Bank rules ‘restrict Africa growth’

CorporateBusiness

By Ann Crotty

Global banking rules such as Basel 3 were making it difficult for banks in Africa to provide services to the public and were consequently restricting the continent’s potential to develop, delegates attending the World Economic Forum on Africa were told last week.

V Shankar, the group executive director and chief executive of Europe, Middle East, Africa and the Americas at Standard Chartered, said that Africa had huge potential and was “hot on people’s agenda”.

“It has huge consumer potential, huge agricultural potential and huge infrastructure spend potential but all of this requires huge finance. Where will the money come from?”

With the exception of South Africa, Nigeria and Kenya, bond markets in Africa were shallow and governments in the region had an important role to play in developing them, Naveed Riaz, the chief executive of Citigroup’s Africa division, told the delegates.

John Rwangombwa, the governor of the National Bank of Rwanda, said that it was also important to develop the domestic savings markets in individual countries to create depth in the financial market.

Riaz said that Africans had more cellphones than bank accounts and that these were being used to develop banking facilities in countries such as Kenya.

“This has happened because the regulators allowed it to happen… Some money lending rules imposed on African regulators are making it difficult to provide banking services. “Regulators must engage on these rigid rules particularly when transactions are as small as they often are for rural consumers,” Riaz said.

Panel members agreed that anti-money laundering standards were very difficult to implement at the low end of the market and this was preventing the development of banking systems.

Regulators were urged to accommodate the involvement of cellphone firms in the development of banking services and the capital market. “Mobile banking has the potential to be transformative,” said Riaz.

Shankar said that Africa’s biggest challenge and opportunity was its population.

“Whether there is a demographic dividend or demographic debacle depends on the development of SMMEs [small, medium and micro enterprises] that is where the growth is and that is where finance is needed.”

At an earlier session entitled, “Myth Busting: Investing in Africa”, delegates were told by Carlos Lopes, the executive secretary of the United Nations Economic Commission for Africa, that: Africa had about twice the per capita income of India, it had fewer people living in poverty, it had more cellphones per head of population and had fewer people affected by conflict than India and yet India was perceived as successful and Africa was not.

Lopes said that Africa did suffer from a perception problem and that this could be affected by the fact that Africa was not one country but 54 countries.

He said that disposable income had doubled in the last 20 years in Africa and “will double again in the next 20 years”.

Jay Ireland, the chief executive of GE Africa, said that consistent regulations played an important role in influencing perceptions.

Ireland said that GE knew the risks attached to Africa but believed Africa was the place to be, “we’re all in”.

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