International banks are likely to increase their interest in Africa, creating opportunities for partnerships and minority shareholding arrangements, while domestic banks are likely to merge and focus on regional operations.
That’s the view of IBM lead partner for financial services for Africa Mike Emmett, one of the speakers at the BMI-T/IDC African Banking Forum in Midrand on Thursday.
Emmett also believes that governments will slowly but surely exit the retail banking game while exchange controls will be “significantly further deregulated and result in regional opportunities”.
“Many governments will also succumb to the populist allure and renege on their promises to the sector,” he feels.
Non-traditional banking competitors will become far more prevalent, while new technologies will allow banks to expand services to the previously unbanked — “and make money”.
However, Emmett adds: “Consumers are sadly not going to wake up to poor service delivery and churn will largely be the result of pricing and branding behaviours.”
According to Emmett, the weak performance of foreign equity markets, emerging market concerns from Latin America, interest rate volatility, weakening exchange rates and persistent structural economic and social problems, among other factors, have all led to the down-rating — “real and perceived” — of the African banking industry.
Nevertheless, he believes Africa is a “treasure trove”. “The peculiarities of the continent give African banks a significant competitive edge against the backdrop of the global localisation effect,” he asserts.
However, he believes the success of the continent’s banking sector is very dependent on support by the governments of Africa to maintain macroeconomic stability and avoid financing large fiscal deficits through the private banking system,
Governments also have a role to play in accumulating savings in the domestic banking system to create more room for private sector borrowing and in improving the institutional environment for bank lending by strengthening the commercial legal system, enabling banks to enforce contracts and foreclose on defaulters with delay.
“Banks are not suited to lending to small-scale enterprises which are crucial to maintaining future growth. Governments need to support and encourage local banks to do this,” Emmett says.
Governments also need to work with telecoms providers and other related parties to expand the full spectrum of communications infrastructure, he feels.
Africa’s banks, he believes, are critical to the economic growth and development of the continent and its success in alleviating poverty and enhancing social development.
But what he would like to see is banks adopting an “infrastructure, component and integration mindset” and deciding what they are or want to be then focus on what makes them special.
“I would also like to see the branch foot-print actually grow and branches become more uniquely tailored points-of-presence that match the wants of the local buying communities — with non value-add activities becoming full or assisted self-service.”
What he would like to see most of all, however, is banks stop behaving like banks.
“But, sadly, there’s a 50/50 chance that we just keep operating like the banks of yesteryear and these opportunities are just dissipating right before us,” he laments. – I-Net Bridge