Africa in the New Millennium: Invest in the Future - Financial Services

The financial services sector has a role to play in African economies, but it's up to Africans themselves – armed with local knowledge, regional aspirations and a global mindset – to make it happen.

That was the view of the participants in the Financial Services panel at the Africa Business Conference. There are plenty of opportunities in this underdeveloped sector, they said, both to grow businesses and to make a difference in the region. But it all starts with talented people with a commitment to the countries of the continent.

"What it needs," said Solomon Asamoah of the International Finance Corporation, "is creative minds to go back and structure instruments that will be able to work in the difficult environment we find in Africa.

"We know the cultures in Africa. We know the impediments. We know the environments. We need to find the way."

"You have to mobilize the resources that are critical to success," agreed Okey Enelamah (HBS MBA ‘94), CEO of Capital Alliance Nigeria. "Those always start with knowledge. The biggest gap in Africa is a competence gap."

"It is you who will make the difference," William Jimerson of MUSA Capital Advisors told the audience. "As a Harvard Business School graduate, you have an opportunity to go out West and dot.com it up. It is your responsibility to look beyond the short-term gains the market is offering us to the real resources."

Jimerson said he left Wall Street to work on African investments because of "the passion, the earnest belief that I could be as rich if not richer both spiritually and financially in Africa.

"Without that conviction, forget about it," he said to applause from the audience. "Stay here. Be a CFO somewhere. Be a dot.com. Forget about it."

Financial entrepreneurs with an eye on Africa should look beyond investment banking services, said Cyrille K. Nkontchou (HBS MBA '97) of Liquid Africa. "Most of the opportunities in financial services in Africa are in basic services," he said. "Not mergers and acquisitions, but in providing basic services – as basic as having a credit card, having a bank account. This is still very difficult to get in Africa."

But while providing such services locally, said Nkontchou , entrepreneurs need to think bigger, too. "One of the problems with pure local players is the scale," he said. "In Africa you have 53 countries. The aggregate market cap is $400 billion, and $250 billion of that is in South Africa. It's difficult to get the scale.

"You need to be local; you need to understand each market; but you also need the scale."

Part of the challenge, said Enelemah, is getting African business people to look beyond their local environment. "Too often the needed economies of scale are not realized," he said. "People think it is more important to have a family name on the business than to have the critical mass they need.

"It's important to have a global mindset and assume that Africa is going to become part of the modern economy. Africa is either going to join it and get better or it's going to be left out."

Global standards and global systems should work in Africa, he added. "You have to practice them locally. You have to have local partners. You have to understand the local laws. But there is knowledge out there in the world that can work in Africa."

The panelists also addressed the question of capital for financial services in Africa. "The conventional wisdom about financial services in Africa is that it is difficult to find capital, that accessing capital is the key," said Nkontchou. "From my experience, what Africa really needs is entrepreneurial opportunities more than capital."

"I always wondered why the cost of land in my country [Cameroon] is so expensive – more than in South Africa! How can this be, when they have a higher GDP per capita? When you dig a little, you find that the reason is there's nowhere else to put the money. The only place to put the money if you want to save for the future is in real estate.

"There have to be more opportunities to invest."

"There's a fallacy that poor people don't save," agreed Asamoah. "They save the most, but they don't have instruments to invest in."

Asamoah also called for change on the part of national governments. "Capital is not the problem, particularly on the infrastructure side. If the environment is right, there's enough capital floating around the world that it will find the right opportunities.

"But governments are stuck in the mindset that we can't sell the family silver, we have to hold on to telecoms, etc. It's rubbish.

"If I'm in Ghana, I don't care if it's the national telephone company or it's Deutsche Telecom or AT&T. I want to be able to make a phone call and make it cheap.

"Get your environment right, and the money will come."

But while global players should be counted on for capital and for global standards and practices, when it comes to human resources it still comes down to Africans themselves making it happen in Africa, the panelists said.

The problem with the global players, said Nkontchou, is that Africa is relatively meaningless to them. "They don't send the best people," he said. "They're not focused."

Jimerson, by way of contrast, cited his experience with local people from a variety of African countries at EcoBank, one of the leading banking groups in West Africa. "These guys ran circles around anyone I've ever met from CitiBank or Salomon."

Asamoah noted his visit to a well-run and operated local bank in Senegal as a sign for the future of financial services in Africa.

"It made you feel good," he said. "We can do these things. We can do them well. We have to learn our trade, but there's no reason we can't do it. We need to get our own act together, and we can be on top of our game."