Absa, which wants to be among the top three lenders in Africa, could pursue full ownership of its subsidiaries in Kenya and Botswana as it seeks to reduce its dependence on South Africa, which accounts for 65% of its earnings.
The Johannesburg-based lender owns majority stakes in banks in Botswana, Ghana, Kenya, Mauritius, Mozambique, Seychelles, Tanzania, Uganda and Zambia.
Charles Russon, who heads the bank’s Africa portfolio, did not rule out acquisitions in furtherance of the group’s ambition to build a pan-African lender.
“We want sustainable, client-driven growth,” Russon said from Davos, where he is attending the World Economic Forum (WEF). “If you take that as a premise, you can obviously drive organic growth by setting up appropriately and not having our own artificial barriers as Absa. Then there is organic growth and being precise about the sectors that we want to win in.
“But if that doesn’t get us to a position where we are in the top three, we then have to ask ourselves how we achieve our aims. That might require bolt-on acquisitions like we have done with the acquisition of wealth and retail banking businesses of Standard Chartered in Uganda.
“And, of course, if the right opportunity presents itself that we believe makes sense as an inorganic play, either as a partner in some shape or form or an actual acquisition, we will look at it.”
To tap into opportunities in the fast-growing East African region, the group wants to consolidate its Tanzanian business to build scale in an economy that is expanding at about 5% a year.
Absa has two banks in Tanzania and is engaging with the country’s government to merge the two institutions.
Outright ownership
Russon said it doesn’t make sense that the group doesn’t have outright ownership of some of its franchises.
“We have a great footprint. We have achieved significant growth over the years, but there is a lot more that we can achieve. There are some countries like Kenya, Botswana and Tanzania where we are not structurally set up appropriately,” Russon said.
“In Tanzania, we have two banks, which is not the best outcome. In Kenya, we own about 65%, and in Botswana just short of 65%. This means we hold 100% of the risk but get 65% of the earnings. These are things that are within our control to look at and deal with.”
Absa group CEO Kenny Fihla in December unveiled a new strategy based on four pillars: 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.
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