With swelling coffers but dimmer prospects for their India-focused business (see page 45), Mauritian banks are building up momentum in Africa. The secondlargest lender in Mauritius, the State Bank of Mauritius (SBM), kickstarted its expansion strategy at the end of 2016 with the acquisition of Fidelity Commercial Bank of Kenya. SBM is buying the entire share capital for KSH100 ($0.96) a share and injecting Ksh1.46bn of new capital. Fidelity had 14 branches in Kenya.
Other Mauritian banks, like Afrasia and Mauritius Commercial Bank (MCB), already have their own African footprints. Since 2013, the island’s financial institutions have been looking for outlets for their excess liquidity. Local banks are growing, but the demand for credit remains low. In December 2016, local commercial banks had excess cash holdings of more than Rs10bn ($279m).
SBM launched operations in Madagascar in 1998 and is now focusing more on the continent. Kee Chong Li Kwong Wing, chairman of SBM, explains the motivation for the Fidelity Commercial Bank purchase: “The economic potential of Africa remains solid, and the decision of Western banks to withdraw from the continent opens up opportunities for us to enter […]. We have a well-focused strategy, starting with the East African region. This region has strong growth potential and, taking into consideration that the banking sector is expected to consolidate, SBM stands ready to seize the opportunities that arise.” He adds that banks in Côte d’ivoire, Ghana, Nigeria and Senegal have contacted SBM about potential deals.
SBM is following the path of other Mauritian companies that have a footprint in East Africa says Afsar Ebrahim, deputy group managing director of global audit firm BDO. “Mauritian operators are already in the sugar sector in Kenya, Tanzania, Côte d’ivoire, and are also present in Uganda and Rwanda. In terms of sectors, agribusiness, retail and financial services are key areas where growth is likely to come from.”
Several other African banking groups have followed their key customers into the continent – think South Africa’s Standard Bank working with MTN and Shoprite, and Attijariwafa expanding alongside Royal Air Maroc and Maroc Telecom.
While SBM’S expansion is recent, MCB – the country’s largest lender – has shown an interest in the continent since the early 1990s. It has established a presence on the continent via operations in Madagascar, Mozambique, the Seychelles and South Africa. The strategy is starting to pay off, and foreign activities accounted for 38% of MCB’S net profit for 2015/2016.
Pierre Guy Noël, MCB’S chief executive, says: “Africa remains our main focus for growth. There are plenty of things we can do in Africa.” With its ‘bank of banks’ concept, MCB is trying to position itself as a partner of African banks rather than a competitor, in essence offering African banks a platform for their own banking needs.
Not all Mauritian banks have been successful in their African adventures. Afrasia Bank, among the five domestic systemically important banks as identified by the Bank of Mauritius, is among those that suffered setbacks. Facing liquidity challenges, the bank had to cease operations in Zimbabwe in 2015.
The bank is now focusing on working with clients that generate investment and trade flows within Africa and between Africa and the rest of the world, with Mauritius as the gateway.