In West Africa, French banks are beginning to slip from the coveted pedestal they have held due to the aggressive approach of Moroccan and Nigerian banks. Their participation fell from 80% to 33% between 1990 and 2000.

By Amadou Fall, Dakar

The “Old Three”, the industry nickname for BNP – Paribas, Société Générale and Crédit Lyonnais now acquired by Crédit Agricole – are certainly present through their subsidiaries in Benin, Burkina Faso, Ivory Coast, Mali and Senegal. They are even entrenched in some of the healthiest networks around since the thorough clean up to which the West African Economic and Monetary Union (UEMOA) was subjected fifteen years ago to save it from a frightful fate. But they have hardly done anything since.

French banks which have been historically and structurally established in the franc region for some time are starting to look as if they are just taking up space much like the large companies and industries which have formed the financial relay base since the colonial era – all sending profits back to France. In recent years, the trend has even drifted towards investment being withdrawn. Political and social instability, legal uncertainties, corruption and collection difficulties in the region are but a few of the reasons often given to explain why the French are fleeing. But there is also the fact that France’s economic centre shifted to Central and Eastern Europe and French players are no longer enjoying the favourable conditions that gave them their considerable profits in French-speaking Africa in the past. They were spared the hardship of outside competition thanks to their political dominance and the preferential treatment these connections secured them.

French banks could have adopted an approach that would have been contrary to those of other French establishments which previously made up the bulk of their portfolio. But they still have a lot of terrain to make up particularly with a mere 5% bank development rate in West Africa compared to 95% in Western Europe.

Diversification

Even if there have been some attempts at diversification, particularly by Société Générale which is closely protecting its number one standing in the UEMOA, French banks have failed to focus on anything other than their traditional services; failing to address the needs of SMEs and the unregulated business activities that dominate the sector there. Instead, they left these market segments to mutual savings and credit companies that dominate the micro-financial sector and also to a new wave of regional banks such as Bank of Africa, Ecobank, Banque Régionale de Solidarité, Banque Sahelo-Sahariennne pour l’Investissement et le Commerce and, more recently, Banque Atlantique. With the creation and development of these institutions fuelled primarily by African capital, the sector witnessed the shrinking of French banks’ influence with a decrease in their participation – slipping from 80% to 33% from 1990 – 2000.

In their movement and with the liberalisation that has characterised the last few years, the number of UEMOA banks is going to increase considerably, already climbing from 66 in late 2002 to 97 at the end of 2007. Yet, according to BNP Paribas’ figures, total credit granted in this region amounted to 16% of the GDP in 2006 as opposed to 80% of the GDP in South Africa or Mauritius, the two most developed economies in the Sub-Saharan region. The new African regional banks like those that are smaller swarmed the domestic market but made only a very modest contribution to financing the region’s development in the last few years an outcome that was not in keeping with expectations. The spread of these establishments has been quite fast in the eyes of the monetary authorities of the Union and it is feared that this phenomenon could weaken sub-regional banking development.

French banks are no longer spared the hardship of outside competition thanks to their political dominance and the preferential treatment these connections secured them.   To reabsorb this inflation and reduce the risks of a new crisis, the Central Bank has recently put in place new regulations that the minimum capital required of a bank authorised to operate within the Union will be 5 billion francs CFA (7.6 million euros) by 2009 at the latest and not one billion as was previously the case. This measure will help to better organise the banking system and better enable it to assist financing and economic activities within the region. It is an effort that will open up the region’s doors to all foreign banks that are able to contribute to the renewal of the regional system in competitive partnership with French and African capital structures.

Moroccans and Nigerians

First came Morocco and Nigeria. The Moroccans were the first to shoot. Somewhat squeezed in their country where the banking rate is around 25%, the two leading banks in Morocco, BMCE and Attijariwafa respectively strove in 2003 and 2006 to expand in Sub-Saharan Africa. In 1989, BMCE took over the management of Banque de Développement du Mali which was bankrupt at the time. In 2003, it opened a subsidiary in Dakar, BMCE Capital, which contributed greatly to the search for financing for Senegal’s major construction projects. It recently claimed a 35% stake in Bank Of Africa’s Capital, the number three establishment of the UEMOA.

The onslaught of Nigerians and Moroccans is likely to gain strength as many local banks which are often under-capitalised will be gobbled up.

Attijariwafa Bank is working similarly in the quest to become a heavyweight in the West African banking sector. Therefore, seven months after opening three branches in Dakar in 2006, it acquired Banque sénégalo-tunisienne by officially buying 66.67% of its capital on 24th January 2007. It then acquired CBAO, the second largest bank in Senegal, claiming 79.15% of the latter’s shares on 13th May 2008. The 11th January of the same year it acquired shares in Financière du Burkina Faso renamed Cauris Bank International. It is well positioned to take over Banque Internationale pour l’Afrique in Nigeria, a transaction that has been under negotiation since 2007. On 25th July, it went on to acquire 51% of Banque internationale du Mali’s capital, taking the best of 4 other suitors, including Société Générale, the only French bank still putting up a fight, BMCE through BOA, Ecobank and Nigeria’s United Bank for Africa.

The latter and four other Nigerian banks, Diamond Bank, Acces Bank, Zenith Bank and Sky Bank, are all battling to conquer the West African, French-speaking market. Nigeria’s leading bank with 13.2 billion dollars in revenue for 2007, UBA is going to finalise its take over of 37.4% of Banque Internationale du Burkina Faso’s capital, beating Attijari Bank and Ecobank by a head. It is now in Ivory Coast and is hoping to set up shop in Mali as well. Access Bank has acquired 88% of the Ivory Coast based bank, Omnifinance through a combination of operations that brought its capital from three to over ten billion FCFA. Through this manoeuvre, Access Bank intends to expand throughout French-speaking West Africa. Zenith Bank and Sky Bank have similar aspirations.

Under-capitalised

French banks which have traditionally been well established in the UEMOA have remained completely passive before the onslaught of the Nigerians and Moroccans which is likely to gain strength as many local banks which are often under-capitalised will be gobbled up. The level of capital they will have to have in less than a year will oblige them to seek partnerships to stay out of harms way.