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We have not waited for Africa to be popular to invest, Philippe Heim

13/12/2018

Societe Generale has been active in Africa for 100 years and is now represented in 19 countries, and will continue to assist in the development of infrastructure, retail and capital market financing.

The long-term megatrends in Africa are based around three things: some staggering demography dynamics, a huge US$2 trillion infrastructure investment and the "acceleration and convergence of innovation", according to Philippe Heim, deputy chief executive officer at Societe Generale, speaking at the second of the bank's Accessing Africa Conference on Friday 7 December at The Four Seasons Trinity Square in London.

With only around 20% of the continent's population owning a bank account, "there is a huge opportunity, but also a great responsibility in helping the transformation," said Mr Heim. "Connectivity is moving quickly, with 30% of Africa's population connected to the internet, and 80% using mobile phones – a higher percentage than either the UK or France."

The bank's stated objective is to ‘open one million wallets' by 2020 through the YUP initiative, an ‘e-wallet solution' launched in August 2017 that allows payment transactions on even the most basic of mobile phones. "YUP is very important and gives us the opportunity to double our retail client base in the sub-continent in three or four years, and to capture as many clients in that period as we have done in the past 50 years," he said.

"We wanted to enter this market – we saw what had happened with Orange Money and MTN, the local players, and wanted to provide this solution to our clients and it is moving very fast, catalysed by the B2B part of the business: we are talking to corporates, proposing a solution that localises the payment of salaries electronically, rather than taking a large wallet of cash into the bush," said Mr Heim.

100 years

"We have not waited for Africa to be popular to invest; we have been active in the continent for 100 years and are represented in 19 countries," said Mr Heim. "We developed the business first for our corporate clients, mainly for transaction banking, and then to finance their operations on the ground. Progressively, we are shifting towards something more sophisticated with the development of projects, infrastructure, and maybe to help governments access capital markets.

"Every year, the need for finance in the continent is huge, and the point is to put together clients, investors, financial institutions and large public institutions that support Africa, as well as find solutions and interesting projects," said Mr Heim. "You have a pool of liquidity locally with some shortage of financial products, so there is a need to tap international markets, diversifying sources of funding, in maturity and currency.

Heim points to recent work for Ivory Coast as "a good example of the combination of our local presence and international banking experience", notably when the group took part in the TPCI (Public Treasury of Côte d'Ivoire) 2018-2026 bond issue.

As you wonder how 52 (for some 53) countries and such a massive and massively diverse continent is so often and so easily grouped as one, Mr Heim explains: "from an SG presence perspective, Africa falls globally into the Mediterranean Basin (Morocco, Algeria, Tunisia); and two monetary and regulatory zones of Sub-Saharan Africa: Western Africa representing UEMAO zone (the Economic Monetary Union of West Africa with eight countries, from Senegal to Ivory Coast), that is supervised by a global regulator BCEAO (Central Bank of West African States) settled in Dakar and I Central Africa, CEMAC zone (the Central African Economic and Monetary Community of six countries) with the supervisory authority BEAC, Bank of Central African States, based in Yaoundé).

And then there is South Africa and Nigeria, and the other English speaking African countries.

The numbers

Over the next 30 years, there is a need to create 500 million jobs in Africa for the young, a feature that lies behind SG's commitment to increasing its SME (small- and medium-sized enterprise) loan book by 60% between 2017 and 2020.

"For 2020, we want to capture growth of 8% and demonstrate that we can be more profitable and best of class in the continent," said Mr Heim. "The revenue increase accounts for 5% of the global figure but could be 12%-13% by 2030".

As well as assisting in the development of infrastructure, the most profound change in financing in Africa will come through further investments in the YUP initiative, to the benefit of retail but also wholesale banking in the region.