The Economic Intelligence Unit recently released a report titled Banking in sub-Saharan Africa to 2020: A promising frontier. There have been lots of reports that have suggested the positive growth trajectory in the continent, looking at the manufacturing and agricultural sectors, as they indicate the outputs. However, lots have ignored the mechanisms that are needed to ‘oil the prospective machine’. Thus, this report comes at no better time, anchored with helpful data to come to grips with how effective the banking sector will be to help manage the growth expected on the continent.
The report looks at two scenarios: a scenario that is driven exclusively by economic expansion, while the other scenario looks into economic growth and financial deepening. With the former scenario, it is projected that 16 key African countries will boost its financial assets by 178% to US$980bn by 2020, while with the latter scenario, which is seen as the more likely scenario will be driven by both economic growth and financial deepening, we foresee assets expanding by 248% to US$1.37trn.
Some key findings from the report include:
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- The expected boom is largely dependent on the expected high economic growth as well as the application of innovation in communications and the financial sector.
- The growth of continent’s banking sector is not expected to be uniform across countries. It is expected that the current poorly served countries will experience the strongest growth as they greatly tap into the new resource boom. Some of these countries include Angola, Uganda and Tanzania.
- South Africa which currently has the largest banking sector in sub-Saharan Africa is expected to stay the same come 2020. However the country’s financial sector is expected to experience the slowest growth trajectory. Other countries that might experience this include Botswana and Namibia
- A current trend in policy decisions, which have been deemed positive, by several experts are expected to support the growth in the sector. An example of these trends include a new wave of issuance of benchmark-setting sovereign bonds as well as the construction of national and regional markets for stocks and bonds.
