‘Three more years’

New ex­pan­sion tar­gets make for cu­ri­ous read­ing

Finweek English Edition - - Business Strategy - Sikonathi Mantshantsha

ADAY AF­TER LAUNCH­ING op­er­a­tions in Africa’s most pop­u­lous na­tion, fi­nan­cial ser­vices com­pany Blue Fi­nan­cial Ser­vices said it would con­tinue to ex­pand into more mar­kets be­fore it pauses to take stock of its achieve­ments. “We’ll go into all the coun­tries worth go­ing into over the next three years,” said CE Dave van Niek­erk.

Speak­ing at the launch of Blue in Nige­ria and a fort­night af­ter launch­ing in Rwanda, Van Niek­erk said the com­pany was work­ing on es­tab­lish­ing op­er­a­tions in Ghana and was also looking at Mali and An­gola. Three days later he added Mozam­bique and Cameroon to that list.

“There­after, we have our sights on Chad, Congo Braz­zav­ille, Benin and Sene­gal,” Van Niek­erk told Blue’s 2008 share­hold­ers’ meet­ing re­cently.

Founded by ex-African Bank In­vest­ments (Abil) ex­ec­u­tives who saw niches in the rest of Africa, Blue cur­rently op­er­ates in 12 coun­tries, seven be­ing opened since Fe­bru­ary last year.

While Blue has grown rapidly in ev­ery sense since list­ing on the AltX in 2006, in­vestors might be wor­ried – cor­rectly – about the pace and qual­ity of that growth. How­ever, it’s worth not­ing its rat­ing (earn­ings mul­ti­ple in the mid-Fifties) on the JSE cur­rently doesn’t re­flect any mar­ket fears about its progress. Blue re­cently is­sued a trad­ing up­date that in­di­cated in­terim earn­ings to Au­gust 2008 would be 130% up on its pre­vi­ous cor­re­spond­ing pe­riod.

Is Blue grow­ing too fast? Is qual­ity per­haps not suf­fer­ing in or­der to ful­fil its am­bi­tion of be­ing Africa’s big­gest mi­cro-lender?

“We have the largest mar­ket cap­i­tal­i­sa­tion on the AltX – more than R3bn from R1bn a year ago – and now rank in po­si­tion 156 on the JSE, up from 189 a year ago,” said Van Niek­erk. He could have been thought to be brag­ging as he told share­hold­ers at the meet­ing.

Group fi­nance di­rec­tor Grant Chit­ten­den told Fin­week in Rwanda re­cently Blue was comfortable with its pace of growth. “All our op­er­a­tions through­out Africa are mon­i­tored real time from head of­fice (in Pre­to­ria).” He said ev­ery sin­gle day staff in Pre­to­ria do qual- ity checks on ev­ery trans­ac­tion con­ducted.

“Our IT sys­tem (called FAME) al­lows us to go at any time into any trans­ac­tion en­tered into in any lo­ca­tion and check if ev­ery­thing is done ac­cord­ing to the book,” Van Niek­erk said en route from La­gos, Nige­ria. “Be­fore we can open any branch in any coun­try, we spend at least two years fa­mil­iaris­ing our­selves and re­search­ing the mar­ket.” He said Blue has two di­vi­sions, one looking af­ter its ex­pan­sion process and the other its op­er­a­tions.

The op­er­a­tions side is re­spon­si­ble for mon­i­tor­ing its op­er­a­tions while le­gal di­rec­tor Wes­sel Smit can be de­scribed as head of the ex­pan­sions team. Smit’s job in­volves re­search­ing and in­ves­ti­gat­ing the le­gal regime in any coun­try Blue in­tends en­ter­ing. When a de­ci­sion to go ahead is fi­nally made, Blue de­ploys coun­try man­agers (only South Africans), led by ex-Unity Fi­nan­cial Ser­vices (taken over by Abil) ex­ec­u­tives Jo­han Senekal (who has made him­self avail­able for the next three years) and An­ton Nel.

In most coun­tries Blue starts its op­er­a­tions from scratch or takes over com­pa­nies. How­ever, Nige­ria was dif­fer­ent, as it joined forces with the In­tercon­ti­nen­tal Bank (ICB) to form Blue In­tercon­ti­nen­tal Mi­cro-fi­nance Bank (BIMFB).

Said Van Niek­erk: “We re­alised Nige­ria was go­ing to be a chal­lenge, as it has its own cul­ture and chal­lenges. We de­cided on a lo­cal part­ner with its own in­fra­struc­ture and the re­quired ex­pe­ri­ence.” Blue owns 55% of the new en­tity and ICB 35%, with the Amer­i­can In­vest­ment Group (AIG) the re­main­ing 10%.

“If man­aged cor­rectly, Nige­ria can be Blue’s big­gest mar­ket,” added Van Niek­erk. Without build­ing its own in­fra­struc­ture Blue builds kiosks in­side the ICB’s 280 branch net­work, al­though it started with 17 and will grow that to 70 by Fe­bru­ary next year. With more than 140m peo­ple and a neg­li­gi­ble re­tail credit mar­ket, Nige­ria is in­deed po­ten­tially Blue’s most lu­cra­tive and big­gest mar­ket. Blue re­quires a lot to achieve suc­cess in the coun­try as Nige­ria is far from nor­mal. A sim­ple thing, such as check­ing into the coun­try at Mur­tala Muham­mad Air­port, is a se­ri­ous ef­fort that can take any­thing be­tween two to nearly four hours (we left our pass­ports with an agent at im­mi­gra­tion, hav­ing sat in a pri­vate VIP lounge for more than an hour). A 14km trip in La­gos can take any­thing from three to four hours due to traf­fic con­ges­tion. To gain some ad­van­tage in traf­fic, po­lice es­corts (nor­mal for for­eign busi­ness­men – at a fee, of course) can cut that time by up to an hour. It would also be of great as­sis­tance to the com­pany if the Nige­rian gov­ern­ment can con­tain the grow­ing un­rest in the Niger Delta so it doesn’t spread to other parts of the coun­try.

“It’s very dif­fi­cult do­ing busi­ness in Nige­ria, peo­ple will find any ex­cuse not to pay,” construction com­pany Esor’s CE Bernie Krone told Fin­week in May. “If you want to get paid your con­tract re­ally has to be very wa­ter-tight.” Franki Africa, now a sub­sidiary of Esor’s pulled out of Nige­ria in 2004 af­ter a three-year study of the coun­try.

The lat­est ad­di­tions to the list of Blue’s pos­si­ble ex­pan­sions also make for cu­ri­ous read­ing. Only Benin speaks English, the oth­ers be­ing French- and Por­tuguese-speak­ing coun­tries. How­ever, Blue’s in-house IT team can mod­ify its soft­ware to any lan­guage.

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