African banks going bullish on investments

Business records have shown that African banks are stepping out boldly into globalization terrain and partnering to maximize benefits in the petroleum and infrastructure sectors. Few years ago, collaborations, partnerships and ability to take up significant investments in the oil and gas market to support local projects were not possible because of poor capitalization of these banks.

Since most of these banks have recapitalized; mergers and acquisition between mushroom banks which were anemic and then ones with healthy financial muscles, brought about a shift in the banking paradigm based on comparative advantage and in repositioning of the banking industry.

This month of April, Nedbank one of the four big banks in South Africa, the biggest market in Sub Saharan Africa, embraces the 19.85% equity investment by the Public Investment Corporation (PIC) – which operates on behalf of the Government Employees Pension Fund (GEPF) in Ecobank Transactional Incorporated (ETI). In this strategic partnership, PIC will invest $250 million in the common equity of Ecobank – a pan African bank with foot print in more than 32 countries in the region. The $250m investment will be backed with the purchase of 3,125,000,000 shares of Ecobank, representing 19.85% of the bank’s total outstanding number of shares. In a statement released by Nedbank, the transaction complements the growth potential of Ecobank across the region, and as a recognition and acceptance of ETI’s business model by a major investor.

Smith Crouse, who manages investment alliances and strategies for Nedbank said “we are delighted for yet another South African institution to join so many others that are embracing the continent as our future and are growing and expanding across Africa.

 This is not the first time Nedbank has partnered with ETI. November 2011, Nedbank provided the sum of US$1285milion in suooirt of ETI corporate expansion and the acquisition of Oceanic Bank of Nigeria.  This latest involvement of PIC, through Nedbank will afford PIC a seat in Ecobank’s board a move which Mr. Arnold Ekpe, Ecobank’s Group Chief Executive Office gladly welcomes. Ekpe stated that “we look forward to welcoming GEPF as a shareholder.” The new investment will bolster Ecobank’s capital base and foster its rapid and strategic growth across the continent.

John Oliphant, GEPF’s head of Investments and Acturials said, “Our continent is ripe for investment with over one billion people  and a rapidly growing middle class, Africa, in tandem with the rest of the developing world, represents exciting investment opportunities for investors looking for good returns.”

 Ecobank’s Transnational Incorporated (ETI), has been involved since 2009 in the $300million facility used in financing and restructuring the debt of Tema Refinery, the only refinery in Ghana. This is among some of the major investments which ETI has undertaken in the continent.

The year 2004 saw a consortium of Nigeria’s local banks led by First Bank Nigeria and others are: Intercontinental Bank, Standard Trust Bank, Diamond Bank, First Atlantic Bank and Zenith Bank, coming out with the bold plan to raise loans to fund the construction of a refinery owned by a local company, named Total Support refinery which was to be built in Calabar, the State capital of Cross Rivers State in Nigeria.

 In 2008, Zenith bank  of Nigeria and Guaranty trust Bank (GTB) took a giant leap, by fully guaranteeing a  giant  leap by guaranteeing a US$200 million loan agreement between Merrill Lynch international and Oando,

 Standard bank which has operation in South Africa for almost 150 years, remain another prime financial institution in oil and gas development in Africa. The banks’ involvement was critical in the development of Azurite Field in republic of Congo.

 African banking system has become more sanitized, transformed and business ready and more customer-focused. The emergence of new corporate leaders in the continent helped in the reforms