Ethiopia: Standard Bank weighs up options to join Ethiopia’s finance industry

Standard Bank Group Limited, the largest lender in Africa in terms of assets, is considering joining the banking sector in Ethiopia. The bank is waiting until the National Bank of Ethiopia (NBE) starts the process of granting international banks licenses in Ethiopia, which is anticipated to happen in less than a year.

Yinka Sanni, the bank’s CEO of Africa Regions, was in Ethiopia between November 30 and December 2, 2022, leading a series of meetings with various partners, clients, and stakeholders, including the Ethiopian government as well as the bank’s clients operating in Ethiopia.

The Council of Ministers approved a policy and strategy for allowing foreign investment in Ethiopian banking, putting an end to a half-century of protectionism. The subsequent amendment of the Banking Business Proclamation by the NBE also stipulated four modalities for the foreign banks’ entry: subsidiary, branch, commercial representative office, and acquiring up to 30 percent of the existing local banks.

“Standard Bank is in the process of considering all options. We are respectful of the process outlined by the banking authorities and the government in Ethiopia, and we look forward to the time when regulatory approval allows us to establish a bank,” said officials of Standard Bank in an email response to The Reporter. “We have not decided on the modality or exact business model that we will use to enter the Ethiopian market.”

Headquartered in Johannesburg, South Africa, with 159 years of history, Standard Bank has a footprint in 20 countries across the continent. The bank already has an extensive commitment in East Africa, with operations in Tanzania, Uganda, Kenya, and South Sudan, and a representative office in Ethiopia.

“We have many success stories from other countries. We believe that we are uniquely positioned to support the government’s plans to attract more investments into the country through our client base on the continent and facilitate the financing on their behalf,” Taitu Wondwossen, Head Standard Bank Representative Office in Ethiopia, said.

Establishing a presence in Ethiopia is also in recognition of the increasing interest by investors and clients, in the country’s economic growth and significant investment opportunities, according to Taitu. “We note that over the last decade, Ethiopia has emerged as one of Africa’s most profound growth stories. This growth has been driven by structured government development plans, positioning Ethiopia as a regional industrial hub and global aviation center.”

The Standard Bank intends to bring its clients from around the world to its Ethiopian operation. “Standard Bank is committed to Ethiopia, which remains a vital market for our clients seeking investment opportunities with the potential of driving development in the region, through our client base on the continent and facilitating the financing on their behalf,” Sanni said.

Other African banks, including Kenya’s KCB, have also disclosed their appetite to join the Ethiopian market over the past couple of months. Officials of Standard Bank believe that South African and Kenyan banks are the top candidates to get the first licenses once the NBE starts implementing the open-up legislation.

However, experts question what unique services African banks can bring to the table, given that most stick to similar traditional banking services.

“Standard Bank will be well-positioned to take advantage of the cross-sectorial investment opportunities both in Ethiopia and the region. Our experience in East African markets will benefit all our clients by providing them with insights into how to best capitalize on their investments in the region,” Kate Johns, reputation and communication manager at Standard Bank, said.

Johns believes Standard Bank can leverage its strong position on the continent, its strategic partnership with the Industrial and Commercial Bank of China (ICBC), its sector expertise, and its corporate and investment banking capabilities to facilitate capital investment in support of Ethiopia’s growth. “We are particularly strong in the development of capital markets and attracting or facilitating foreign investment into countries.”

Regarding the latest dynamism in the Ethiopian banking sector, which is evolving to digital banking and being accelerated by MPesa and telebirr, Johns says Standard Bank has a better competitive edge.

“We are as digitally agile as other financial services in the region and will be able to serve our clients with advanced digital capabilities and platforms. Because we are experiencing this digital transition in all 20 of our markets on the continent—all at different stages of maturity and execution—our competitive edge is the experience and infrastructure we have in place to provide seamless digital services,” Johns said.

The strict regulatory environment in Ethiopia and the macro- and political challenges Ethiopia is facing, are all manageable, according to officials.

“In our view, Ethiopia is no different from any other African country. We are an African bank with a footprint in 20 countries across the continent. We specialize in obtaining local knowledge and insights and use international best practices in applying governance and risk frameworks in all the African markets we operate in,” Taitu said.

She says operating in Africa is a core competency of the bank, and it regularly consults with central bank regulators and authorities on policy making. “The same will apply to Ethiopia, where we will adhere to the processes outlined by the banking authorities and the government.”

The Standard Bank also has its eye on capitalizing on the growing green energy investment in Ethiopia. Ethiopia is emerging as a major energy hub in East Africa and is leading the continent in the development of green energy. Together with neighboring Kenya, the country has a lot of the continent’s potential for hydro, wind, and geothermal energy. As a result, investment is focused on supplying reliable power to Ethiopia.

Standard Bank has assisted Ethiopian Electric Power’s (EEP) search for sustainable solutions for funding requirements and supported this critical power build.

“We are also excited to see Ethiopia emerging as a major energy hub in East Africa and as a leader on the continent in the development of green energy, and thus increased investment in supplying Ethiopia with reliable power,” Sanni added.

Other investments in the country include Standard Bank’s structured USD 75 million in financing facilities for the opening of Coca-Cola Beverages Africa’s bottling plant in Sebeta, situated on a 14-hectare plot. This is set to bolster the country’s manufacturing capacity and expand production of local beverage products.

With the exception of Liberty, the group has more than 46,000 employees, more than 1,143 branches, and more than 6,600 ATMs on the African continent. This gives it the ability to offer a full range of personal and business banking, corporate and investment banking, and wealth management services.

Standard Bank Group Limited’s s headline earnings for 12 months ended December 31, 2021, were R25.0 billion (USD 1.4 billion), and the return on equity (ROE) was 13.5 percent. Standard Bank’s market capitalization as of December 31, 2021, was R228 billion (USD 14 billion).

The group’s largest shareholder is the Industrial and Commercial Bank of China (ICBC), the world’s largest bank, with a 20 percent shareholding. SBG and ICBC also have a strategic partnership that makes it easier for trade to move between Africa, China, and some emerging markets.