E-Financial
Nedbank of SA Buys $493m Stake in Ecobank
South Africa’s Nedbank said on Thursday it will acquire a 20 percent stake in pan-African lender Ecobank Transnational for $493 million in cash, ending months of speculation it could walk away from the deal over governance concerns.
The acquisition gives South Africa’s fourth-largest lender badly needed access to fast-growing sub-Saharan Africa, where it has lagged behind rivals. But the deal also puts it in the position of sharing its influence with Ecobank’s other strategic investor, Qatar National Bank (QNB).
QNB, which also harbours ambitions for African expansion, last month became the top shareholder in Ecobank with over 23 percent, although it is due to pare that back to 20 percent.
“Nedbank will be investing a very substantial amount of their energies into a business where they own a 20 percent stake and another bank with considerably deeper pockets owns an equal stake,” said Chris Steward, head of financials at Investec Asset Management.
“It’s a little bit like: ‘do you really want to renovate this house and make it look beautiful when you’re only renting ?'”
Togo-based Ecobank has a presence in nearly 40 sub-Saharan countries and is particularly strong in West African countries such as Nigeria, where its ATMs are a common sight on bustling streets and where it has a stock market listing.
Nedbank, which is majority owned by British insurer Old Mutual, gained the right to buy the stake under the terms of a 2011 loan to Ecobank. But a crisis over corporate governance that led to the departure of Ecobank’s chief executive in March raised questions about whether the deal would go through.
Nigeria’s Securities and Exchange Commission (SEC) launched an investigation last year after Ecobank’s financial director said she had been pressured to mis-state financial results. The regulator criticised weaknesses in the board’s ability to monitor management and oversee ethical behaviour.
Ecobank has made great strides on governance since, said Smit Crouse, Nedbank’s managing executive for Africa.
“We carefully watched how Ecobank, specifically their board and management, dealt with their governance issues,” Crouse said. “They’ve gone about it very diligently. They’ve been very transparent in terms of their communication.”
Nedbank said it will pay $493.4 million for 4.5 billion new Ecobank shares, valuing Ecobank at 10.93 U.S. cents a share, a 4 percent discount to its price on the Nigerian Stock Exchange at the end of September.
But shares in Nedbank fell 1.8 percent to 214 rand on news of the deal, as some investors worried that Nedbank was overpaying, even with that discount.
“I think they are taking the view, ‘we want this and we’re going to pay up to get it’,” said Abri du Plessis of Gryphon Asset Management in Cape Town.
“In the short term it may be a bit expensive but in the longer term, it should be good value.”
The acquisition is the biggest by a South African bank in six years, according to Thomson Reuters data. It is Nedbank’s biggest purchase since 2002, when its predecessor acquired lender BOE Ltd for $742 million.
Under the deal Ecobank will repay its $285 million loan to Nedbank, meaning it will be left with $208.4 million in cash.
Titan Trust Bank has selected Oracle FSS for its core and digital banking technology, it is understood.
The start-up bank recently obtained its license by the Central Bank of Nigeria (CBN).
It’s understood that Temenos and Infosys also competed for the deal.
The shortlist came down to the two most widely installed international core systems in Nigeria, Infosys’ Finacle and Oracle FSS’s Flexcube.
The Nigerian banking sector has seen a great deal of upheaval over the years, with many mergers, start-ups and closures. Flexcube is a well respected name since the late 1990s (the pioneer was Access Bank, now one of the country’s top five banks) and has been a commonly selected platform since then.
The new bank is believed to be one of five to have gained regulatory approval of late (Globus Bank is another).
Local media sources say the new licences stem from the Central Bank’s desire to attract new investments into the sector and better serve the country’s 50 million+ unbanked and under-banked citizens.
Titan Bank is said to be headed by a former executive director of Heritage Bank (which is a Finacle user).
Oracle FSS did not respond to request for comment.
International Monetary Fund (IMF), has appointed Tony Elumelu, Nigerian billionaire and group chairman of Heirs Holdings, owners of United Bank of Africa, to its advisory council on entrepreneurship and growth, convened by Kristalina Georgieva, the fund managing director.
The announcement was disclosed in a statement on Friday.
According to the statement, the IMF advisory council comprises global business leaders, policymakers, and academics dedicated to identifying and addressing regulatory barriers to entrepreneurship.
The IMF said Elumelu will be instrumental in ensuring that Africa’s entrepreneurship is central in policy making.
“Elumelu, Africa’s leading advocate of entrepreneurship and whose Foundation has funded, mentored, and trained over 25,000 African entrepreneurs since 2015, champions entrepreneurship as the engine for the economic transformation of Africa,” the statement reads.
“A self-made entrepreneur, Elumelu’s embracing of entrepreneurship is fundamental to his concept of Africapitalism, his belief that Africa’s private sector can and must play a leading role in the continent’s development, making long-term investments that deliver social and economic value.
“Elumelu will be instrumental in ensuring that Africa’s entrepreneurial potential is central to global economic policy making.”
Speaking at the inaugural meeting of the advisory council on March 26, Georgieva said the appointees would share their experiences on how macroeconomic and financial policies “can provide a supportive environment for innovation, entrepreneurship, and productivity — key ingredients for a thriving private sector and strong economic growth”.
Africa’s Micro, Small, and Medium Enterprises, fintech industry, scaling remittances, and cross-border payments will be the driving forces behind the continent’s digital ballooning payments system, which is estimated to reach $1.5 trillion by 2030.
This is according to a MasterCard-commissioned study by Genesis Analytics, which states that the digital payments economy is growing faster on the continent.
This comes as the World Bank says Sub-Saharan Africa has shown significant growth in financial inclusion over the past decade, much of it driven by mobile money account adoption.
Dimitrios Dosis, president, Eastern Europe, Middle East and Africa at MasterCard, comments: “Africa is filled with immense possibilities, and its people have the potential to shape the global economy in the decades ahead.
“MasterCard remains deeply committed to driving digital transformation across the continent, working closely with entrepreneurs, merchants, banks, start-ups, telcos, and governments. By increasing our investments, expanding innovation, and fostering inclusion, we are helping build a more connected and accessible digital future.”
The payment technology company went on to say as a longstanding technology partner to Africa, its continues to strengthen its commitment to the continent’s digital growth through strategic investments, public-private partnerships, and innovation initiatives that drive financial health and economic growth.
In addition, it says trends in Africa signal a strong shift towards digital transactions, with businesses and consumers increasingly embracing contactless solutions, further accelerating economic participation and financial accessibility across the region.
“For over five decades, MasterCard has worked alongside African governments, businesses, and communities to advance financial inclusion and economic development.
“With Africa projected to host nine of the world’s 20 fastest-growing economies, we are focused on leveraging our expertise and a technology to support the continent’s continued digital transformation.
“Our investments today will help build a more resilient economy for the future,” says Mark Elliott, division president, Africa, MasterCard
By fostering collaboration with key stakeholders, MasterCard says it aims to enhance digital connectivity, expand economic opportunities, and enable millions of people and businesses to thrive in the digital economy.
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