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Bridging the Economic Divide Between Anglophone and Francophone Africa
- July 2012
World Economics emphasises the commercial chasm which remains to be bridged between francophone and Anglophone Africa. While the continent is enjoying strong economic growth its potential is shackled by persistent problems relating to currency exchange and bank transactions. Ecobank, the continent's fastest growing financial institution, is seeking to tackle these manifest problems. Keith Boyfield, World Economics' Africa Editor, reports on moves to remove these hurdles and interviews Arnold Ekpe, Ecobank's CEO at the bank's headquarters in Lome, Togo.
Economic growth continues to surge ahead in Sub Saharan Africa. The latest forecasts suggest Nigeria’s real GDP is set to grow this year by 7.7 per cent while Gabon is due to see its economy expand by 4.4 per cent. For the region as a whole the IMF forecast economic growth will increase from 5.1 per cent in 2011 to 5.4 per cent in 2012, albeit this figure is slightly lower than previously predicted. While the economies are smaller, this rate of expansion is far more bullish than the situation in Western Europe where economies continue to stagnate or indeed contract.
However, one wonders how much greater it would be if further progress could be achieved in terms of bridging the commercial chasm between Francophone and Anglophone Africa. Recent visits by the author to Gabon, Nigeria and Togo have reinforced the perception that much remains to be done with respect to promoting trade between the countries of West and Central Africa.
It is remarkably difficult, for instance, to exchange Naira, Nigeria’s currency, in Gabon and equally frustrating to exchange Central African Francs (CFA) in Lagos. Nor do Naira go far in Lome, the capital of Togo. West African CFA Francs are a nightmare to exchange in Nigeria, Africa’s second biggest economy and a country surrounded by French speaking nations using currencies pegged to the euro.
One rapidly expanding financial institution, Ecobank, is seeking to bridge the all too evident divide between Anglophone Nigeria and its neighbours. Whereas in 2006 Ecobank operated in 15 West and Central African countries it has now expanded its network to 32 countries throughout Africa and now boast over 1,150 branches in these countries. Compared with its rivals, Ecobank is way ahead in terms of continental presence.
Ecobank has invested in a network of almost 1500m ATMs across the continent and offers debit and credit cards to its fast expanding customer base, which now totals 8.4 million. Nonetheless, shareholders at the recent AGM, held in Lome, Togo, were vocal in their complaints concerning the difficulties of using Ecobank’s cards across the region, including in the bank’s own headquarters in Togo. Obviously, there is still a lot to be done to ensure that the bank’s customers can count on receiving a harmonious service continent-wide. But at least it is tackling the all too evident manifestations of the problem. Ecobank recently launched a new pan African service – Rapidtransfer – which enables its customers and those who are not even Ecobank account holders to send money between Ecobank branches anywhere on the continent reliably and conveniently. Such innovations are set to revolutionise banking on the continent.
Simply paying for goods and services in many African countries remains immensely frustrating. Partly attributable to Nigeria’s abysmal electricity supply infrastructure, the simple task of paying for a meal, hotel bill or airline ticket can all too often turn in to a time consuming hassle. One can spend a whole afternoon going from ATM to ATM merely to accumulate sufficient cash to buy an airline ticket. In practice, locally based carriers such as Arik refuse to accept globally recognized cards such as Visa or Mastercard. The maximum one can take out from any Nigerian ATM is 20,000 Naira – equivalent to approximately £80, so buying any product or service of any value can turn into a major exercise. Experience also suggests that many banks do not recognize foreigners’ bank cards.
This frustration surrounding completing straightforward day to day transactions deters outside investors from committing to the continent. Lagos’s Governor affirms that he is committed to seeing the introduction of a ‘cashless’ economy but in order to fulfil this far-off vision much remains to be done, notably with respect to Nigeria’s intermittent alternating power supply, which remains quite literally an on/off affair.
Trade is further impaired by customs barriers and excessive tariffs at borders. Even worse, journeys between countries can be hazardous. One hears endless stories relating to the sizeable bribes drivers of motor vehicles must shell out in order to negotiate police road blocks in West Africa. Benin appears to be a particularly bad case.
Arnold Ekpe, the impressive and charismatic CEO of Ecobank , who is due to retire at the end of the year, says that “we are not just a bank, we are a vehicle for greater integration in Africa”. He points out that Ecobank has not withdrawn from a country when they are experiencing difficulties, Cote d’Ivoire being a good example. Ghana used to be unprofitable but it has now turned into a highly successful operation, partly underpinned by the discovery of oil offshore. The bank has demonstrated that it is prepared to sustain short term losses in order to underpin its pan continental reach.
In an interview for World Economics at the bank’s Lome headquarters, Arnold Ekpe observed that Liberia, Kenya and Zambia had abolished exchange controls and seen their economies thrive. In contrast, exchange controls are all too prevalent in many African countries, stifling economic development. While politicians talk the talk with regard to economic integration, in practice the pace of harmonisation is far slower.
The key driver for economic development in Africa will be an emerging Small and Medium-Sized Enterprises (SME) sector. However, the continent is weak in terms of its manufacturing and value added capability and many countries continue to import the vast majority of electronic and manufactured goods from the developed world, but also increasingly from China. Outside South Africa, there is not much of a manufacturing base. Nor is there much of a retail sector across Sub-Sahraran Africa outside regional centres such as Johannesburg in South Africa and Nairobi in Kenya. In Nigeria, the well-heeled travel to Dubai or London to buy designer clothes and luxury items such as handbags and fragrance. It is striking to note the paucity of major African brands outside brewing and mobile telephony.
Retailing is in its infancy in many economies. In Nigeria, for example, in order to obtain a lease for a shop or an office one has to pay two years’ rent in advance. This is hardly conducive to entreprenurial activity. There are no major supermarket chains or pharmacies in Africa’s second largest economy. WalMart looked around to acquire a local chain of stores to enter the country, but there were none to buy.
There is considerable scope – and opportunity – for improved economic growth in the SME sector; one of the elements in this opportunity set will be the proven ability to bridge the cultural and language divide between Francophone and Anglophone Africa. Easing the flow of funds between countries by facilitating liquid and sizeable foreign exchange transactions is an essential step in promoting trade. This, and not grandiose currency union schemes, will enable African trade. Those entities such as Ecobank, now close to building up an asset base of US $20 billion, which can demonstrate an ability to operate across the continent, are set to benefit immensely on the crest of surging economic growth. But many obstacles still remain.
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500 days ago
Unfortunately i must accede with the majority of the points you have raised in this article. Lack of cooperation between countries pan Continent results in slow growth of all economies. Nigeria, in particular, despite the small progressive steps it has made over the last decade, is still in an infantile phase.Lack of retailing is the most shocking and i experienced this on a recent visit to Nigeria myself. Nigerian visitors to Britain are in the top 5 of the biggest spenders in retail shopping after China, the Middle East, Russia and Brazil. It is a sad fact that money earned in Nigeria is being pumped into the UK economy rather than being pumped back into growing the Nigerian economy or economies of other countries in the continent. If Ecobank can continue to set the precedence in developing its banking procedures, other banks will follow and then perhaps the Governments of African nations will wake up and aid in removing some of the irrelevant barriers that has hindered the so needed growth that the continent needs
Copyright Economic & Financial Publishing 2013