BNP Paribas’ exit from SA has been framed as a strategic realignment, focusing on core markets in Europe and Asia.
But let’s call it what it is: a retreat. A retreat from a battlefield where the big five banks stand unflinching, their roots entwined and deeply ingrained within the rich soil of Africa’s banking market.
The French bank’s decision to wind down its corporate and investment banking services immediately puts the spotlight on RCS, a consumer finance division sitting on a R13bn loan book in a crowded unsecured loans market dominated by Capitec, African Bank and a scattering of payday loan providers.
The eurozone’s largest bank did not comment on the future of RCS, which struck up partnerships with retailers such as TFG and Takealot.com under which consumers buy these merchants’ goods on credit. Even so, if a 2022 Bloomberg report, citing people familiar with the matter, is anything to go by, that BNP Paribas had hired investment bankers to help offload RCS, it is logical to surmise that RCS is merely the last piece of the silverware left on the table, soon to be snatched up by the ever-hungry established giants.
Granted, BNP Paribas’ exit, albeit partial for now, aligns with a broader trend among European banks, which have been scaling back African operations amid tighter European banking supervision and a more conservative risk appetite. The list of European banks that have either opted for a selective downsizing or complete withdrawal is long: From Societe Generale and Crédit Agricole to Barclays and Standard Chartered.
Let’s not kid ourselves. The African banking market is a shark tank, and Standard Bank, alongside mobile phone operators such as MTN Group and Vodacom’s Mpesa in East Africa, are the big white sharks, large enough to fend off the likes of BNP Paribas, which made its mark as one of the biggest names in the eurozone personal finance market and investment banking.
Triggered panic
Except in debt capital markets, or DCM in capital markets parlance, BNP Paribas is nowhere to be seen in the latest investment bank league table from Refinitiv, a unit of the London Stock Exchange Group. Standard Bank, FirstRand and Investec are featured highly as among the top investment fee earners, a testament to how robust home-grown companies are in their own backyard.
Take Walmart for example. Its foray into Africa via Massmart triggered panic among everyone from investors to regulators that it would launch an aggressive price war machine that would annihilate weak players and erode profitability for established giants such as Shoprite. It has done the opposite. Shoprite, feared the likeliest to take the pain from Walmart’s entry, is not only profitable but it grinds out one of the world’s fattest profit margins — ammunition it sometimes deploys to defend its turf in the intensely competitive grocery retail environment.
Unlike Massmart, RCS is a minnow in the personal finance market with about 2-million customers in SA. It is up against all the big five, which have a deep-seated presence in personal finance, and some of whom may see RCS as an opportunity to entrench their position further. Capitec, for example, boasts more than 20-million clients.
Whether RCS thrives as an independent entity or becomes an acquisition target is anyone’s guess. What is not in doubt is that BNP Paribas’ strategic realignment feels less like a masterstroke and more like a white flag to the competition.
• Motsoeneng is Business Day deputy editor.
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