Top 5 Banking Opportunities In Africa

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The rise of sub-Saharan Africa’s banking sector has been incredible. Coupled with emergence as one of Africa’s fastest growing sectors, compared to its relatively unexplored (and approach with caution) status only a decade ago, the sector has served as a major turn on for investors. Before now, the sector’s perceived (and often well-founded) risks and limited profit potential underscored the need of dire reform. Yet, in recent years, banking sectors reforms in many sub-Saharan African countries have paid big dividends. Capital bases have grown significantly (albeit from a small base) and risk management practices have drastically improved. Consumer and commercial lending has strengthened. However, despite the reforms and robust economic growth, the banking sector remains underinvested and in need of more robust strategies and systems, capital bases, lending capabilities, and talent infusion. Filling these gaps provide great profit potential, particularly in a few of Africa’s fastest-growing economies.


Nigeria is fan-favorite in the investor world for several reasons. It is Africa’s second largest economy and the world’s fourth biggest exporter of oil. A massive population and an entrepreneurial economic backdrop further brightens the country’s shine. Consumer banking provides enormous upside with more than half of Nigeria’s 170 million population still unbanked. A large proportion of those unbanked are of working age in a country ready absorb them into the workforce. Yet, consumer banking is only the tip of the iceberg compared to the corporate banking sector.

A constant flow of oil exports and growing share of gas opportunity fuels an active business community within the energy industry, in auxiliary industries and beyond. New business minds, such as Jason Njoku—the founder of IrokoTV, Nigeria’s version of Netflix—and established industrialists, such as Aliko Dangote—Africa’s richest man and owner of the behemoth conglomerate Dangote Group—are creating companies to fill the many gaps in the Nigerian economic system. Yet, five years after the 2009 economic crises which affected a number of its banks, many Nigeria banks are still reeling from the capital flight and are still unable (and scared) to provide sufficient business lending and financing on reasonable terms.

Corporate and consumer confidence arguable remains a challenge. Nigeria’s President Goodluck Jonathan’s recent ousting of central bank governor Sanusi Lamido Sanusi has done little to help the situation. Mr. Sanusi was generally respected and extolled for saving the economy after banking system collapsed in 2009. But his dismissal following his allegation that the state oil company, Nigerian National Petroleum Corporation (NNPC), failed to pay $20 billion to the government has raised eyebrows over the central bank’s independence and the country’s banking system in general. Several analysts predict this could cause a drop in foreign investment in the near-term. Still, it is unimaginable that the Nigerian banking system, having learned its lessons after 2009, will not pick itself up and strive for greater heights and higher returns.


Ghana is a comparatively diversified economy with many sectors hitting a boom at the same time. With potentially 1.25 billion barrels of oil in reserve, officials expect to produce 225,000 barrels per day in 2014. Infrastructure challenges have delayed production but the sector is roaring ahead. A strong gas sector, with approximately 22.7 billion cubic meters in reserves, assists in making the energy sector a very nice compliment to Ghana’s already strong mineral exploration industry, particularly gold. Yet logistics and service companies in auxiliary industries struggle for capital. Similar to the industries they serve, they look to offshore financing as the banking sector gradually improves. A lack of trade financing is very palpable considering the needs of explorers and operators in the country.

The recent integration of banking ATMS among nine banks in the country, including Zenith Bank (one of Nigeria’s biggest banks) and Ecobank, was a long overdue advancement, allowing customers to use their bank cards at ATMS serviced by banks different than the card provider. It was also an indication of how behind the times the banking sector had become. The country’s economy hosts a burgeoning small and medium enterprises (SME) sector. Yet this is the sector that most banks struggle to lend to, let alone insure. Ghana Commercial Bank has worked anxiously to fill the gaps in the system. But their officials are clear to state that it needs more partners in the banking sector to get the country roaring ahead. A more sophisticated risk management system, stronger capacity building abilities and greater financial resources in the system would go far to boost profit potential and move the sector forward.


The “Angola opportunity” in financial services is best characterized by three things: (1) GDP, (2) oil, and (3) banking net profit. Most investors are familiar with sub-Saharan Africa’s top two economies, Nigeria and South Africa, but struggle to identify this emerging behemoth, Angola. It is Portuguese-speaking, often keeping it under the radar of both Francophone and Anglophone news sources. But its growing prowess makes that point less relevant, specifically as Africa’s third top producer of oil and the world’s seventh biggest oil exporter in the world. Oil (and gas) drive this coastal country’s economy and also make’s Luanda a consistent #1 or #2 for most expensive cities in the world for expats.

Despite the country’s economic strength, the financial services sectors remain relatively uncompetitive. Bankers in Luanda brag about the net profits garnered in the country. Specifically, two Portuguese banks, Banco Espirito Santo and Millennium BCP, have performed extremely well. They operate primarily in three countries in sub-Saharan Africa: Angola, Mozambique (which we will cover next) and Cape Verde. Banking net profits, excluding South Africa, place Banco Espirito Santo and Millennium BCP as the approximate #3 and #7 bank in Africa by net profit. Yet, all these numbers overshadow the daily reminder in Luanda (and especially outside Luanda) that service offerings and product availability can still improve.

Businesses consistently complain about the banks’ abilities to move monies quickly (particularly for international business), provide quick money transactions (i.e., point of service (POS), direct debit, etc.), and negotiate suitable corporate lending agreements. And, for the rapidly growing middle class consumers (in this relatively small population), cash can sometimes reign as king when traveling outside Angola (and sometimes within it) when ATMs do not have cash, POS systems do not work, and certain bank cards are not accepted at different stores and ATMs.


Mozambique is very different from the previous three countries. Although a Lusophone country (Portuguese-speaking), the country is not an emerging oil giant (not for lack of trying considering all the oil exploration companies passing through). South African petrochemical company Sasol made the sole minor splash with its announcement that it will be the first to produce oil commercially in Mozambique (with around 2,000 barrels of oil per day compared to Nigeria 2.2 million barrels per day). It is more known for its picturesque coastal beaches, amazing food, and welcoming culture. But it is not just tourism that has foreigners inundating Maputo’s international airport.

With over 250 trillion cubic feet (Tcf) of reserves, Mozambique could become the fourth largest exporter of gas in the world. The country expects to have four LNG units completed by 2018 with a total capacity of 20 million metric tons per year. Banks have made best efforts to meet the resulting boom in corporate and consumer spending. But the infrastructure is simply not there yet. POS systems takes months for delivery and they cannot work (too often for comfort) because a banking system internal network or country network is down (offline). Banc ABC is one of the few banks to provide a decent option for paying bills outside the country with its prepaid travel card. Consumers consequently carry 3 – 5 bank cards to ensure they have access to cash at any point.

Corporate banking presents even greater challenges as credit lending is minimal and cross-border transactions involves much paperwork and can take beyond a week to process. In a country where the most medium sized private equity firms (i.e., $50 million) would be a top five bank based on assets, all these challenges are not too surprising. But, when two of the top five banks CEOs in the country say lending $1 million for a project can be stretching them far, it is hard to ignore the investment opportunity.


Ethiopia is the new investment darling to the conversation. It is sub-Saharan Africa’s second most populated country with a very young workforce. It is attracting foreign capital for major energy projects (in both traditional and renewable sources) and manufacturing for its burgeoning consumer class and export. But there is still one holdup: the banking sector is closed to foreign investors. Yet it is hard to not include this country on the list. The country has an entrepreneurial business community that requires greater access to lending and financing as the Development Bank of Ethiopia feels greater financial constraint from backing the numerous projects in the government’s massive infrastructure plan. Product and service offerings remain relatively underdeveloped. Ethiopia officials give all indications that the sector will open up over time. For now, it is simply a diamond in the dirt that attracts considerable attention than its more refined peers.

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