Nedbank’s Mozambican adventure
Mobile banking and focus on SMEs can serve burgeoning population, bank says
● Despite a faltering economy on the back of a hidden debt scandal that has stoked some tensions in a number of banks, Nedbank has not let a good crisis go to waste in neighbouring Mozambique.
The bank, South Africa’s fourth-biggest, has plans to expand its subsidiary in Mozambique, Banco Único.
Único was the 18th bank to enter the market when it opened its doors in 2011, but has since become the country’s fifth-largest bank by deposits and loans, after gaining traction with corporate customers, small and medium-size enterprises and affluent retail customers.
It will now pursue the country’s mass market, with the launch of its first massmarket branch early next year.
“When we started we were very focused on corporate clients. Those are the ones with less risk in terms of loans. But that was not our main strategic decision, [instead it] was to be a universal bank,” said Único CEO António Correia.
Some of Único’s 20 branches, most of which are in Maputo, are specialised, in line with the bank’s customer-centric concept.
The bank has a branch dedicated to SMEs and another linked to the municipality in Matola, a large suburb outside Maputo, in an attempt to reduce municipal theft.
In courting Mozambique’s mass market, Único will use digital channels to communicate with clients.
The number of mobile banking customers in Mozambique, using platforms such as M-Pesa, was estimated to outstrip the four million serviced by the formal banking sector, said Correia.
“Most of the mass market are very young people and they are very close to digital solutions,” he said, as he explained the bank’s plan to attract more of Mozambique’s population, 45% of which is under the age of 14. Único believes it can prepare a place in the economy for this youthful demographic by focusing on SMEs.
“Mozambique’s economy is concentrated in just a few projects.
“If you take [those] out [of the economy], what do we have in Mozambique? Almost nothing,” said Correia. “The SMEs can [therefore] play a huge role in terms of financial inclusion.”
Quick credit
Único’s SME work has proved to be one of its differentiators in Mozambique’s banking sector of about 20 players, which serve its 26 million people, according to Robert Besseling, executive director of EXX Africa.
“SME customers are looking for quick and easy credit facilities, which the major banks have not been able to provide. I think there’s a number of countries in Africa where some of the bigger banks are so well regulated that they can’t innovate.
“Similarly, in Mozambique some of the largest banks have not been able to take advantage of the recent boom in Africa in mobile banking [due to a lack of innovation].”
Único had insulated itself, to a degree, from Mozambique’s debt crisis by not relying too heavily on the state and the typical banking structures in the country, said Besseling.
Mozambique’s debt crisis — in which some state-owned enterprises took on more in loans than the government, which guaranteed the loans, was able to repay — has placed the country’s financial system under threat, despite the strengthening of capital and liquidity rules by the central bank.
Kroll investigation
An investigation by corporate investigations firm Kroll this year, which was expected to map a path out of the crisis, found that the companies could not account for $500-million of the $2-billion in undisclosed loans, which had resulted in the IMF and others suspending aid.
Since then no progress had been made in improving the relationship between the Mozambican government and the IMF.
“The risk of a systemic banking crisis in Mozambique is increasing almost every month as the situation drags on,” said Besseling.
“Several of the local banks like Millennium bim, Moza Banco, Banco Comercial, all have bought significant amounts of debt in SOEs, which are at the heart of the hidden debt scandal.”
Though Único was not exposed to implicated SOEs, and had seen growth in deposits, assets and loans significantly higher than that of the market average, the scandal would eventually strain the bank, he said.
“There’s huge contagion from the sovereign debt to any major bank in the country, and the Mozambican economy continues to suffer from anaemic growth and hard currency and liquidity shortages that will affect the broader banking sector.”
Despite this, Mozambique remained an attractive market with potential for growth in gas projects, port developments and commodity expansions and related services, said Jan Meintjes, a portfolio manager at Denker Capital.
Lacklustre strategy
But the Nedbank group’s investment in Mozambique would not be enough to lift its lacklustre strategy on the continent.
“Compared to Standard Bank and the Barclays Africa Group, Nedbank’s African strategy has significantly underperformed. The main reason is a lack of control and lack of diversification,” said Meintjes.
“Exposure to Nigeria through Ecobank has been a drag on Nedbank’s bottom line, and they are not in control of this entity.
“The rest of Africa could not make up for this.”
Though Nedbank’s African expansion had not been as effective as others, it had managed to protect its profitability, said Harry Botha, an analyst at Avior Capital Markets.
“I am a bit disappointed that they haven’t done more in the bigger markets, such as Kenya and Ghana, but they probably have enough to deal with in Ecobank and their home market, where they still have reasonable growth opportunities,” he said.
“The story is really that there’s still a long way to go.”
Risk of a systemic banking crisis is increasing Robert Besseling Executive director of EXX Africa