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Société Générale among French and UK banks pulling back from Africa

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Just a few years ago, UK and French banks were hyping Africa as a growth market and a place to burnish their sustainability credentials. But several have since sold subsidiaries across the continent. This might look like a bad sign for a continent with some of the world’s most urgent sustainable development challenges. But it leaves an opening for a new crop of pan-African banking groups that could boost financial inclusion and domestic investment. Below, I report whether this could become a reality.

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sustainable development

What do European banks’ cold feet mean for Africa?

For years, Société Générale touted its far-flung holdings in Africa as proof of its commitment to sustainable growth.

In a 2018 post, “Africa — our reasons for believing”, then-chief executive Frédéric Oudéa pointed to a new mobile banking service and an “electronic wallet,” called YUP, which he said would increase Africans’ access to banking. As late as 2021, the third-largest French bank by market value was advertising its financing of climate-resilient African cities in the FT.

But YUP shut down in 2022, and last year, SocGen, which operated in more than a dozen African countries, signed agreements to dispose of subsidiaries in the Republic of Congo, Equatorial Guinea, Chad and Mauritania. Earlier this month, Africa Intelligence reported that SocGen had asked the investment bank Lazard to find African buyers for subsidiaries in Tunisia, Cameroon and Ghana (SocGen declined to comment).

SocGen’s pullback is partly about conditions specific to the bank, which is seeking to focus on core markets after weak profits. But it’s also part of a wider trend of French and UK bank exits from Africa, where previously they had presented demographics and digitalisation as tailwinds for growth.

In 2022, Barclays sold the last part of what had been a controlling stake in South Africa-based Absa Group, which had given it a footprint in 12 African countries. London-listed Standard Chartered announced in 2022 that it would leave five African countries. Crédit Agricole is now present in just two African countries, Algeria and Egypt, after the sale of its Moroccan subsidiary in 2022 and its South African subsidiary in 2023. BNP Paribas, France’s biggest bank, closed its South African corporate and investment banking operation last month.

A range of factors explain the departures. Analysts Jamal El Mellali and Ramy Habibi Alaoui, who cover African banking at Fitch Ratings, said some European banks had not spotted opportunities for “synergies” between Africa and other parts of their operations, and several had decided that higher risks and lower returns from African subsidiaries did not justify an ongoing presence.

There is also a geopolitical dimension to the French banks’ exit, as President Emmanuel Macron’s government rethinks its strategic presence on the continent amid security and political challenges, and as Paris faces growing competition for influence from Russia and China.

Alex Vines, who directs the Africa Programme at UK-based think-tank Chatham House, told me France was entering a “deep moment of introspection” on its presence in the region, leading to a “thinning out of expertise in Paris on the Africa issue”.

But the retreat of international banks may not necessarily be a bad sign for Africa’s sustainable development goals.

The upside for Africa

Two West African banks have been quick to capitalise on the departures. Burkina Faso’s Coris Group, founded in 2008, and Guinea’s Vista Group, launched in 2016, have both recently snapped up subsidiaries from French banks including SocGen. Both emphasise their work with small businesses that are frequently overlooked.

“These large banking groups that are exiting — we remain colleagues, and we will continue working together on projects,” Martial Goeh-Akue, director-general of Vista Bank Guinea, told me. “But their departure leaves a field that is not exactly empty,” he said. “It’s up to us to durably finance our African economies”

The depth and resilience of capital markets and the financial services sector are crucial for development. Local banks can play a critical role in reducing poverty and supporting sustainable growth, from lending to woman-run businesses to financing infrastructure. Vista Bank Guinea had experimented with “concept stores” and incubators for local businesses, Goeh-Akue said.

While Vista and Coris don’t rival the scale of Africa’s biggest banks by assets — South Africa-based Standard Bank Group and the National Bank of Egypt — they’ve been growing rapidly.

Vista is present in Guinea, Gambia, Sierra Leone, and Burkina Faso, and if acquisitions agreed last year are finalised, the bank will have a presence in 16 African countries, according to Fitch. Coris currently operates in 10 African countries.

The growth of pan-African bank groups such as Vista and Coris could boost financial inclusion, El Mellali told me. French and UK banks were subject to tighter regulatory capital requirements than their African counterparts, he said, and had a higher cost of capital for routine activities such as compliance and IT.

“French banks have a very conservative risk appetite, so their subsidiaries in Africa tend to shun smaller companies and the lower end of the retail segment,” El Mellali added. “Their lending criteria is, to some extent, adapted to the local banking sectors, but . . . they can’t just get rid of their DNA.”

International sales haven’t gone exclusively to West African entrants. Société Générale Maroc was acquired by the Saham Group, a Morocco-based private equity conglomerate. And ex-European subsidiaries are now acquiring each other: Absa Group just bought an HSBC subsidiary in Mauritius.

Disruptions to cross-border payments

Of course, merely changing hands to African owners is no guarantee of governance that is better for ordinary Africans. It’s worth asking why Moroccan banks, which have a big existing presence in francophone West Africa, haven’t been more actively snapping up more of these subsidiaries.

One risk, in the reshuffling, is disruption to correspondent banking relationships, which facilitate cross-border payments. French banks with African subsidiaries typically have a dedicated foreign currency line for trade finance, and their exits could disrupt trade financing or remittance payments.

Asked what new opportunities could stem from the ongoing shake-up in Africa’s bank sector, Goeh-Akue referred to the Pan-African Payment and Settlement System, a continent-wide digital payment system using local currencies, and other efforts to grow intra-African trade, which he said remained weak.

“Pan-African integration — that’s where we, where Vista, can really benefit from growth,” he said, “as we enter an increasingly uncertain global environment.”

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