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Economy

Ecobank turns Africa’s diversity into key driver of business growth

A branch of Ecobank at Westminster House in Nairobi. File
A branch of Ecobank at Westminster House in Nairobi. File 

As the aircraft floats across the landscape of West Africa, one notices ruler-straight earth roads stretching as far as the eye can see. A gaggle of Chinamen seated right behind me are animatedly watching the terrain from the vantage point and excitedly making conversation only they—for now—can understand.

I ignore them and their chatter until we meet at the opening of the Ecobank Group in headquarters Lome, Togo, the next day. Ceedi the group whose plainly dressed and unassuming female president, Ms Hu Ping, proudly tells me in tortured English needing a good dose of interpretation that they built “the stadium in Kenya”, constructed the building.

A sky blue imposing seven-storey building facing the Atlantic Ocean just across the seaside road stretching from Ghana across the Togolese strip, it represents a partnership between the pan-African group represented in 32 continental states and the Chinese. More aptly, it is a symbolism of the new Africa where investors are belatedly realising that Africa with its backwardness, just in 2000 cover headlined as the ‘hopeless continent’ by the widely respected Economist magazine, is the last high potential destination for investors. (“Since then its progress has been remarkably hopeful,” the magazine wrote in a grudging retraction last year. Timely if you consider seven of the fastest countries in the World are African, you may say.) As a matter of fact, just like the Chinese Ecobank, whose headquarters in Kenya is Ecobank Towers in Nairobi, was one of the pioneering visionaries that concluded Africa was the place to invest in despite the obvious difficulties. And it is by no means a charitable dream of pan-Africanism going by their books.

Last year for instance, the company made $169 million (Sh15 billion) in pre-tax profit, representing a 67 per cent increase on the previous year. Not much to write home about, you may think, on the back of $900 million revenue, which means the efficiency ratio was slightly below 70 per cent. But looking at the growth and more importantly, the strategy to be top three in every market they operate in — meaning it is only a matter of time before they snap up a local bank in Kenya, probably bid for National Bank—it is clear the bank has only scratched the surface. The 3.1-million Ecobank so far operates in more markets in Africa than any other bank including Standard Bank of South Africa and it may not be long before the continent’s growth rubs off on its bottom line.

Unenviable theatre

Without a doubt, the bottlenecks for the bank as the continent opens up would appear insurmountable in view of the breadth of markets it operates in. The following quote from its head of research Paul-Harry Aithnard only half captures the unenviable theatre of operation for the bank: “We are the only bank in the world with exposure to 18 different African currencies, 12 fixed income markets and multiple equity markets across Africa.” He should have pointed out the difficulties of summoning at annual general meeting in 32 countries, involving advertising in three national dailies for three consecutive days (and still have a shareholder from Benin claim he heard of the event through rumours) as part of the gargantuan task. Sample its list of woes in various markets.

In the 1990s, the whole banking industry in Guinea Bissau collapsed and Ecobank was there to bear the consequences. Quite recently, Cote d’Ivoire was paralysed for months after a tussle over who between former president Laurent Gbabo and current leader Alassane Ouattara won the presidency. In the past Ecobank has recapitalised the bank in the country three times.

Group CEO Arnold Ekipe though proudly notes that 34 of its branches in the world’s largest cocoa producer remained open until the bank had no option during the crisis; two branches were destroyed. Nigeria, its largest market has been in a banking crisis mood lately forcing the central bank to take over a good number of the banks and badly affecting Ecobank performance. Indeed, during the annual general meeting of the bank on June 29 a Francophone Africa shareholder—who could barely conceal his hostility toward the Anglophone Jonny-come-lately who he accused of speaking too much English — complained Nigeria was unnecessary pain for the bank. The bank in Nigeria recorded a $16 million loss for the second year running and this year has had to sell $400 million in bad loans. Nine of 24 Nigerian banks closed although Ecobank remained one of the few strong ones. “Nigeria will continue to be the best market despite what happened,” retorted one of its 180,000 shareholders echoing wisdom many an investor has shared in the past. Despite this litany of woes, diversification in several sub-Saharan Africa markets remains its strength. Mr Ekipe is quick to remind the complaining West Africans of this fact.

“Our strength is in diversity; at one time Nigeria provided 40 per cent of the profit. Gambia and Liberia have also had their difficulties but we have a diversified portfolio so if one business is doing badly you recover in the next,” he said during the AGM held at its new commercial conference wing. The complexity of the operating atmosphere for Ecobank is further illustrated by its staff of 10,000 from more than 35 countries.

Ecobank started as what appeared like a fanciful idea floated by businessmen under the Federation of Chambers of Commerce of West Africa, which was linked to one of major shareholders, the Economic Community of West Africa in the 1980s. The promoters led by the chambers chairman Henry Fajemirokun sold the idea to the rest of the region, backed by one of the Ecowas founders, the late long-serving president Gnassingbe Eyadema who quickly supported an agreement entrenched in an Act of Togo parliament for hosting its headquarters. His successor son Faury Gnassingbe was at hand on June 28 to open the new Ecobank Pan African Centre from where the future of African banking could be crafted. The late Eyadema laid the foundation stone for the $30-million complex on November 7, 2008. The bank with representative units in Paris, Dubai and Johannesburg apart from targeting the African commerce is tapping the huge potential in the Dispora, which according to Word Bank contributed a respectable $21 billion in 2009 in remittances. Nigeria, Kenya, Sudan and Senegal top the list of recipients although in countries like Lesotho, in terms of ratio to GDP, the remittances make up to 25 per cent. Like the other innovative and ambitious Africa operatives who include Kenya’s very own Safaricom and Western Union, the group has come up with a diaspora account set for launching soon.

Besides expansion in Kenya, Ecobank’s chairman Kolapi Lawson, 60, says the firm will consider listing on the Nairobi Stock Exchange when it reaches the “critical mass”. It has already injected $41 million in the Kenyan operation, which returned a $2.4 million after shaking off legacy losses arising from the acquisition of EABS Bank. The 760-branch bank now covers the whole of East Africa after establishing presence in Tanzania and Rwanda, where it has broken into the top three, and Uganda, — some of the fastest growing economies in Africa. “Ecobank Pan African Centre should also rekindle the Pan-African ideal pursued all those years ago by Kwame Nkurumah: that the Ghanaian, the Nigerian, the Togolese, the Kenyan, the Zambia must see themselves as Africans,” says Mr Lawson.

“That it is in being united as Africans that we develop strength…ready to take our rightful place in the world.”

With EAC trade fast taking shape, the bank hopes to leverage on intra-bloc trade here like it has done with Ecowas. Under Southern African Development Community it is tapping into trade through presence in Angola, Congo DR, Malawi, Zambia and Zimbabwe.

Growing economies

That will be a great boost for families in Kenya where the bank locally chaired by businessman Peter Kanyago has 21 branches with more in the pipeline including in Meru and Nairobi.

Besides expansion in Kenya, Ecobank’s 60-year-old chairman Kolapi Lawson says the firm will consider listing on the Nairobi Stock Exchange when it reaches the “critical mass”. It has already injected $41 million in the Kenyan operation which returned a $2.4 million after shaking off legacy losses arising from the acquisition of EABS Bank. The 760-branch bank now covers the whole of East African Community (EAC) after establishing presence in Tanzania—together with Rwanda, where it has broken into the top three, and Uganda the some of the fastest growing economies on the continent. With EAC trade fast taking shape, the bank hopes to leverage on intra-bloc trade here like it has done with Ecowas. Under Southern African Development Community it is tapping into trade through presence in Angola, Congo DR, Malawi, Zambia and Zimbabwe.

“Ecobank Pan African Centre should also rekindle the Pan-African ideal pursued all those years ago by Kwame Nkurumah: that the Ghanaian, the Nigerian, the Togolese, the Kenyan, the Zambia must see themselves as Africans,” says Mr Lawson. “That it is in being united as Africans that we develop strength…ready to take our rightful place in the world.”

If that sounds rhetorical, that is not to Ecobank or the Chinese who look at the notoriously disconnected African states with their primitive infrastructure as an unnecessary burden. People actually do make money in Africa, as both have demonstrated, and there is only much more to be made. The West African earth roads as the Chinese may have concluded are part of African opportunities not setbacks.

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