EUROPEAN LENDERS CREATE NEW $660M AFRICA INVESTMENT COMPANY

Groups pool stakes in banks across countries including Kenya, Tanzania and Zambia.

Three European lenders have pooled stakes in sub-Saharan African banks to create a $660m investment company.

Norwegian development body Norfund, Dutch bank Rabobank and private sector development bank FMO have formed the company — named Arise — by combining investments in financial service providers across more than 20 countries, including Kenya, Tanzania and Zambia.

From January 2017, the new company plans to begin operations and allocate new capital for investment in banks that serve retail and SME clients in eastern and southern Africa.

Africa’s banking sector is undergoing a fintech revolution driven by mobile payment systems such as Kenya’s M-Pesa, which provide millions of new customers with access to financial services.

However, the continent is also suffering from a broad economic slowdown and a fall in overseas investment that has hampered progress.

Once lauded as the best source of growth in emerging markets, the “Africa rising” narrative has suffered a blow in the past two years, as prices of oil and other commodities exported by many economies fall.

This year, the International Monetary Fund expects gross domestic product growth in sub-Saharan Africa of just 1.6 per cent, meaning income per head will fall for the first time in more than two decades.

Nigeria, Africa’s most populous nation, is expected to contract 1.8 per cent this year — driven down by falling oil prices, terrorist attacks and the government’s struggles to prop up its domestic currency, the naira.

However Nanno Kleiterp, chief executive of Dutch lender FMO, said the reduction in commodity prices had not resulted in problems for all 49 countries in sub-Saharan Africa.

“For some it has had a positive effect,” he said. “The growth prospects in countries in east Africa are positive and we take a long-term view that this is a good moment to step in and join forces.”

Alongside the current partners, Banco Montepio, a financial group based in Portugal, is expected to join Arise in the near future. The company plans to eventually expand into west Africa and aims to have $1bn in assets invested in domestic financial companies.

Berry Marttin, board member of Rabobank, insists the long-term forecasts for Africa remain compelling.

“The population growth projections mean there is upside potential,” he said. “We have a focus on food production and local banks provide access to finance for farmers which will support that development.”

Sub-Saharan Africa is the world’s most food-insecure region, with almost a quarter of the population undernourished, according to the Food and Agriculture Organization of the United Nations.

Rabo Development holds minority stakes in five banks: Zambia’s Zanaco, Tanzania’s NMB — the country’s largest bank, BPR in Rwanda, BTM in Mozambique, and Uganda’s DFCU.

Financial Times