17 Oct

Debunking the stereotypes about high risks for investing in Africa

It is very unfortunate that the world is still plagued with news and pictures that seem to depict a blood-thirsty and war-ravaged Africa. These stereotypes, that are constantly perpetuated by the popular mass and social media, are mainly about a conflict-ridden and politically unstable Africa, ruled by dictators and warlords.

While it is true that there are still a few territories with localised conflict zones, most of the 54 countries in Africa have become more stable and peaceful nowadays. Unfortunately, the depiction of bloodshed in Africa greatly influences investors’ perception, while giving the impression of an extremely high risk level over the whole continent. However, the truth of the matter is that the reality on the ground is not as extreme as often portrayed by these media.

Less armed conflicts and civil wars

Unlike during the post-colonial era of the 1960s and 70s, there are now less and less widespread civil wars, conflicts and social unrest in Africa. Although there is still civil war in Libya and South Sudan, as well as localised armed conflict zones, most of the continent has become more peaceful since the 1990s. Data from the Uppsala Conflict Data Programme, managed by the Swedish Uppsala University, as well as research from the Peace Research Institute Oslo and Oxford Research Group, all show that there is less conflict and death from wars in Africa.

Compared to Africa with its 1.2 billion people, the armed violence statistics in the US with a population of 323 million, show a stark difference. Unofficial statistics show that there is now a gun for every American in the US. According to the Gun Violence Archive, in 2016, there were 58,774 incidents of gun shooting with 45,691 people killed or injured in the US. Moreover, there were 383 incidents of mass shooting in 2016, increasing from 333 and 274 incidents in 2015 and 2014 respectively. This shows that the US is averaging about a mass shooting daily.

Read more: Debunking the stereotypes about high risks for investing in Africa

27 Sep

Mobile financial services in Africa: Winning the battle for the customer

Africa is the global leader in mobile money, which has become an important component of Africa’s financial services landscape.

Mobile network operators (MNOs) have dominated mobile money services in Africa for the past decade. More recently, fintechs have established a solid footing in the market, and a number of banks are beginning to compete aggressively for the mobile banking customer. While some banks have chosen to “go it alone”, others are forming partnerships in hopes of reaching the market faster. This article outlines five paths banks can take to retain ground in the battle for the mobile customer in Africa.

Africa is the global leader in mobile money

Mobile financial services (MFS) span the full spectrum of financial services, from payments and current accounts, to savings, loans, investments, and insurance. Mobile money, which enables customers to send, receive, and store money using their mobile phone, is a subset of MFS that is provided mainly by telco companies. The underlying funds are typically held by a bank in a dedicated stored value account or a linked current account.

Just over half of the 282 mobile money services operating worldwide are located in sub-Saharan Africa, according to the GSMA. In Africa today, there are 100 million active mobile money accounts (used by one in 10 African adults). This far exceeds customer adoption in South Asia, the second-biggest region for mobile money in terms of market share, with 40 million active mobile money accounts (used by 2.6% of adults)(Exhibit 1).
Exhibit 1
Mobile money now extends far beyond Safaricom’s initial M-Pesa offering, which enabled consumers and small businesses – many of which had little or no access to a bank – to send and receive money quickly and securely across great distances. Today, mobile financial services have expanded to include a broad array of financial services, including credit, insurance, and cross-border remittances, and M-Pesa now accounts for less than a quarter of MFS users in Africa.

Read more: Mobile financial services in Africa: Winning the battle for the customer

 

20 Sep

The budget bank rattling South Africa’s financial sector

STELLENBOSCH, South Africa (Reuters) – A budget bank is booming in South Africa’s economic slump, challenging the decades-long dominance of the “big four” lenders and prompting a price war that is driving down banking costs in a country where many people can’t afford an account.

Capitec Bank has doubled its customer numbers over the past five years and quadrupled in market value, even as South Africa’s economic growth has stalled and the country has slid into recession, squeezing household incomes.

It offers a single “no-frills” bank account with low fees, as well as unsecured loans to customers including low-income borrowers, but steers clear of the more complex financial products offered by rivals.

This model has insulated it from the downturn, which has constrained mortgage lending and vehicle finance, key business areas for the four biggest banks: Standard Bank, FirstRand, Barclays Africa and Nedbank.

Those four heavyweights have reigned unchallenged over South Africa’s financial sector since the 1990s.

But Capitec, whose shares have risen more than 300 percent since 2012 and over 30 percent this year, now has a market value of 103 billion rand ($7.9 billion) – closing in on the number four lender Nedbank, which is worth 110 billion rand.

The Stellenbosch-based bank, which launched in 2001, has 9 million customers, of which 4 million are so-called primary clients who have their salaries deposited into these accounts.

“Most of them we’ve taken from other banks,” Capitec Chief Executive Gerrie Fourie told Reuters in an interview, saying that his bank attracts 100,000 to 150,000 new customers a month.

“The economy is helping us,” he added. “People have started questioning why they have to pay banking costs.”

There are clear risks to the bank’s business model of offering unsecured loans to lower-income borrowers without any other forms of lending to counter any losses, according to industry experts.

Capitec’s rise is nonetheless forcing its rivals to respond. They are all fighting back with their own no frills accounts aimed at hard-pressed consumers.

Read more: The budget bank rattling South Africa’s financial sector