Tag Archives: banking in Africa

World’s Toy: the African Country

Ouagadougou City Burkna Faso. image from wikipedia

Investors are yanking their cash from African assets, until recently a popular play for the adventurous, as a toxic confluence of factors overhangs the continent.Crashing commodity prices, a Chinese slowdown and a string of policy failures are forcing investors to reassess the risk of investing in Africa after years of optimism about its growth prospects.Stock markets and currencies have been selling off across the continent, especially in commodity-dependent economies. Nigeria, the continent’s largest economy and longtime investor darling, has one of the world’s worst-performing stock indexes this year, down by 14% since the start of 2016. The S&P Zambia Index has fared even worse over the past year, plunging 45% as the country’s copper exports tumbled on softening Chinese demand. President Edgar Lungu last September called for a day of national prayer to petition God to shore up Zambia’s currency, the kwacha. At the time, the kwacha had lost 45% of its value against the dollar in 2015.  The declines mean African equities are performing worse than any other frontier markets. The MSCI Africa index tumbled 19% last year, significantly more than the overall MSCI Frontier Markets index….The upshot is that frontier investors are moving their money from Africa to Asian countries like Pakistan, Bangladesh and Vietnam; net energy and commodity importers which have shown more commitment to industrialization….

The shift has also pushed up the costs of sovereign borrowing, even as African countries slow down their issuance of bonds in international capital markets. In 2014, African sovereigns issued $12 billion worth of bonds in international capital markets; last year it was half that, according to Deutsche Bank.Ghana, mired in an economic crisis, issued the most expensive African Eurobond in history late last year, paying a whopping 10.75% for $1 billion; far higher than the single-digit interest rates the government had become accustomed to paying for international bonds in recent years….

[T]here are important exceptions to the rule: Kenya, which has a more diversified economy, and Ivory Coast, the world’s top producer of cocoa, are still attracting frontier investors…..

“One of the biggest flaws when investors look at Africa is that they think of it as a country and not a continent composed of very unique countries and companies,” says Laura Geritz, who runs U.S.-based Wasatch Frontier Emerging Small Countries with $1.1 billion under management.

Excerpts from  Africa Bruised by Investor Exodus, Wall Street Journal, Feb. 26, 2016

Banks of the World: Dahabshiil

Dahabshiil outlet in Columbus, Ohio. Image from wikipedia

Dahabshiil…. is now trying to become something bigger: a bank….

Since most Somalis do not own passports (which are in any case far from secure as proofs of identity), Dahabshiil relies on the strength of the clan network. In a country where men can recite their ancestors’ names back fifteen generations, references are an effective way to prove that new customers are who they say they are. After that, their biometric information and fingerprints are stored in a Dahabshiil database, so that later transactions can be verified. Many financial transactions are filmed, in case records are needed later.

This system has fended off bureaucrats determined to believe the worst about the firm and about Somalia, says Mr Duale. But it has not completely warded off controversy. Barclays closed Dahabshiil’s London account in 2013 largely because of worries about its reputation. The British bank did not want to risk being associated with car bombs and warfare in Somalia. After an outcry, and a court case, the two firms reached a settlement—but Barclays did not reopen the account. Mr Duale is now coy about how the firm banks in the West, refusing to reveal the identity of his partners…Zakaria Hussein Ali, the local chief operations officer, explains in a broad London accent how Dahabshiil is like an 18th-century European family bank—relying on trust and careful management to get by. He says he hopes that by the end of the century, Dahabshiil will be as big as HSBC or Citigroup is now. Such grandiose ambitions show how far it has already come.

Banking in Africa: Transfer Window, Economist,  Oct. 17, at 78