“Bitcoin is not a currency” – Jeune Afrique

After several difficult years, during which Ecobank had to clean up its portfolio and its management in Nigeria, the pan-African group has regained its colours. For the first time in five years, it redistributes, on the basis of the 2021 results, dividends to its shareholders. Artisan of this recovery, Ade Ayeyemi, its general manager, must hand over. This change of leadership is one of the main files of Alain Nkontchou this year, appointed head of Ecobank’s board of directors in 2020.

The banker, also founder of Enko Capital, a pioneering investment company in the management of African debt which manages 900 million dollars in assets, is the great guest of the economy Young Africa-RFI, broadcast on May 14 on RFI. At our microphone, he discusses recent economic news, from the management of environmental issues for banks during COP15 in Abidjan, to the adoption of bitcoin as the official currency in the Central African Republic, including the return of the inflation in Africa. Rare thing, the financier points out the responsibilities of the banks and calls on them to lend more to companies.

Jeune Afrique: The COP15 on desertification is being held from May 9 to 20 in Abidjan and raises the question of the impact of human activities on nature. Are the banks aware of their responsibility when they finance agro-industrial projects which are, in essence, harmful to the environment?

Ade Ayeyemi: Absolutely. We have managed to put in place fairly detailed measures of the environmental protection needs and impact of these projects. This is part of the set of social and environmental responsibility elements taken into account by banks in obtaining credit.

Is it important to issue environmentally friendly financial products?

Banks, including Ecobank, issue green bonds. The way these funds are deployed takes environmental criteria into account. We must go further, it is true, but Africa above all needs capital. This need is reinforced by the war in Ukraine and the resulting rise in food prices. It also seems urgent that the continent have, if not total independence, at least a certain form of autonomy in terms of production.

Inflation worries households, governments, but also the financial sector. How do you analyze this phenomenon?

The surge in prices is visible: it stands at around 12% in sub-Saharan Africa. This situation requires a calibrated response. It is not by raising the interest rates of the central banks that the price of food products will fall, but it is essential to cushion the shock on the currency, and to avoid a trickle-down effect of this inflation. We must slow down the pressure on local currencies.

Is the rise in interest rates the only recourse to limit this inflationary surge?

In the immediate term, unfortunately, yes, even if it leads to a slowdown in the economy. That being said, rising prices can have significant social consequences. Subsidies are therefore also needed to help the poorest. No government has a mandate to let its people suffer, even if states’ budgetary situations are made even more difficult by the Covid crisis.

In this context, can banks be tempted to lend less?

This is often their reaction in an uncertain environment… Their job is still to know how to take this risk.

Since the beginning of the year, Mali has been under sanctions from the Economic Community of West African States (ECOWAS). Guinea and Burkina Faso, which have also experienced coups, are also under pressure. Will these savings be even more impacted? And how does Ecobank, present in these three countries, manage the situation?

With an inflationary situation and relatively weak growth, it makes sense to think that these economies will be impacted. As a player present in these countries, Ecobank respects the instructions given by ECOWAS, while trying to do our best to respect the commitments we have there.

Another country in economic difficulty, but not only, the Central African Republic has just adopted bitcoin as its official currency. As investors and bankers, do you see any interest in this innovation?

Can bitcoin be a medium of exchange? It is difficult to process 24,000 transactions per second as some payments do today, due to both energy and technical constraints. Technology is evolving – we can trust it on this point – but as we speak, as a transaction tool, bitcoin is not a currency… Given access to electricity and the Internet in a country like the Central African Republic, we can have doubts about the rational aspect of this decision.

Are banks lending enough to the African private sector?

In Africa, the share of credit allocated to the private sector is low: private debt represents about 38% of overall GDP. In the United States, it is 210%, and 140% in Europe. This is due to two reasons. First, banks should clearly do more than what they are doing today. They should provide for this permanent capital need of the economy. But to get there, they need to better appreciate the risks.

This is the second point: governments must push banks to take more risk. They have the means, for example by offering support on the first levels of losses in the projects in which they are involved. Both parties have an interest in finding an environment that encourages banks to take more risk. A continent with an average per capita income of $1,500 and a young population needs heavy investment. Africa needs to develop agriculture, build roads, ports…

In terms of banking, telecom operators have taken over from banks. Did they lose the game?

No of course not ! This dynamic is welcome, but there is a limit beyond which the telecom operator can intervene. It can attract new customers, offer payment and transfer services, etc. But does it turn them into bank customers? Is it able to offer him loans, savings or insurance products? Maybe not. It is clear that we have an interest in getting along.

You are not in favor of telecom operators obtaining banking licenses?

The authorities decide what is optimal for them. Becoming a bank means committing to respecting capital ratios… If a telecom operator wishes to become a bank, in the responsible sense of the term, so much the better. These are different professions, with complementarities, due to technology. There is certainly room for banks to increase their profitability by using their portfolio of financial services for the benefit of these new customers.

Ade Ayeyemi, the managing director of Ecobank, is due to leave at the end of 2022. Has the process of recruiting his successor begun?

Yes, as Ade Ayeyemi is expected to leave at the end of the year. But this change of leadership must take place under optimal conditions for the bank, without haste.

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