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Africa's top banks.

Our March 2004 Cover Story, Africa's Top Companies, was such a hit with our readers--including institutions--worldwide that we decided to give a similar treatment to African banks.

Although banking in various African countries is fairly well covered by national financial media, there has been little effort to look at the industry from a pan-African perspective.

Yet all the indications are that Africa has begun to follow the wider global trend towards multinationalism. Banks are becoming bigger with a wider, more global reach and--more to the point--making unprecedented profits.

For example, according to The Banker magazine, its 1000 World Banks list achieved the stunning figure of $417.5bn aggregate pre-tax profits over 2003-04. This represented an almost unbelievable 65.4% increase over the previous financial year.

African banks enjoyed perhaps an even more spectacular performance. The dollar value of Tier 1 capital of the top South African banks has shot up by between 10%, to a whopping 76%. (Standard Bank 42%; ABSA 76%, First Rand 10%, Nedcor 27% and Investec 38%.) This is, of course, partly due to the strength of the rand against the dollar, but profitability has also been very healthy. In terms of sheer performance, Nigerian banks have been the star turns. First Bank of Nigeria delivered a brilliant return on capital of 66.6% and Union Bank of Nigeria managed a more modest but nonetheless commendable return of 37.1%.

It might be a sign of the times that the strongest banks in Africa are also the most adventurous in terms of a pan-African presence. Standard Bank, the giant of Africa (the rest of Africa makes up only 8% of its 2003 revenue) now has a presence in 16 African countries; Ecobank, with affiliates in 12 countries, continues to flourish and several other banks are expanding operations to service the growing need for a pan-African service.

On the following pages we present a listing for Africa's Top 50 banks and an explanation of how we arrived at our ranking. We also highlight the top banks in each sub-Saharan African region.

Our list of Africa's Top 50 banks follows overleaf.

How we ranked Africa's Top 50

The Top 50 sub-Saharan African banks were ranked according to shareholders' equity (Tier 1 capital) as defined by the Basle-based Bank for International Settlements (BIS). This stipulates that commercial banks should hold capital against risk-weighted assets. The BIS definition refers to the banks' soundness or underlying strength--the shareholders' core capital available for absorbing actual or potential losses occurring from non-performing loans.

Banking profitability is calculated before corporate taxes and minority interests for the end-reporting period. The financial health of a single bank is measured by annual Returns On total Assets employed (ROA) and Returns on Equity (ROE).

The sub-Saharan Top 50 listing is dominated by South African banks, which occupy the first five positions. In 2003, South African banks accounted for 70% of aggregate Tier 1 capital of the SSA banking sector, followed by Nigeria (9.8%), Zimbabwe (4.6%) and Mauritius (3.8%).

The Nigerian banks are led by the big-three--notably Union Bank of Nigeria, First Bank of Nigeria and United Bank for Africa.

Barclays Bank of Zimbabwe and National Merchant Bank of Zimbabwe Holdings enjoy the largest market share in that country, but like other banks have been affected badly by sustained stagflationary conditions, i.e., plunging economic output amid hyperinflation. The Mauritian banks are headed by Mauritius Commercial Bank and State Bank of Mauritius. The Commercial Bank of Ethiopia, the Lome-based Ecobank Transnational, Kenya Commercial Bank and Ghana Commercial Bank remain major players in their respective markets.


According to the Reserve Bank of South Africa, the combined assets of 20 registered banks rose by 35.7% to R1260.7bn ($188.44bn). The top four retail banks--Stanbic, Nedcor, ABSA and FirstRand accounted for 88% of the sector's assets. The industry's profitability also improved, with average return on capital and assets of 10.9% and 0.7%, respectively, in 2003. By contrast, the Reserve Bank's figures show that returns on equity and assets were 5.6% and 0.5%, respectively, in 2002.


* Balance sheet is a financial statement showing a bank's assets, liabilities and equity, as well as yearly income on a given date, approved by an external auditor.

* Total assets deployed refer to cash and short-term funds, demand balances with other banks, loans/advances (business/personal lending, structured project finance), short-term investments (Treasury bills), investment securities (including stakes in non-banking ventures), debt stock and fixed assets.

* Deposits include the customers' deposits and certificates of deposits. There are two types of savings account--non interest-bearing current account and time deposit. The latter is usually referred to as a checking or deposit account that pays a fixed-term interest.

* Non-performing loans refer to loans that are in default or close to being declared in default i.e., typically in interest arrears for 90 days or more.

* Tier 1 capital comprises (i) common shareholders' equity and retained profits or net earnings; (ii) qualifying non-cumulative preferred stock (up to a maximum of 25% of Tier 1 capital); and (iii) minority interests in equity accounts of consolidated subsidiaries.

* Tier 2 capital is defined as (i) reserves for problem assets [bad debts] that may not exceed 100% of Tier 1 capital; (ii) perpetual preferred stock not qualified to include into Tier 1; (iii) hybrid capital instruments and mandatory convertibles; (iv) subordinated debt; and (v) preferred stock with medium-term remaining current maturity. Tier 2 capital is sometimes referred to as "supplementary capital" and Tier 1 as "core capital".

* The Basle Capital Convergence Accord as operated by most domestic regulators requires banks to hold total capital equivalent to at least 8% of their combined assets, with half of this cushion in the form of Tier 1 capital.

Assets are weighted according to perceived risks, with a 100% weighting for most private-sector lending; 50% for residential mortgages; and only 20% for short-term inter-bank credits.

Loans to banks from non-Organisation for Economic Cooperation and Development countries (exceeding one-year) receive a 100% risk-weighting. However, claims on central banks and governments in local currency have zero-weighting.

* Syndicated lending refers to large loans made jointly by a group of banks to one borrower. Usually, one lead bank takes a small percentage of the loan and partitions (syndicates) the rest to other banks.

Ranking by capitalisation (US$ mn) Capital Assets CAR

Standard Bank Group (South Africa) 12/03 4,233 81,384 5.2
ABSA Group (South Africa) 12/03 3,012 47,938 6.3
FirstRand Banking Group (South Africa)
 06/03 1,851 40,238 4.6
Nedcor Group (South Africa) 12/03 1,595 47,076 3.4
Investec Group (South Africa) 03/04 1,092 23,078 4.7
Mauritius Commercial Bank 06/03 295 2,586 11.4
African Bank (South Africa) 09/03 287 925 31.0
Union Bank of Nigeria 03/04 265 3,002 8.8
Barclays Bank of Zimbabwe 12/02 242 2,216 10.9
National Merchant Bank of Zimbabwe 12/02 215 1,367
First Bank of Nigeria 03/03 201 3,224 6.2
State Bank of Mauritius 06/03 177 1,334 13.2
Commercial Bank of Ethiopia 06/03 163 2,932 5.5
United Bank for Africa (Nigeria) 03/03 117 1,607 7.3
Ecobank Transnational (Togo) 12/02 100 1,143 8.7
Zenith International Bank (Nigeria) 06/03 99 883 11.2
Intercontinental Bank (Nigeria) 12/02 74 500 14.8
Kenya Commercial Bank 12/03 74 794.5 9.3
Banque Internationale pour le Commerce et
 l'Industrie de la Cote d'Ivoire 12/02 57 455 12.5
BGFI Bank (Gabon) 12/02 56 546 10.2
Wema Bank (Nigeria) 03/03 53 483 11.0
Ghana Commercial Bank 12/02 50.4 553.6 9.1
Banque Internationale pour le Commerce et
 l'Industrie du Gabon 12/02 48.2 498 9.6
Bank Windhoek (Namibia) 03/03 47 483 9.7
Afribank Nigeria 03/02 47 720 6.5
Standard Chartered Bank Ghana 12/03 46 432.6 10.6
Investment Banking & Trust Company
 (Nigeria) 03/03 46 189 24.3
Diamond Bank (Nigeria) 04/02 45 458 9.8
Merchant Bank of Central Africa (Zimbabwe)
 12/02 42.9 193.5 22.1
Commercial Bank of Namibia 12/03 36.7 376.2 9.7
Barclays Bank of Ghana 12/02 36 321 11.2
FSB International Bank (Nigeria) 03/02 35 271 12.9
Chartered Bank (Nigeria) 03/03 32.7 348.8 9.3
Societe Generale de Banques du Senegal
 12/02 31 514 6.03
Universal Trust Bank of Nigeria 03/02 29 253 11.4
National Bank of Malawi 12/02 29 182.5 15.9
CFC Bank Kenya 12/03 29 216.2 13.4
Banco Internacional de Mocambique 12/02 28.5 597.8 4.7
National Bank of Kenya 12/03 28.3 341 8.3
Banque Internationale pour le Commerce et
 l'Industrie du Senegal 12/02 27 324 8.3
Co-operative Bank of Kenya 12/02 26 376 6.9
Generale de Banque de Mauritanie
 (Mauritania) 12/02 25 89 28.1
Swaziland Development Savings Bank 03/03 24 85 28.2
Bank of Africa Benin 12/02 24 375 6.4
Banque Malgache de l'Ocean Indien
 (Madagascar) 12/02 22 242 9.1
Lead Bank (Nigeria) 03/02 22 108 20.3
African Banking Corporation (Botswana)
 12/02 21 218 9.6
Standard Chartered Bank of Zambia 12/02 21 181 11.6
Citizens International Bank (Nigeria) 03/02 20.8 324 6.4
First City Monument Bank (Nigeria) 04/02 19 129 14.7

Ranking by capitalisation (US$ mn) Profits ROE ROA
 (%) (%)

Standard Bank Group (South Africa) 12/03 1,332 31.4 1.6
ABSA Group (South Africa) 12/03 977 32.4 2.0
FirstRand Banking Group (South Africa)
 06/03 755 40.8 1.8
Nedcor Group (South Africa) 12/03 -94 -5.9 -0.2
Investec Group (South Africa) 03/04 182 16.6 0.8
Mauritius Commercial Bank 06/03 36 12.2 1.4
African Bank (South Africa) 09/03 95 33.1 10.2
Union Bank of Nigeria 03/04 95 35.8 3.1
Barclays Bank of Zimbabwe 12/02 43 17.7 1.9
National Merchant Bank of Zimbabwe 12/02 15.7 N.A.
First Bank of Nigeria 03/03 114 56.7 3.4
State Bank of Mauritius 06/03 41 23.1 3.1
Commercial Bank of Ethiopia 06/03 64 39.2 2.2
United Bank for Africa (Nigeria) 03/03 40 34.2 2.5
Ecobank Transnational (Togo) 12/02 30 30.0 2.6
Zenith International Bank (Nigeria) 06/03 43 43.4 4.8
Intercontinental Bank (Nigeria) 12/02 21 28.3 4.2
Kenya Commercial Bank 12/03 6.3 8.5 0.8
Banque Internationale pour le Commerce et
 l'Industrie de la Cote d'Ivoire 12/02 1 1.7 0.2
BGFI Bank (Gabon) 12/02 12.4 22.1 2.3
Wema Bank (Nigeria) 03/03 18 34.0 3.7
Ghana Commercial Bank 12/02 20 39.7 3.6
Banque Internationale pour le Commerce et
 l'Industrie du Gabon 12/02 0.7 1.4 0.1
Bank Windhoek (Namibia) 03/03 18 38.3 3.7
Afribank Nigeria 03/02 21 44.6 2.9
Standard Chartered Bank Ghana 12/03 20 43.4 4.6
Investment Banking & Trust Company
 (Nigeria) 03/03 15 32.6 7.9
Diamond Bank (Nigeria) 04/02 17 37.7 3.7
Merchant Bank of Central Africa (Zimbabwe)
 12/02 44 102.5 22.7
Commercial Bank of Namibia 12/03 12 32.7 3.2
Barclays Bank of Ghana 12/02 32 88.9 9.9
FSB International Bank (Nigeria) 03/02 10 28.5 3.7
Chartered Bank (Nigeria) 03/03 13 39.7 3.7
Societe Generale de Banques du Senegal
 12/02 16 51.6 3.1
Universal Trust Bank of Nigeria 03/02 13 44.8 5.1
National Bank of Malawi 12/02 7.3 25.1 4.0
CFC Bank Kenya 12/03 3.9 13.4 1.8
Banco Internacional de Mocambique 12/02 4.0 14.0 0.6
National Bank of Kenya 12/03 5.3 18.7 1.5
Banque Internationale pour le Commerce et
 l'Industrie du Senegal 12/02 7 26.0 2.1
Co-operative Bank of Kenya 12/02 1 3.8 0.2
Generale de Banque de Mauritanie
 (Mauritania) 12/02 3 12.0 3.4
Swaziland Development Savings Bank 03/03 4 16.6 4.7
Bank of Africa Benin 12/02 7 29.1 1.8
Banque Malgache de l'Ocean Indien
 (Madagascar) 12/02 8 36.3 3.3
Lead Bank (Nigeria) 03/02 7 31.8 6.4
African Banking Corporation (Botswana)
 12/02 10 47.6 4.5
Standard Chartered Bank of Zambia 12/02 13 62.0 7.1
Citizens International Bank (Nigeria) 03/02 7.7 37.0 2.3
First City Monument Bank (Nigeria) 04/02 4 21.0 3.1

CAR = Capital/adequacy ratio.
ROE = Average return on equity;
ROA = Average return on aggregate assets.

West African Banks

Industry seeks consolidation

As expected, Nigerian banks continue to dominate the West African banking sector. The federal government in Abuja is promoting consolidation in the sector, partly in order to improve governance, but Nigerian financial institutions continue to fill seven out of the top 10 places in a ranking of West African banks by market capitalisation.


This success is not only a function of Nigeria's huge population but of the size of the country's economy. However, despite Nigeria's regional success, none of the country's financial institutions are ranked in the world's top 1000 banks today: according to Charles Soludo, the governor of the Central Bank of Nigeria (CBN), up to three have been ranked in the global 500 in the past.

Comparisons along these lines always pose statistical problems, partly because different countries operate different financial years, but also because of the difficulty of obtaining up-to-date information.

In countries such as Cote d'Ivoire, which have experienced civil conflict over the past few years, stock values can vary enormously and less attention is paid to providing up-to-date figures. Many of Nigeria's leading banks could grow even further over the next few years because of consolidation in the industry. In June, Soludo published his plans for banking sector reform in Nigeria. At the core of the plans lies the assumption that there are too many banks in Nigeria and so it is difficult to regulate the sector. Many banks initially objected to the plans but after closer examination of the details they have now begun to back the CBN plans.

According to CBN figures, a great deal of consolidation occurred following the introduction of the 2003 banking regulations. As a result, there are now just 89 banks in Nigeria, but 30 of these control 80% of the market, leaving relatively little for the remaining 59, so there is likely to be further scope for a series of takeovers and mergers. A smaller, more tightly regulated group of banks may improve the image of the Nigerian banking sector both within the country and internationally.

The US has put some pressure on the Nigerian government for reform because of fears that Nigeria could easily be used to channel terrorist funding.

Some steps have already been taken to tackle fraud--an issue which generates a great deal of unwelcome publicity both for the Nigerian banking sector and for the country as a whole. Around 250 fraudsters have been arrested by the Economic and Financial Crimes Commission (EFCC).

While cutting back the number of financial institutions at the top end of the market may help to improve sector performance, there is still a real dearth of credit options for smaller businesses. Although microfinance organisations have operated in West Africa since the early 1970s, many small businessmen and women are still unable to secure access to credit even when they have good grounds for expanding their operations.

It is vital that small and medium sized enterprises (SMEs) have access to credit. Such companies provide the bedrock of the economies of most industrialised countries but are often marginalised in the informal sector in many African countries, including Nigeria.

If the current government in Abuja is serious about economic expansion and job creation, then small businessmen and women must be able to access credit to finance new machinery, purchase vehicles or fund training. The vast majority of West Africans work in SMEs and so it is to this sector that the government must look for genuine economic growth.


The presence of a bank registered in Togo in our Top 10 may surprise some, but Ecobank Transnational is a genuinely regional bank and earns its ranking because of its international operations.

Financial backing from the Economic Community of West African States (Ecowas) enabled the West Africa Chambers of Commerce to set up Ecobank as a regional private sector bank in 1985 to compete with foreign commercial banks. Stock in Ecobank is still mainly held by West African interests and the Ecowas' Fund for Cooperation, Compensation and Development remains the largest single shareholder. The bank embarked upon a major expansion programme for its branch network during the latter half of the 1990s, setting up offices in Burkina Faso, Liberia, Mali, Niger and Senegal.

By the time the Cameroon branch opened in 2000, Ecobank had expanded its operations into 12 countries across the region.

The main aim of the bank is to promote regional integration and development. Ecobank is attempting to compete within each domestic market, in a range of different cultures, legislative structures and investment environments: although this may be challenging in the short term, this strategy should put Ecobank in a strong position for major cross-border deals in the future.


Top of our table for 2004 is Union Bank of Nigeria (UBN) with market capitalisation of $467m. Although First Bank of Nigeria (FBN) has the largest net assets base, UBN is also the leading bank quoted on the Nigerian Stock Exchange (NSE) in terms of turnover and deposits, and the second biggest company of any type listed on the NSE.

Apart from corporate lending, UBN has a strong presence in agricultural financing and promoting the Small and Medium Industries Equity Investments Scheme (SMIEIS), which provides credit for smaller companies with good business plans but a lack of investment capital. The bank supports the government's consolidation plans for the industry. Godwin Oboh, the bank's chief executive and managing director, told the Bankers' Committee at the end of August: "We as bankers have come to agree that consolidation is a good thing for this country. At the end of the consolidation exercise, we will have strong banks with the issue of distress very minimal or nonexistent. We have all come to terms with it." The bank's directors may be confident that it can strengthen its position as the country's leading bank.

When UBN's board of directors was reorganised at the end of August, Professor Musa Gella Yakubu became the bank's new chairman. Yakubu was previously a director at the Central Bank of Nigeria, New Nigeria Development Corporation and the Nigerian Agricultural Cooperative Bank.

UBN projects an image of investing for the long term and is keen to promote its training schemes, some of which are run in cooperation with higher education institutions in the country. With his background in academia, Yakubu is likely to strengthen those ties.


As one of the few non-Nigerian banks in the Top 10, the Ghana Commercial Bank (GCB) is obviously the biggest commercial bank in Ghana. The bank celebrated its 50th anniversary last year and retains the same aim today as in 1953: to provide credit facilities for private sector enterprises of whatever size, wherever they are in the country.


GCB now has 130 branches spread around Ghana, including at least one branch in all of the country's 110 districts. The bank plans to invest $15m in creating a national IT network encompassing all GCB branches.

One thing that may restrict the GCB's room for expansion is the limited size of the Ghanaian economy. Although it can perhaps further increase its domination of the Ghanaian banking sector, it may need to expand elsewhere in the region if it is to challenge the biggest Nigerian banks at the top of our table.

However, the range of options is limited, as most of the other states in the region operate very different francophone legal and regulatory systems, while it would be difficult to move into the Nigerian market. The best step for now could be to expand into neighbouring Togo and Benin, both of which already have strong economic ties to Ghana.

GCB has been listed on the Ghana Stock Exchange (GSE) since 1996. Although the government is seeking a strategic investor, probably a foreign bank, to take a stake in the company, President John Kufuor has promised that none of the bank's local branches will be closed.
Top West African banks

Bank Country Market capitalisation

Union Bank of Nigeria Nigeria $265m (March 2004)
First Bank of Nigeria Nigeria $201m (March 2003)
United Bank for Africa Nigeria $117m (March 2003)
Ecobank Transnational Togo $100m (December 2002)
Zenith International Bank Nigeria $99m (June 2003)
Ghana Commercial Bank Ghana $50m (December 2002)
Intercontinental Bank Nigeria $74m (December 2002)
Banque Internationale pour Cote d'Ivoire $57m (December 2002)
le Commerce et l'Industrie
Cote d'Ivoire (BICICI)
Wema Bank Nigeria $47m (March 2003)
Ghana Commercial Bank Ghana $50m (December 2002)

Neil Ford

Southern African Banks

Banking with the Jolly Green giant

Banking operations in southern Africa happen in the long shadow cast by the South African financial services sector. As a result, much of what takes place financially in the SADC region is as a consequence of banking buttons pushed in South Africa. Increasingly, South African banks are cranking up their influence in the region and takeovers and mergers are regular occurrences from Manzini to Dar Es Salaam.

Absa Group, South Africa's bank, has publicly stated that it is uncomfortable in markets outside the continent, that it is an "African bank" and intends to make Africa its continental home. This is not to say that South African banks are unwelcome in Africa. Most appreciate the injection of capital and know-how that accompany acquisitions and mergers.

The southern African financial landscape is blighted somewhat by the spate of recent bank failures, brought about by general economic decline forcing interest increases beyond the means of many businesses and depressed resource prices cutting into export revenues. However, the bigger and better managed banks are weathering the rough economic seas, many of which are demonstrating impressive performances.


Standard Chartered Bank Botswana (SCBB) continues to lead the Botswana banking sector demonstrating impressive expertise in the capital markets environment, and scoring handsomely through its continued investment in high technology that keeps it a step ahead of its rivals.

The national economy's drive to diversify from its heavy reliance on diamonds, to manufacturing and more intensive ranching, has stood the bank in good stead in the resulting demand for capital.

The bank, whose high-degree of automation gives it a significant competitive edge against rivals, consistently increases its net profit above 30% and its ROE above 50%.



First National Bank of Namibia (FNB Namibia) is one of the country's more impressively performing financial services companies, recently bolstered through a successful merger with a local peer.

The bank consistently raises its net profit above the 100%-mark with ROE around the 30% mark. It also enjoys double-digit increases in assets and Tier 1 capital.

In 2002, FNB Namibia merged with Swabou Holdings, with considerable banking and insurance assets.

The merger also reduced foreign ownership of the bank to 55% from 78% and it became the first in the country to appoint a native Namibian as its chief executive.


First Merchant Bank (FMB) is Malawi's strongest growing financial institution, catering to medium to large sized businesses and wealthy individuals. With net profit boosted by 63.9% and an ROE in excess of more than 100%, strong gains were also registered in assets and Tier 1 capital.

The bank pioneered internet banking, linking itself with the country's central bank to improve the speed and efficiency of its electronic payments. The bank continues to enjoy the highest growth rate in the Malawi banking sector while its customer base includes the majority of the country's blue chip corporates.


Although the Mozambican economy edged down from its four-year run of record highs, Banco de Formento's high degree of profitability as well as enhanced technology and customer service ensured another banner year.

The bank has performed a remarkable turnaround in the last few years. It increased its profit to nearly 90%, and took its return on investment from 7% in 2000 to just below 40% last year.


Operating in an unstable economic environment aside, Standard Chartered Zimbabwe maintained its strong performance, helped by the introduction of innovative and forward thinking products.

Its profits increased by an impressive 220%, along with a surge in ROE of nearly 60% and big gains in assets and Tier 1 capital, climbing 141% and 135% respectively, while its cost-to-income ratio declined to 41%.

Several innovative products, including full-service electronic banking for corporate clients, and the country's first international credit card, helped to keep the bank in its leading position, as did its adherence to regulatory compliance and social responsibility.

The bank was one of the first Zimbabwean companies to provide antiretroviral drugs to its staff free of charge. "We operate in a challenging environment," says the bank's CEO Washington Matsaira, "but we have found that perseverance, consistency and superior customer service are the key to success."


A new CEO at the helm, continental aspirations, relentless high-tech enhancement and an eagle eye on cost-income ratios are all helping to sustain Absa Group's turnaround now into its second year.

A rethink after a double-digit decline in net profit in 2002 saw net profit gains in the first half by 82.3%. ROE for the period stood at 21.4% compared with 12.9% for all of 2002. Income from Absa's e-business sector has jumped by nearly 50%, pushing the value of Internet transactions over the R120bn mark with its 400,000 internet banking customers taking up 40% of the e-market, making the bank undisputed leader in this sector.
Top 10 SADC Banks

Bank Country Market capitalization

Standard Bank Group South Africa $4,233m (December 03)
ABSA Group South Africa $3,012m (December 03)
FirstRand Banking Group South Africa $1,851m (June 03)
Nedcor Group South Africa $1,595m (December 03)
Investec Group South Africa $1,092m (March 04)
African Bank South Africa $287m (September 03)
Barclays Bank of Zimbabwe Zimbabwe $242m (December 02)
NMBZ Holdings Zimbabwe $215m (December 02)
Merchant Bank of Central Africa Zimbabwe $53m (December 03)
Bank Windhoek Namibia $99m (December 03)

Tom Nevin


Tito Mboweni

SA Reserve Bank's enigmatic governor

Who is the real Tito Mboweni, South Africa's Reserve Bank governor? Is he the arrogant, disdainful figure painted by some of South Africa's business media, or is he the banker with a Midas touch? Tom Nevin profiles the man holding the keys to the nation's treasury.

Nowhere else have economists, analysts and asset managers proven that theirs is an inexact science than on South Africa's confounding financial landscape. They consistently get it wrong, bedevilled by a currency that defies divination and takes delight in humiliating the economist community. They're equally frustrated by an economy that rides the breakers and is swamped by ripples. The South African economy is a frustrating, baffling monkey puzzle and the bane of anyone with an Econ after his or her name.


Some suspect that this state of affairs, or at least its perception, is helped along by a mischievous Reserve Bank governor. But Tito Mboweni vigorously denies that he has the ability or inclination to manipulate the economy, especially the rand forex rate. He champions inflation-targeting at the expense of all else, and says it's about time the rand learnt to stand on its own two feet and battle it out with the world's currency heavyweights.

He's convinced that the rand is satisfactorily presenting its credentials to the world's financial community, demonstrating that it is no longer the money of an unstable third world, and is ready and able to take its place alongside its global peers as a solid and respected means of exchange in the flow of world capital and commerce.

To be sure, Mboweni takes his share of flack by the region's economic intelligentsia. They're constantly on his back with advice on how he should be running the Bank, panning his inflation policies, giving their tuppence-worth on exchange rates and generally telling him how to do his job.

Every now and then he publicly demonstrates how irritating he finds that procession of counsel. He recently branded as "arrogant" criticisms by economists of his decision to cut the interest rate by 0.5%. Business writers and economists had predicted, at best, no change in the rate for the rest of the year or, at worst, an increase of at least a percent. Mboweni's lowering of the rate to 7.5% stunned the markets and immediately set off business press speculation of political interference and pressure by trade unions concerned at job losses caused by the strong rand, especially in the gold-mining industry.

Mboweni strongly denied this. Briefing parliament's two finance committees, he branded the reaction of some economists as "symptomatic of their arrogant attitude" that the government should always follow their advice. "The bank is independent, not only from government, but from the markets, from economic commentators, from NUM. It is independent to pursue its objectives without fear or favour," Mboweni insisted.

Contrary to journalistic huffing and puffing, reporters, analysts and the banking community agree on the soundness of much of Mboweni's policy, mildly complaining that he's "too severe, too unbending and too unapproachable".

The Bank chief doesn't entirely agree. He maintains he's the thinking man's monetary policy maker and will concede to well-made argument.

"It doesn't pay to be too dogmatic," he says.

East African Banks

Kenya still on top

In spite of the political and economic uncertainty that has affected Kenya over the past decade, Kenya's financial institutions still dominate the list of major banks in eastern Africa.

Visiting Nairobi in September, the group chairman of British banking group Barclays, Peter Middleton, said that Kenya looked like becoming an important banking hub for the wider eastern African and Middle East region.

Indeed, three of the four largest banks in the region are based in Kenya, while the top 10 includes one each from Tanzania, Uganda and Djibouti, plus two from Ethiopia.

The continued strength of its financial institutions aside, the Kenyan banking sector is currently affected by poor labour relations. The country's main financial sector trade union, the Banks, Insurance and Finance Union (BIFU) had appealed for an across the board 16.7% pay rise, while the country's banks offered only 4%. The Industrial Court considered the dispute and judged 15% to be a fair increase but the banks have refused to meet the claim. BIFU is now expected to proceed with strikes scheduled for later in the year.

Kenya's minister for national development, Anyang Nyong'o, has appealed to banks operating in the country to promote bank accounts and other financial services to a greater proportion of the population. He argued that improved access to credit and savings facilities led to economic empowerment and created more small and medium sized enterprises (SMEs).

While the provision of credit to SMEs is vital to the development of both the East African economy and the region's banking sector, it is also important that long-term credit facilities are encouraged.

The East African Development Bank (EADB) plans coordinated bond issues on all three stock markets to raise funds for integration projects. The director general of the EADB, Godfrey Tumusiime, says: "The bank has been issuing bonds whose tenures have been progressively increasing, to four years, five years, and now the seven year bond. At an opportune time, the bank intends to raise even longer tenure bonds, possibly 10-year bonds."


Banks in Tanzania, Kenya and Uganda are starting to plan for greater competition within East Africa. The governments of all three countries are committed to East African political and economic integration and the creation of a regional stock exchange could be the first major step towards the integration of the three financial sectors. Kenya Commercial Bank has already set up a subsidiary in Tanzania, while other banks in the region are understood to be considering similar moves.


Commercial Bank of Ethiopia (CBE) has had to face increasing competition since banking sector liberalisation began in 1994. The bank had formerly held a monopoly over banking in the country but has undergone a restructuring programme over the past decade in order to allow it to operate on a more commercial basis. With 171 branches, CBE has by far the largest network in Ethiopia.

The State Bank of India was originally awarded a contract to manage CBE but the Indian bank failed to take up the agreement and the Ethiopian bank has now opted to retain control of its operations, whilst working in close cooperation with another international accountancy firm, KPMG.

CBE tended to only provide short-term credit in the past but now offers five-year loans and hopes to provide longer term credit in the future.


With an asset base of $1bn, Kenya Commercial Bank (KCB) is one of the biggest banks in Africa. It was formed in 1970, when the Kenyan government took a majority stake in National and Grindlays Bank, allowing it to rename the company.

The bank recently raised KSh2.45bn from a rights issue, which was oversubscribed by around 12%, and the government has now reduced its stake in the bank to 26.2%. The new shares have been listed on the Nairobi Stock Exchange.

Pre-tax profits for the first half of 2004 stood at KSh649m, more than double the figure recorded for the same period last year.

KCB also owns two major subsidiaries that are expected to boost profits in the longer term. The creation of Kenya Commercial Bank (Tanzania) has given the company a foothold in the Tanzanian market, while Saving and Loans Kenya Limited provides mortgage finance for residential and commercial property.

KCB already operates 73 ATMs and another 45 are due to be installed over the next year: it is hoped that all branches and main shopping centres will have at least one machine by the start of 2006. With 130 branches, KCB has by far the biggest network in Kenya and is particularly well represented in rural areas.


The Tanzanian government's decision to liberalise and deregulate the banking sector led to the creation of CRDB bank in 1996. It was born out of the Cooperative and Rural Development Bank, which was a mainly state owned institution.

The Danish International Development Agency (DANIDA) agreed to back the bank on a commercial basis with financial investment and technical and managerial support. Equity in the company is now divided between DANIDA investment fund (30%), Tanzanian cooperatives (14%), 11,000 individual shareholders (37.6%), private companies (9.6%) and Tanzanian parastatals (8.8%).

The CRDB divestiture still stands out as one of the most successful privatisation processes in the country.


Uganda is just one of many markets where British bank Standard Chartered is active but the bank was sufficiently interested in the country to retain a locally registered subsidiary, which is now one of the biggest banks in East Africa.

Standard Chartered is also active in Tanzania, Kenya and further afield in eastern Africa.

The bank has been operating in Uganda since 1912 and has branches in Jinja, Mbale and Mbarara, in addition to its Kampala network. With the introduction of ATM facilities in the region over the past five years, the company has now developed the biggest cash machine network in Uganda.
East Africa's top ten banks

Bank Country Market capitalisation

Commercial Bank of Ethiopia Ethiopia $163m
Kenya Commercial Bank Kenya $74m
CFC Bank Kenya $29m
National Bank of Kenya Kenya $28m
Co-operative Bank of Kenya Kenya $26m
Banque pour le Commerce et
 l'lndustrie(mer Rouge) Djibouti $22m
Commercial Bank of Africa Kenya $18m
Bank of Abyssinia Ethiopia $17m
CRDB Bank Tanzania $15m
Standard Chartered Uganda Uganda $15m

Neil Ford

Banking briefs

"Earthquake" as CFA bites the dust

In an unprecedented move described as "an earthquake" the Central Bank of West African States (BCEAO) says it will withdraw all CFA franc notes from circulation by the end of the year. The move is aimed at erasing the reserves of dirty money and the hoards of cash stolen in a series of bank robberies in Cote d'lvoire between 2001 and 2003.

A three-line statement reads: "The bank informs the public that all BCEAO notes of the 1992 type will no longer be legal tender from January 1 2005. After that date they can no longer be used as a means of payment." West African residents can exchange the old notes for new ones at no charge at banks and post offices. BCEAO countries are: Benin, Burkina Faso, Guinea Bissau, Cote d'lvoire, Mali, Niger, Senegal and Togo.

West Africa's new currency marking time

It now seems unlikely that the launch of a unique currency for West African countries will go ahead as planned in 2005. The new currency was to be introduced into the member states of the Economic Community of West African States (Ecowas) and the West African Monetary Zone (ZMAO, from the French name).

The Senegal daily Wal Fadjri, reports Ecowas central bank governor, Charles Konan Banny, as saying: "There has been no breakthrough in the convergence of member countries' economies towards the existence of a viable unified currency. Trade liberalisation is insufficient and does not allow for the setting up on a unified economic space." According to Ghana's central bank governor, Paul Acquah, the main objective for West African states should be for them to coordinate their macroeconomic policies, and this could take time.

Zim multinationals rake in 2,000% profits

The three foreign banks operating in Zimbabwe notched up after-tax profits in excess of 2,000% in the six months to June this year, raking in close to $100m. The gains arose because depositors were paid virtually zero interest while banks threw the resulting cheap funds into the money market, that at times yielded over 300%. The banks--Stanbic of South Africa and British banks Barclays and Standard Chartered--reported a historical aggregate cost profit of Z$115bn, about half of what it made from the rest of its banks in Africa. For the past three years, Zimbabwe banks paid 0% to 10% interest while market rates varied from 30% to 50%. Minimum lending rates are still around 200% while deposits attract 10% at best.

US tightens African remittances

Third World migrant workers in the US were dealt a blow with the imposition of regulations tightening informal money transfers to their families at home. A total of around $30bn a year flows into Africa and other developing regions in this way. The move was reportedly triggered by growing US concerns that the money could be used to fund terrorism. Migrant workers will now have to channel their remittances home through official banking circuits, making money transfers easier to trace and monitor. Countries such as Cape Verde, Senegal, Mali, Burkina Faso and Niger receive around $100m annually from their nationals living in the US and Europe.

Kenya gets World Bank funding for infrastructure projects

The World Bank has approved loans of $262m to underwrite transport, agriculture and water projects in Kenya. Most of the money will be spent on the Northern Corridor project to upgrade the 375km of highway linking the port of Mombasa to Uganda, and the creation of a national highway authority. Some of the funding will also be channelled into upgrading to world standard Nairobi's Jomo Kenyetta international airport and the Moi International in Mombasa. The remainder of the funds will be used to strengthen the Kenya Civil Aviation Authority and to improve air navigation safety.
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Title Annotation:Banking in Africa
Author:Versi, Anver; Ford, Neil; Nevin, Tom
Publication:African Business
Geographic Code:60AFR
Date:Oct 1, 2004
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