Building the Asia-Mauritius-Africa Corridor (*Branded Content)

Established in 1973, SBM has more than 20% of the market share in domestic advances and deposits in Mauritius and is also present in Madagascar, India and Kenya. It is one of the biggest banks not only in Mauritius but also East Africa, with a view to expanding its activities not only on the continent but also to facilitate trade between Asia and Africa. As part of of our Special Report on Mauritius – published in our February print edition – we spoke to the group’s Chairman K.C. Li Kwong Wing.

AB: It appears that the pace of the developmental process is most uneven from country to country in Africa. Are there any rational explanations to this or it’s all about luck?

KC Kwong Wing: Over the last 50 years, Mauritius, has made tremendous improvement on the economic and social fronts, moving from a poor mono crop economy to a service driven one.

This progress has been marked by different phases of growth: Since the early 1970’s, industrialisation set the pace for higher growth. Unemployment dropped from 30% to 3%. Thousands of women became professionally productive. Standard of living improved substantially and more children went to school. Our human asset performed well and became highly educated.

Rather than luck, as some suggest, I would say that the implementation of well-thought out strategies made the difference. The industrialization process was backed by policy measures such as fiscal and non-fiscal incentives to promote exports and attract foreign investments, supported by good governance, rule of law, political and social stability. Gradually, products and markets diversification created more resilience to external shocks.

When it comes to the rest of Africa, it is true that different countries grow at different speeds. Today, Rwanda, Ghana and Senegal and others are doing well, while some are lagging behind. Political stability, transparency and low corruption, infrastructure development, adequate business regulatory frameworks, etc are important elements that contribute towards growth and development. The contrary keeps away foreign investors.

If good planning, implementation of the right policy frameworks and a good economic climate prevail, countries lagging behind will catch up fast. We in Africa can no longer afford this paradox of being rich in resources yet poor economically.

As far as Mauritius is concerned, it is emerging as an International Financial Centre, moving up the value chain with the help of technology and talent. Are you optimistic or pessimistic regarding the overall developmental process on the continent, including the banking and financial sector?

Some countries in the region have good growth potential. The development of the African financial sector will occur only if there is demand for such services. This in turn depends on a host of other parameters, like infrastructural availability, connectivity, accessibility to services and education and so on.

Over the last few years, the rapid growth of the African middle class has led to an increase in the demand for financial services – for instance, the growth in demand for retail banking services in Africa. This is thanks to the emerging middle class – an income category which has tripled over the past 30 years to 355m or more than 34% of the continent’s population.

Likewise, the emergence of the micro, small and medium enterprises makes demand for financial services and financial support for growth even more intense. This trend augurs well to attract more diversified and sophisticated financial solutions.

The growth and development of Africa’s financial sector relies on the ability to adopt the latest technology. Today the financial sector is driven by technology.

However, risk management and investors’ perception about Africa is another issue. Implementation of sound regulations as per global standards can be helpful.

Having said all this, the truth is I am neither ‘Afro-sceptic’ nor ‘Afro-optimist’ but ‘Afro-realist’. As such, I recognize the fact that there are huge opportunities and huge challenges. I believe that as a region, the path to success is that we should be in this together.

In 2019, are you satisfied with the role and presence of SBM Group on the continent or do you think the Group needs to go deeper and wider and get more engaged?

Let’s look at things in a step by step way. SBM has reinforced its presence in Kenya through the acquisition of selected assets and liabilities of Chase Bank Limited (currently in receivership) and is now operating more than 60 branches across the country. We are also present in India, Madagascar and will be soon in The Seychelles.

Our presence in Kenya is quite new. In one year,we have been able to grow from 31^st to 11^th place to become a strong Top Tier 2 bank. With its solid capital base, SBM Group possesses the right infrastructure, resources, ability and strategy to grow further on the continent. Our objective is simple: be a Tier 1 bank in Kenya.

Our immediate Africa strategy is to first stabilise our position in Kenya, strengthen our base there. We are looking closely at all opportunities for further growth in Africa. However, we have to be cautious and selective.

At a time when trade wars and protectionism are real global issues, do you still feel comfortable that things may not turn worse? Trading is known to be the right hand arm of the banking business…

When major countries engage in protectionism and trade wars, this poses a real risk to the global economy. However, trade flows will not be dragged down completely. We are ideally positioned between Africa and Asia as this region is expected to witness a significant above-trend increase in trade flows in the coming years. SBM is positioning itself to capitalise on these developments.

In terms of performance, how is the SBM Group doing in the Indian Ocean, Africa and Asia?

As I said earlier, operations in Kenya are still new and the early signs are quite encouraging.

We are progressing well in respect of our strategy in India where we are changing our business model. We have just received a banking license from the Reserve Bank of India to carry out business as a Wholly Owned Subsidiary.

Our presence in the key locations of India, East Africa and Mauritius will enable us to facilitate business for our clients along the corridors of Asia-Africa-India-Mauritius, capitalising on the Island’s International Financial Centre to serve both Africa and South Asia.

We also have five branches in Madagascar strategically well located. We shall be operational in Seychelles in the coming months. This will complete our Indian Ocean presence. And we look forward to serving the Blue Economy.

Has the association between SBM Group and Afreximbank met all expectations?

Together with Afreximbank, we have made financial history by issuing and listing Depositary Receipts of Afreximbank on the Mauritian stock market. As a director on the Board of Afreximbank, I can say that we share a good working relationship. We want to work in a mutually beneficial manner to promote intra-Africa trade and investment.

How is the relationship between the SBM Group and ConsenSys and SALT and what does the future looks like when it comes to technology and digital banking?

SBM is the first financial institution to explore the potentials of block chain technology and crypto-currencies. With ConsenSys and SALT, SBM undertook test cases to introduce some innovative financial services. SBM wants to espouse the newest technology to enhance customer service and maintain proximity with its clients.

Our latest innovation is the Digital Private Wealth Platform, MoneyWare, a cross-asset, front to back solution, which includes client onboarding, risk profiling, model portfolios and investment limits, trade order management, settlements and fee management.

Despite all assurances from bankers, the common people are still afraid about hacking and hackers? How do you improve on this to make technology and digital operations successful in this milieu?

Cyber threats are one of the biggest risks cited by banks globally and this is unfortunately on the rise. Like any other area of business exposed to external threats, close monitoring and management of the systems and processes are very important.

It is a mix of both operational and technology controls that have to be implemented. Close monitoring of the operations and periodic reviews of the effectiveness of the controls need to be performed.

Collaboration with partners, technology service providers and international cybercrime control agencies are required to mitigate risks.

Beside operational controls, the maintenance of basic discipline by all players in the eco-system is also important to reducing the number of incidents and therefore allaying the fears associated with hacking and hackers.

SBM is gearing up to be in line with the latest standards of cyber security.

After the renegotiation of the original Double Taxation Agreement with India, where do things stand right now?

On the back of the previous Double Taxation Agreement with India, Mauritius had been sleeping on its laurels and there were no grounds to look for new opportunities in other jurisdictions.

The renegotiation of the Double Taxation Agreement with India has shaken up the Mauritian economy but at the same time has given a new energy to the Mauritian financial sector.

With this renegotiation, Mauritius has to look for new products and markets such as Africa. For us, it has been an opportunity to develop more substance and capability in our business.

Given our strategic position in the Indian Ocean, Mauritius is emerging as an important financial platform within the Africa-Asia corridor. There is already a major increase in the number of global business companies doing business in Africa.

To improve on this path, we must remain up to date with the laws, always ensure compliance with both local and international standards, build competence and recruit and retain talent.

To support this strategy, we also need to create better infrastructure and connectivity. Both the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and the OECD have recognized Mauritius as a clean jurisdiction. According to the ESAAMLG Report, Mauritius is one of the first countries in the region to develop anti-money laundering and combating of terrorist financing regimes. We must remain vigilant and be ahead of the curve.