The first time I interviewed Ade Ayeyemi was in September 2016, a year after he’d joined the bank from Citi as the Group CEO. We met in Montreal during the Global Fund’s replenishment conference.
The Global Fund is the biggest organisation in the fight against AIDS, TB and malaria. The replenishment conference had raised $13bn and Ecobank had pledged to commit an additional $3m during the Montreal conference, or a total of $6m between 2014-2019, to support the Fund’s efforts in Africa, where most of its work in terms of prevention and treatment happens.
My meeting with him this time was against a backdrop of a health crisis that has effectively locked down half the world, with economic consequences that could prove very grave for the continent. Like most meetings in a Covid-19 world, this one took place via Teams, Microsoft’s own virtual collaboration platform.
Public health and economic wellbeing
During our first meeting, I’d wondered if that commitment to the Global Fund had been little more than ticking the CSR box. So I decided to ask him, now we’re experiencing a once-in-a-lifetime health crisis, whether he felt somewhat vindicated. “The crisis is demonstrating the importance of public health as one of the foundation infrastructure for economic wellbeing,” he tells me, hinting that economies and governments will have to recalibrate their priorities.
“As a society, there will be some re-alignment and some changes. It was good to have supported those initiatives at that time.”
The private sector across Africa has risen to the challenge during this latest pandemic. Given the continent’s fragile healthcare systems, companies across the spectrum have mobilised efforts to support the most vulnerable and provide assistance to purchase protective equipment and tests and thus build resilience into the system.
The week before our video call, Ecobank had just announced a $3m contribution supporting various agencies and international organisations on the continent in the fight against Covid-19.
Uptake in digital services
That same week, they’d also announced a partnership with the AU’s development agency (AUDA-NEPAD) to support MSMEs, the lifeblood of African economies. Given their large African footprint in 36 countries, did they see any major trends – shifts in patterns of spending, in transactions?
With lockdowns in many of the countries they operate in, he told me, and enforced physical distancing, they did see a significant reduction in economic activity. Cross-border transactions, namely around trade, for example saw a large drop. There was also a slowdown in the buying and selling of goods.
At the same time, there was a considerable uptake in their digital services, and the fact that transfers, payment of salaries and other services could be done digitally, effectively kept the economies ticking.
“In Nigeria, banks were given 24hrs notice to close,” he says. “Thirty years ago you would have had riots.” But today, the transition was relatively seamless and the enforced mass experimentation of having to do everything remotely and digitally has shown that the backbone and infrastructure is there.
As well as a surge in internet banking and digital transfers, they did notice that people were also preserving their cash savings, given the uncertainty caused by the pandemic.
Private sector must step in
Does he foresee greater investments in healthcare from the private sector? Governments, he says, will not be able to do it alone – that is a certainty. So the private sector will have to step in one way or another. “This pandemic will have alerted the world of the need for a functioning healthcare system. And the market is there.” It is estimated that Nigerians alone spend over $2bn annually on medical care abroad.
As countries exit lockdowns and rebuild their economies, is he worried about the damage that has been caused by this global health and economic crisis? Commodity prices having recovered from the fall in 2014/5, have once again tumbled, the most noticeable of these being oil.
Questioned on his bank’s exposure to the oil and gas sector in Nigeria and the threat of increased impairments, he appeared calm. “Nigeria as a country,” he explains, “only contributes some 15% of the bank’s revenues and less than 5% of the bank’s profits before tax.”
As far as Ecobank is concerned, diversification through its large footprint will stand it in good stead, he says, and warns against knee-jerk reactions. The bank, he stresses, is there to help businesses ride this wave, working alongside them, across all industries.
“Am I concerned for our customers in oil and gas? Yes. But if a business is decently run, the fall in the price of oil may delay payments but businesses will ultimately be able to make the payments.
“So things will change, but we don’t see it as catastrophic. There will be some customers that may have bigger problems and we are working with them to see the best way to weather the storm.”
Ecobank can withstand shocks
The company made profits of $400m before tax last year, he says, and he feels it is well positioned to withstand the possible shocks from the pandemic as it works its way through the economy.
Does that mean he’s expecting a V-shaped recovery? “It’s too early,” he notes, “for anyone to predict what type of recovery we will have, and a lot will depend on how we control this virus – not just as a continent but globally, and how the virus evolves.”
The bank, he says, is prepared. Several scenarios have been worked on, ranging from the most optimistic (a quick vaccine or effective therapy), which would lead to a V-shaped recovery, to a prolonged economic slowdown, resembling more an L-shaped scenario.
Government decisions will be critical
“The role of governments and policymakers in ensuring that the right choices are taken on policy and actions at the right time,” he stresses, “will be critical in determining the economic and health outcomes in the different countries.”
Does this uncertainty and possible prolonged slowdown mean that the regulators will have to be more lenient with the banks and give them more space to support the economy?
He thinks that monetary policy will have to be loosened to encourage spending and kick-start demand – and that includes the regulators having policies that are supportive of the banking system. “It will be important that the capital elevation that was created as a result of the global financial crisis [when banks were asked to hold larger capital reserves], is now drawn down to allow the society to survive and build it up again over time.”
Twice in our discussion, he emphasised the role of regulators and central banks and the need to provide banks with sufficient flexibility from both a capital and operational point of view to enable them to play a meaningful role in getting the economy back on its feet. Operationally, banks should not have to maintain branches just for the sake of it, he stressed, especially as the world digitises.
Will African economies have to change fundamentally? He says this crisis does present an opportunity and “technology is on our side. You can have a good diagnostic centre in a place like Lagos or Timbuktu, using the best experts from across the world. You can use 3D printing to enable complicated manufacturing.”
Business models, he argues, are radically changing and you can do things on the continent that were unthinkable 10 years ago. But he doesn’t think it’s just going to happen.
“The crisis allows us to start thinking about how we re-start our economies. The continent is not destined to be poor, but at the same time, we are not predetermined to be successful. We need to make the right choices, and if we make them, we can actually get a better outcome.”