Arnold Ekpe: Ecobank Legend Says Farewell

Arnold Ekpe, CEO of Ecobank International, is one of a handful of African business champions who have become legends during their own lifetimes. The tall, bespectacled Nigerian is quietly spoken and probably the most modest CEO I have ever come across. He inhabits the world of finance and banking with an ease and grace that comes from uninterrupted success.

There is little doubt that the story of Ecobank under Ekpe’s leadership has been one of continuous success. It has subsidiaries in 32 countries in Africa and 1,140 branches across the continent. It is the first true indigenous African multinational – a genuine pan-African institution. If it was regarded as something exotic during its early days, it is now an essential cog that makes the continental financial system work. Ekpe was born in Nigeria but also lived for a while in Cameroon. He describes himself as a perennial nomad – studying engineering at Manchester University then crisscrossing the continent for Citibank. He obtained a first class engineering degree and a master’s in business administration but decided to go into banking after stints in industry.

Even a conversation of a few minutes with him is sufficient to reveal a formidable intellect and an acute eye for detail. In his early forties, he became CEO of Ecobank – then in desperate financial straits despite the noble principles on which it had been founded. The pan-African nature of the bank had been the main attraction for Ekpe but he found himself at odds with the board on the strategy and structure of the bank. He left, but was recalled four years later when the board realised that his vision was the only practical one.

The innovative and most technically advanced banking system he supervises today is a different from the institution he took over in 1996 as the Boeing Dreamliner is from the propeller-driven biplane of yesteryear.

Ekpe will leave his post at the end of this year, in step with company policy, and hopefully write his memoirs. His successor, Thierry Tanoh, will join the bank in July to work alongside him.

Ekpe is married to ‘the same woman all my life’ and has three children. He was a ‘decent’ footballer and is an avid fan of Manchester United.  Arnold Ekpe may leave banking but African banking will not leave him alone – he has far too much to contribute to be able to fade away into the background.
The following interview with Arnold Ekpe was conducted by African Banker Editor, Anver Versi.

African Banker: When you came back for a second crack of the whip at Ecobank, could you envision the bank to be where it is now? Has it met your expectations?

Arnold Ekpe: Yes, I envisioned Ecobank to be more or less at the level which it is at today. To some extent, I think that there are areas where we’ve lagged behind objectives but also areas where we have been far ahead of objectives. That’s in the nature of business, as you know.

Q: Where did you lag behind?

A: In terms of our performance, I think we could have done better. There were unexpected developments that held us back. In terms of our geography, our network and our footprint, we’ve exceeded our initial expectations.

Q: What do you consider Ecobank’s greatest achievement under your leadership?

A: That’s a difficult one. I think that we’ve done something that’s fairly unusual. We have shown that there is significant potential for integration in the private sector – bringing various nationalities, languages and cultures together to create a pan-African institution. That model hadn’t been tested or proven before and I believe we’ve managed to do that.

As a consequence, we’ve seen other institutions, not only in the banking sector, but also in other sectors, trying to do the same. This can only be good for Africa because, ultimately, the future for Africa lies in being able to create large and attractive markets and not small, fragmented ones.

Q: Has Ecobank received the required cooperation from the Economic Commission of West African States (ECOWAS)?

A: ECOWAS has been a supporter of the organisation from the start. They have a permanent seat on the board of directors of ETI [the holding company] and they have been fully supportive.

The one area where I think we can collectively do more is in further opening up the West African market, because although ECOWAS is supposed to be an economic union, there isn’t as much economic integration as there should be.

There are still, I think, about seven or eight currencies in the sub-region; the customs union is not really working; while there is free movement of people, the movement of goods is not as free and the movement of capital is not as free either. The banking laws and regulations are not in harmony.

    
Q: How would you compare ECOWAS with the East African Community (EAC) and Southern Africa Development Community (SADC)?

A: ECOWAS is certainly ahead of SADC in terms of the free movement of people. ECOWAS has been doing that for about 20 years and, indeed, that is something the East African community and, to a lesser extent, SADC can emulate.

In terms of the free movement of goods, the regional bodies are pretty much about the same with East Africa maybe a little bit ahead. But I think that in terms of movement of capital, East and Southern Africa are probably ahead of West Africa. So they are all at different stages depending upon which track you are looking at but what is important, which I think is a positive thing, is that they all seem to be moving in the same direction, i.e. towards greater integration.

Q: What is the main hurdle towards greater integration? Is it political or is it economic?

A: I don’t think it’s economic, I think it’s more political. If you have the will to get greater integration, you will. The free movement of people in West Africa, which started over 20 years ago, came about because the heads of state met and said, “We are going make this a requirement across West Africa”, just like that. For the free movement of capital all you need is central bank governors to get together and agree on the free convertibility of their currencies.

It’s very clear that inter-regional convertibility is supported by economics – it will certainly reduce transaction costs and will facilitate investment. Regarding the single currency – notwithstanding what’s happening in Europe, I really don’t think that the concept of a single currency is something that Africa should be moving too quickly towards; but the concept of free movement of capital without all the requirements of exchange controls is certainly valid.

Q: May we turn our attention to the current financial crisis in Europe? How will this impact African economies?

A: There are certain givens and some unknowns. If you look at the worst affected in the Eurozone, there are really two impacts that are of particular concern to us.

The first is that if Europe and the West go into recession and if growth in the East slows down, as we have begun to see in China, the flow back to Africa will be that the demand for commodities will drop and commodity prices are likely to fall. In consequence, there will be stress on African economies, especially in terms of revenues into the countries and into government coffers.

We can see that the naira, the shilling, the rand, the cedi are all under stress. Since the CFA is backed by the euro, to the extent that the euro is under stress, the CFA is also under stress. And the euro has lost a lot of value over the last eight months or so.

The second aspect of this is that banks internationally start to suffer and because of the need to recapitalise or shrink the balance sheet, they start withdrawing lines of credit. It is not affecting us because we are positioned at the top of the food chain, so it is the smaller banks that will suffer.

I think it will also affect exchange rates and this will affect growth because Africa is very much a trading continent – we export a lot and we import a lot and we don’t manufacture as much as we should. We can see significant risks to some economies in those two areas.

Q: What are some of the frustrations that you faced in your career?

A: I think we are still work in progress. I mean we are probably a $17bn or $18bn bank and in the scheme of things, that is not a very big bank – in Western European terms, that is quite a small bank. In South African banking terms that is still a very small bank. Of course, we have grown very fast over the last five to six years, since I got back.

We never saw impediments as such, we saw challenges. Our motto in Ecobank is ‘We never give up’. So for example, while the issue of regulation across Africa is a challenge, for us it is also a competitive advantage because we know how to do things. Infrastructure is a challenge and so we built our own infrastructure – we have the largest corporate telecoms network in Africa. We built a $50m technology centre in Accra and right now we are running the whole group from it.

Other banks are trying to do the same thing but it will take them another three to four years, so we have an advantage. African countries are relatively volatile but we take a long-term view. For example, in Côte d’Ivoire we were the last bank to close and among the first to reopen, and we still made a significant profit.

Q: Do you see a trend in African banking as a whole or is it really regionally structured?

A: There is clearly a trend and the major trend, from an industrial standpoint, is consolidation. And I think it is a very positive because while a lot of African countries are very small, they have 20 to 30 different banks – it makes no sense. I have always argued with central bank governors and ministers of finance that you need big banks to develop countries. Small banks do not develop a country.

Nigeria has had its problems, as you know, but following the banking consolidation, if you want to raise a billion-dollar loan, it can be done; there are very few projects in most African countries that cost more than a billion dollars.

In Ghana, I had the same discourse and I told them “you need to consolidate the market because you need big banks”. Ghana’s export trade is worth several billions of dollars but small banks cannot underwrite such transactions.

This has been an impetus behind the Trust Bank acquisition, which makes us the number-one bank in Ghana. It means that if there is a transaction over a certain size, we can do it. If there were two or three such banks in Ghana, then Ghanaian companies wouldn’t have to go abroad looking for $20m, $30m, or $40m. There are very few projects in Ghana that are in excess of $100m.

Q: What do you think of the increasing interests in Africa taken by international banks?

A: I think it is a logical interest; the West is really not competitive any more. The banks there compete on reducing cost, they don’t compete on growth.

If you want to grow, you’d have to go to the Far East or to Africa.

I think Africa is probably about 20 years behind China in terms of growth. If you were in China 20 years ago and see the sort of returns their clients are now getting on the minority stakes they had in Chinese banks, then by the same thinking, if you get into Africa now, in 10 to 20 years’ time – when Africa really emerges – those who have invested early enough will be reaping the benefits.

Q: Which do you think is a healthier option for international banks – to come and set up lock, stock and barrel, or to take shares?

A: What tends to happen is you have a combination of both and I don’t think one is necessarily preferable to the other. But one of the things I would like to say very clearly, and this is something that African governments and African leadership should be aware of, is if you go to Britain, the biggest banks in Britain are British. In the US, the biggest banks are American. The biggest banks in Germany are German, the biggest banks in China are Chinese and in India the biggest banks are Indian. What does that tell you?

It says that African governments that want to develop need to develop big national banks. The concept of waiting for a foreign investor, a foreign bank to help develop your country is not how you get these improvements.

So Nigeria, for example, has done the right thing by creating large domestic banks. I think Ghana should do the same thing. South Africa has already done it and Kenya should be following suit. All the countries should be nurturing national champions.

Q: How do you think this can be achieved? Through more consolidation, acquisitions and mergers?

A: Let me speak for Ecobank. Acquisitions and alliances are two different things but they are part of a holistic strategy for the group.

We have a very flexible approach. We grow by acquisition and organically, whichever is the best option. So in the case of Oceanic bank, which we acquired, it was a very opportune transaction to enable us to achieve scale in Nigeria. We are now one of the top five banks in the country. We have done the same in Ghana; following our acquisition of Trust Bank, we are now the largest bank in Ghana.

Q: And the Nedbank alliance, what is that driven by?

A: The Nedbank alliance is driven by the basic consideration that we could not compete effectively against the South African banks in South Africa. So the best thing to do was to create an alliance with one of them.

Nedbank, for example, is an $80bn bank. We said we were not going to go there and compete with these guys.

So this alliance allows us to create a one-bank platform in South Africa with connectivity with the rest of Africa. If a South African mining company needs foreign exchange or payments to its mines in Mali, it doesn’t have to go to another South African bank, it can go to Nedbank and Nedbank would use the Ecobank network and its competency to make the transaction happen.

Q: Is your focus on big-ticket transactions or the more day-to-day banking services?

A: Our focus has not been so much about big ticket; we do have a strategy of serving people and businesses for their day-to-day banking needs: payments, transfers, foreign exchange and local currency loans. That is where the bulk of banking profit is made.

The big items tend to get a lot of publicity. They, to be fair, don’t make us much money and a few of them go very badly wrong eventually. But it is important that we get involved in big-ticket items in so far as they support development. So we are very active in areas where we think it makes sense: energy, infrastructure, oil and gas.

Q: Are you still trying to gain market share?

A: Yes, we are. Our strategy is to be in the top three and wherever possible number one in the markets we operate in.

Q: In terms of capital, or in terms of branch networks?

A: In terms of some key indices that we think support long-term profitability for our shareholders, things like: branch network, capital, revenues, number of customers and so on.

We started in West Africa and then moved to Central Africa, then Eastern Africa and now we have moved into Southern Africa. We moved, actually, relatively fast compared to the market because we feel that this is changing with world class professionals, world class infrastructure. We are going to be making more investments.

Q: How many of your customers actually use your network connections all over Africa, or do they use it mainly as a local bank, a more competitive local bank?

A: We have 1,140 branches, across Africa. We have the largest branch network of any bank in sub-Saharan Africa and the second largest in Africa. All Ecobank branches are centrally connected on an online, real-time basis.

 
Q: And your customers use it?

A: Yes. We have several facilities that work because of that platform, for example, the Ecobank Regional Card, which allows you to withdraw local currency across our whole network; and this is not a Visa or MasterCard, it’s our own regional card, effectively giving you a regional banking network. And our integrated network centred in Accra enables us to make rapid transfers that allow us to transfer money across borders and regions.

Q: What are your thoughts on banking regulation in Africa and the countries in which you operate.

A: I have certainly been impressed with the manner in which regulators have been able to manage the banking industry, through some of the most difficult crises. You could almost argue that regulators in Africa have done better than regulators in Western Europe on the basis of the crisis in the banking sector. In Africa, we have one or two similar cases but not as serious. Even in the case of Nigeria, where there was a very clear need for some action, the action was swift, it was precise and the outcome was effective.

I think African regulators should be applauded for this because they have taken a proactive approach to it. Regulation is more stringent now than it has been for years. We are very compliant as an institution and for us it’s been pretty much home territory. But I think the regulators in Africa, given the existing circumstances, are doing a very good job.

Q: If we can switch back a little bit to the overall economy in Africa and its recent performance, how do you see the next five years?

A: I’m very positive about the next five years but realistic. I think the only uncertainties we have is what happens in the West. African government institutions that have managed to improve their fiscal management. They’ve tried to encourage growth. But African growth is now very highly dependent on its globalisation, its connection with the West. So if those markets stutter or falter, then I think it will affect Africa. How much it will do so, I really couldn’t say.

If Africa is to achieve what people say that it might achieve, say the status of China in another 20/30 years’ time, does it have to industrialise or is there an alternative?

We don’t want to be China. We want to be Africa. That means that we need to do things right in a way that allows Africa to catch up with the rest of the world.

Whatever you say, industrialisation is important. No country has developed in the business of micro-finance, it’s never happened. The millions of young people coming out of schools and universities, how are they going to be employed? The unemployment rate for youths in some of our markets is 70%. Agriculture needs power. Industry needs power and therefore power, in my opinion, is central to the future of Africa.

Q: Is there a gap between perceptions of the private sector and the national governments and what is the effect of this gap, if there is one?

A: I think there’s a lack of reality in terms of how business works. An example I give is mobile phones. Why has the mobile phone industry achieved the level of success it has? There’s only one simple reason; it was not really regulated

In Nigeria, the price of the mobile phone is now is a tenth of what it used to be. It wasn’t the government that regulated the price, it was the market. Now, going into the power sector, what happens? Power is regulated. So, in most African countries, the day you finish building the power plant, you start making losses because the tariffs are unrealistic. So, how do you expect someone to invest in power?

Take the case of the subsidy in Nigeria: unless you remove that subsidy, the refineries won’t work because every refinery is going to make a loss, so how do you expect the private sector to invest in refineries?

Q: What has given you the most satisfaction working at Ecobank?

A: I have a certain belief in Africa that I think drives everything we’re doing in Africa. I’ve worked with some of the most incredible Africans and they’ve come from all nationalities; and I don’t know what you get your high from but I get a kick from the fact that you know you have 10 people around the table and they’re from 10 different nationalities and the language is going between English, French, English, French and now we’re adding Portuguese; but the key is that there is a common objective.

For me, it’s something that I just feel is the future of Africa, that’s what Africa should be. We shouldn’t lose identities but we should have that common objective and if we had that then we would build a unique continent. You know people say Africa is fragmented but that should not be a basis for not working together towards a common goal. In Ecobank that’s what we set out to do. We’re not yet there yet, but we’ve made considerable headway.

I am very passionate about Africa and I think opportunities in Africa are understated; I think there is a perception issue. All of the challenges are short-term challenges – we take a long-term view. When people ask me what is your African strategy, my answer is simple: Africa is our strategy.

Q: There’s quite a strong feeling that maybe you are leaving the organisation at little too early and that you should have stayed on to consolidate your leasing positions and so on.

A: What is the right time to leave an organisation? There’s never a right time. I am leaving at almost fifty-nine and a half years of age. There is a mandatory retirement age of 60; so I am only leaving a few months before I am required to retire anyway.

Secondly, I think a lot of the heavy lifting has been done and there is still some work to do but [if you look at the Oceanic transaction] there’s probably not going to be another $6bn acquisition for Ecobank for a long time to come. Certainly not as long as we stick to our strategy.

In terms of capital raising, we will raise the balance of the capital this year before I leave. I think most of the important things would have been done.

But even more importantly, the group is moving into a different phase, where building an institution becomes very important, so that the institution becomes self-sustaining.

I personally believe, and this is a belief that I think I’ve shared with most people, is that nobody is indispensable. If I got run over by a truck, the institution will continue. So it is better to manage the succession process. We believed, and the board believed, that we needed to get a younger person in, with the right experience and background to try and take it to the next level and I think we’ve chosen the right person and am looking forward as a shareholder to ensure that he succeeds exceedingly well, so that I can retire and collect my dividends regularly!