Southern Africa: Dominance Under Threat

As in our pan-African survey of the Top 100 African Banks, South African banks dominate our table of the Top 25 banks in Southern Africa. The largest South African financial institutions are more than 10 times the size of the largest in any other African country.

As last year, the five biggest banks in the Southern African Development Community (SADC) region outside South Africa are all Angolan, reflecting the continued strong economic growth and cash rich economy that stems from the country’s oil industry.

The number of Southern African banks in our Top 100 has fallen from 22 last year to 19 in this year’s survey. Bidvest Bank secures 25th position this year with a value of $103m, far higher than the $62m that Standard Bank Mozambique needed to secure the same spot in our 2011 regional table.

There are still three Namibian banks in the regional table and two from Botswana but Zambia and Malawi have both lost their single entries of last year: Zambia National Commercial Bank and National Bank of Malawi, while Standard Bank of Mozambique has also dropped out of the rankings.

Boost for Mozambique banks
On a more positive note, the two remaining Mozambican banks have increased their capital strength over the past year. Millennium BIM moves up from 15th to 13th as a result of a big increase in value from $170m to $244m, while Banco Comercial e de Investimentos is worth $127m in this year’s table in 21st position.

According to figures from the Bank of Mozambique, just 1m out of the 23m population of Mozambique hold bank accounts. The domestic banking sector is still at a relatively early stage of development, while mobile banking has yet to take off.

However, continued strong economic growth, improving standards of living and not one but three impending booms – in the form of coal, gas and transport – should see the economy boom in the near future, providing a much more attractive environment within which to offer banking services. Foreign banks may also begin to take more of an interest in the country following the government’s decision in March to revise its 2002 money laundering and terrorism finance law.

In addition, the Bank of Mozambique and the Confederation of Economic Associations of Mozambique are setting up a Credit Risk Centre to share information on customer credit, in order to help banks and other financial institutions to offer lower interest rates to suitable customers.

The Minister for Industry and Trade, Armando Inroga, said: “We believe that reducing interest rates will drive commercial credit which, at the moment, is being driven by a policy to create and encourage micro-finance institutions for rural areas.”

The governor of the Bank of Mozambique, Ernesto Gove said: “In 2011, we continued to assist in the expansion of financial services as part of the strategic aim of ‘bancarisation’ of the economy, having increased the number of financial and credit institutions operating in the country and that progress was seen alongside the consolidation of the main indicators of solidity of the financial system, which remained satisfactory and above the levels outlined in the Basil I criteria.”

The implementation of Basel III capital requirements, which were drawn up to prevent a repeat of the 2008–09 global financial crisis, is a major concern for South African banks. Research by consultants Bain & Co found that the net stable funding ratio (NSFR) required by Basel III would cost South Africa’s five biggest banks R471bn ($56.4bn) in new capital through increased costs or greater wholesale lending.

Bain & Co partner Fabrice Franzen commented: “The liquidity coverage ratio is not a problem as the Reserve Bank has set up a liquidity facility to support bank. It is costly to put more liquidity aside. It could be questioned whether banks would be able to increase their retail deposits in time. It is quite tricky to obtain the right returns and in the process not consume too much capital.” Higher interest may be charged on loans in order to cover any shortfalls.