The resolve of South Africa’s banks to grow their earnings in their rest of Africa operations, which are growing faster than those in South Africa, will be tested this year, with mergers & acquisitions on the cards.
The withdrawal of European banks from the continent in the face of stiff competition by domestic lenders is opening up opportunities for well-capitalised South African lenders to fill the vacuum.
Absa, under the leadership of Kenny Fihla, aims to up its game in African operations.
The new strategy Fihla unveiled in December rests on the following: customer-led growth, building a diversified pan-African business, driving excellence and pursuing new growth opportunities.
At the heart of the strategy rejig is the lender’s need to wean itself off dependence on South Africa, Kenya and Ghana for earnings.
To this end, Fihla has appointed mainstay Absa executive Charles Russon to lead the Africa expansion strategy.
Russon, who took over the role in September, is overseeing the performance of the group’s operations across Africa and provides advisory support to the business units.
He has held several senior roles at Absa, including that of interim group CEO, chief of the lender’s corporate and investment banking unit, and CFO of Absa Capital.
Absa is seeing huge opportunities in Tanzania and Uganda, given the large infrastructure investment, as well as in Mozambique despite the sovereign debt challenges the country faces.
Read: Kenny Fihla’s Absa overhaul woos Standard Bank executives
Absa last year bought Standard Chartered’s wealth and retail banking businesses in Uganda.
Standard Bank, which has fared better on the continent than its South African rivals, has entrusted its vast African portfolio to Lungisa Fuzile, who is overseeing the lender’s operations in 20 countries outside South Africa.
The group, Africa’s largest bank by assets, derives more than 40% of its earnings outside South Africa. However, it is doing so despite not holding a market-leading position in many jurisdictions, with inorganic growth on the bank’s radar.
Bloomberg reported last year that Standard Bank was in talks to acquire NCBA Group, aiming to become Kenya’s third-largest lender by assets.
Kenya contributed 3% to the group’s earnings in the 2024 financial year.
Nedbank has taken a different route in its Africa play, with the group comfortable with its asset base being dominated by Southern Africa, with South Africa as the anchor market.
Nedbank will deploy its capital in pursuit of bolt-on acquisitions to scale up its existing businesses in South Africa and neighbouring countries instead of chasing M&As in East Africa where it aims to flex its corporate and investment banking muscle.
The bank has already made two bolt-on acquisitions over the past two years: management business Eqstra Investment from enX and iKhokha, one of the fastest-growing fintech companies in Africa.
Nedbank’s South African franchise now accounts for 96% of the group’s earnings after the sale of its 21% stake in Togo-based Ecobank Transnational.
The group’s Africa business is led by Terence Sibiya.
FirstRand, South Africa’s most valuable banking group by market capitalisation, has entrusted its broader Africa portfolio to Zambian banker Bydon Longwe.
The group last year bought the wealth and retail banking business of Standard Chartered Bank Zambia.
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