms of
world. According to Refnitiv, a fnancial data frm, volume rather than margins.
global M&As plunged 16% year-on-year to $729bn
in the third quarter of this year, the lowest quarterly Regulatory pressure
volume since 2016, as economic uncertainties curb Commercial interest rates were capped in 2016 at four
risk appetite. percentage points above the benchmark central bank
In Africa, according to IMF data, private-sector rate – currently 9% – by lawmakers who said they
credit growth has been declining since 2016 after were concerned about high loan costs.
the commodity crash damaged economic output and Low returns from lending to the private
secfnancial institutions began to opt for more risk- tor have therefore motivated Kenya’s banks to buy
averse assets like government securities. government securities and look to other ways to
In Kenya, banks are yet to fully recover from grow. Bankers argue the cap has stifed SME growth
a shaky 2017 election period and a prolonged in the country, but politicians recently upheld the
drought which is pushing up infation and dam - legislation, saying it wards against mercenary credit
aging growth. Nonperforming loans (NPLs) are practices.
hovering at around 12%, the highest level in the Patrick Njoroge, the governor of the central bank,
last two decades, as the government struggles to called the cap a “temporary deviation” at an
invespay contractors and suppliers which owe Kenyan tor forum in Nairobi, saying its removal is “only a
lenders billions of shillings. Only Angola, Ghana matter of time.”
and the DRC have worse loan books, according to a Its continuation has partly contributed to the rise
report by Moody’s. of mostly unregulated digital-credit fntechs in the
Yet in what is generally considered a tough pe- Kenyan marketplace, who often charge exorbitant
riod, Kenya’s banks have shown resilience. But is interest rates. Almost 3m people are now in debt
the furry of activity being driven by necessity or distress and have been blacklisted from Kenya’s
commercial opportunity? While some analysts say Credit Reference Bureau for being unable to repay
that the M&As refect a healthy banking sector and loans as little as $2.
pre-empt a period of growth which could see the The low credit margins help to explain the period
fnancial institutions of East Africa’s most advanced of consolidation as banks look to grow by volume,
economy compete as African heavyweights, others or in other words, boost their customer numbers.
point to regulatory pressures prompting a need for “I think the banks are going through an
adjustnew customers. ment period,” says George Bodo, Kenyan banking
analyst and director of Callstreet Investor Relations.
Finding synergies “Some of them are still trying to fgure out how
In August 2015, Kenyan lawmakers rejected a pro- to grow in this kind of environment. How do you
posal to increase core capital requirements for bank- compensate for the loss of margins? You need to
ing institutions from $1m to $5m. Core capital is cross-sell more. You need to understand your
custhe minimum amount of capital a bank must pos- tomers. Many of them are looking for a new growth
ses, as set by the regulator in order to ward against story.”
bankruptcies. Last year, the same bill, proposed as For many, this new growth story is about fnding
a means to ensure fnancial stability following the new segments and sectors to lend to in the domestic
collapse of mid-sized banks Imperial Bank and Chase market, as well as with looking outside Kenya’s
borBank, was again rejected. ders to other markets through M&A deals.
Such regulatory pressures are often a precursor
to M&A activity as banks come together to meet Kenya’s small banks
changing requirements. Often, the resulting col- However, East African banks are yet to compete with
laborations are imperfect marriages born out of little the continent’s largest banks either in terms of size
organic synergy. or reach. Not one East African bank is among the
By contrast, Habil Olaka, CEO of the Kenya Bankers continent’s top 15 largest banks, which are dominated
Association (KBA), says the recent period of consoli- by South African and Egyptian institutions.
dation in Kenya’s banking sector is driven by syner- Various reasons account for this. East African
gies rather than regulatory pressure: “It was purely economies are smaller than their continental
counmarket driven, where two entities fnd synergies and terparts. Kenya, which reclaimed its position last
start discussions, only to inform the regulator at the year as East Africa’s largest economy after
Ethioend of the day.” pia clinched the spot the year before, has the sixth
The NCBA merger, for example, combined NIC’s ca- largest GDP in Africa at $99bn. Yet in comparison to
pabilities as the largest asset fnance bank and CBA’s Nigeria’s $445bn, South Africa’s $371bn and Egypt’s
niche as the go-to bank for diplomats and NGOs. $300bn the economy is relatively small.
Commenting on KCB’s acquisition of National Furthermore, Kenya’s private sector has to a large
Bank of Kenya, CEO Joshua Oigara, told African Busi- extent kept within its regional confnes. Even Safa-