The opposition Social Democratic Front (SDF), destabilised by the mass exodus of its militants, most of whom have become the target of separatist militias, is divided over its participation in the local elections of 9 February.
Why international groups are pulling out of Africa
For international banks operating in Africa the continent has not lived up to expectations. They have been forced to re-evaluate their businesses, cutting down and restructuring operations, due to concerns about risk and profitability. In March 2016, Britain-based Barclays announced the sale of most its Africa businesses. The announcement meant the reduction of its 62.3% stake in its Johannesburg-listed subsidiary, Barclays Africa Group.
It proceeded to get rid of its retail and corporate banking businesses in Egypt and Zimbabwe, selling them to Morocco’s Attijariwafa Bank and Malawi’s First Merchant Bank in October 2016 and June 2017, respectively. Later, in December 2017, the bank announced the final sale of a 7% stake in Barclays Africa, bringing its shares in the Africa unit down to 14.9%.
Barclays is not alone in being cautious on the continent. In November 2017, French bank BPCE International launched a search for a financial partner to help expand the activities of its African subsidiaries. According to group chief executive Jean-Pierre Levayer, a strategic review of its international retail banking business showed the bank would benefit from having an experienced and reputed local partner.
The announcement appeared as much an admission as a strategic choice: “We have had difficulty expanding our activities as expected. We may not be the best-placed [to do so],” Levayer said. The bank plans to make deals before the end of its current strategic plan, in 2021, and is considering the sale of all its stakes or reducing its holdings to accommodate new partners. BPCE International is the majority shareholder in Banque des Mascareignes in Mauritius, BMOI in Madagascar, BTK in Tunisa, BICEC in Cameroon and BCI in the Republic of Congo.
In the current atmosphere of reinforced banking surveillance, pan-African operations are not attractive to many international groups. “Profits are low when compared to net banking income. And on the other hand, there is a high reputational risk when seeking to justify a presence,” says Olivier Noël, the general manager of First Bank of Nigeria’s (FBN) Paris branch.
The big foreign banking groups are also struggling with the emergence of a new retail banking model. “The advent of mobile banking and fintech, and the competitors’ exploration of new territories such as Islamic banking, caught many of them off-guard. Moreover, risk analysis in Africa – with vast asymmetries in information – is confusing for them,” says Dhafer Saidane, a professor at France’s Skema Business School.
Regulatory changes have also had an impact on international banks’ attitudes towards Africa. “With Basel III, which forces banks to strengthen their capital base, the big groups had to reduce their international activities, which were big consumers of their equity. That was seen in the withdrawal from business banking in Central Europe and a reduction in retail banking in Africa,” Saidane explains.
The rapid growth of pan-African groups in the past two decades is closely linked to this foreign withdrawal. “What we are seeing is a crowding-out of foreigners by local actors. In spite of the huge challenges they are facing, pan-African banks are constantly innovating,” says Saidane.
These banks have proved their worth, progressively penetrating fields like trade financing that were once exclusive to foreign lenders. “Pan-African banks have foreign currency accounts – which was far from the case two decades ago – and they are perfectly able to meet their clients’ import and export needs,” says FBN’s Noël.
Political pressure further explains the lack of enthusiasm among certain big groups. In 2014, France’s largest bank, BNP Paribas, was hit with a record €6.5bn ($8.9bn) fine by US prosecutors for breaking sanctions on Sudan, Iran and Cuba. “Now a top lender that intends to take part in a huge commercial operation will have to undergo a series of assessments to make sure it doesn’t have a subsidiary in ‘red zone’ countries, which are often African,” Noël says.
the risks of de-risking
Similar constraints come with de-risking – where, under pressure from regulators, European and US financial institutions attempt to restrict questionable business relationships in order to fight terrorism and money laundering. This tends to impact correspondent banking activities.
In 2013, Barclays cut off correspondent banking services to Somali money transfer company Dahabshiil, forcing California-based Merchant Bank to follow suit. This put an end to financial ties between the US and Somalia. In January 2017, German lender Deutsche Bank closed down all of National Bank of Kenya’s accounts due to suspected money-laundering. “The international banks’ monitoring on suspicious transactions constantly forces local banks to choose between risk and returns,” says Noël.
To avoid depending on Western groups for their correspondent banking, pan-African institutions such as Attijariwafa Bank and Afriland First Group have broadened their horizons, particularly with Chinese partners. Others have expanded outside Africa, starting operations in places like London, Dubai, Paris and Beijing. According to Ibrahima Diouf, managing director of Ecobank’s France-based subsidiary EBI: “These different subsidiaries also act as a correspondent bank for other lenders on the continent.”
From the March 2018 print edition