Banking gets little attention in the study of global geopolitics except when sanctions are involved. Yet a healthy banking system or its opposite is a strong indicator of whether a country or region is doing well, even whether its future looks bright. If the locals don’t trust their banks, if international banks won’t do business in the region, then you can be sure that a lot else is wrong – such as political corruption, weak rule of law and the like.
Nowhere is this truer than in much of present-day Africa and its economic prospects. Despite the continent’s abundance of strategic resources, the region remains crippled by the vices of acutely uneven governance that stifle economic growth. Over the last decade, western banks and financial institutions have withdrawn from Africa – the latest being BNP Paribas SA, which followed Barclays Plc, Standard Chartered Plc and Société Générale SA. These departures have created a spike of adversity that cannot be reversed without reinstatement of ethical governance to ensure growth, prosperity and economic development for the region.
While BNP Paribas closed its South African corporate and investment bank on 6 May 2024, other French banks have followed suit. Société Générale sold its banks in Burkina Faso and Mozambique at the end of last year, following sales of other African branches. Crédit Agricole left Morocco last year and BNP Paribas withdrew from Senegal, Ivory Coast, Gabon and Tunisia between 2019 and 2022.
Meanwhile, in 2021, Britain’s Atlas Mara announced plans to withdraw from Africa after previously acquiring banks in seven markets on the continent. Barclays wrapped up its stake in Africa in 2022, a joint venture with Absa. Standard Chartered announced in April 2022 that it would strategically divest from Angola, Cameroon, the Gambia, Sierra Leone and Zimbabwe and exit its consumer, private and business banking in the Ivory Coast and Tanzania. Citi sold its Egyptian consumer banking units in recent years and Royal Bank of Scotland unloaded its African private banking business in 2015.
The official line is that Western banks have been disappointed with the economic performance of their branches in Africa. However, most bankers, speaking discreetly, might also add that the risks are simply too great when you’re operating an international bank, especially its local branches, in a legally undependable environment. With the shadow of corruption and political interference so ubiquitous, not to mention the widespread sympathy for Russia among Africa’s governing elites, you can imagine the potential for sanctions and penalties from Western regulators. It’s enough disincentive just dealing with the ever-increasing scrutiny of a bank’s global operations and supply chains – because it does business in Africa’s messy markets.
Then there’s the opposite view. Let’s consider it for a moment: “International banks scaling back African operations has benefited a number of local banks, which have not only increased in size and geographical presence but have reworked their business models to become true continental champions that can compete on an international scale,” said Afis director Ramatoulaye Goudiaby.
Anyone in the ranks of the vociferous about putting an end to Western economic colonialism and imperialism in Africa would applaud. However, banks are not mining companies – they’re not there to extract and exploit. They make money by enabling a healthy, transparent business environment to prosper. They make money when the local economy makes money – the region gets a boost in the process. Good corporate governance and compliance with rule of law are color-blind principles. Transparency also helps. Sadly, in practice, African banks just don’t get as effectively and impartially regulated as their Western counterparts. Western banks bring the added benefit of setting examples. Absent all that, in the end, it’s Africans themselves who suffer.
So, despite the anti-colonial cheerleading, here’s the reality: The Western withdrawal left a void allowing corruption and other bad behaviors to creep into the sector through the new African banking powerhouses. What results is distrust, disinvestment and prolonged economic difficulties for the masses. That’s what happens when conditions get too murky for businesses and investors to navigate clearly. “In the Democratic Republic of Congo, there are about 30 banks, two of which are truly banking institutions… the others are most often simple letter boxes for money laundering”, stated Thierry Vircoulon from the Institut Français des Relations Internationales (IFRI).
Nigeria, one of the biggest commodity-exporting economies in Africa, ranks poorly at number 145 on the Transparency International index, categorizing it as one of the most corrupt countries in the world. One of the country’s largest banks, Ecobank Nigeria, a subsidiary of pan-African group Ecobank Transnational Incorporated (ETI), has recently been accused of organizing a $42m extortion scheme against a UAE-based company.
Nedbank, South Africa’s fifth-largest lender and the largest shareholder of ETI, had to pay a $21 million fine in South Africa in 2022 because of suspicious transactions and a failure to keep accurate banking records. However damaging, this is a small sum compared to what the Head of the South African National Prosecuting Authority described as the “biggest bank robbery in this country” – the collapse of VBS Mutual Bank, with more than £100m in debts. Much of the money had likely been siphoned into private bank accounts and spent on property or luxury cars.
Weak governance and corrupt business practices in the African financial sector go all the way up to the multi-lateral lender. Last year, the African Development Bank admitted that a $55mn integrity fund launched with great fanfare eight years ago has still not been put into operation and has not disbursed any money on its stated anti-corruption purpose.
Encouraging economic development across the continent is clearly in the interests of African banks, but to achieve this,they must urgently address their own poor governance, prioritizing ethics and compliance. They must fight against corruption to ensure they do not incur the wrath of international financial centers.
While the finger of blame is often pointed at governments, responsibility also lies with the banking sector. Now that western banks have withdrawn from Africa, seemingly to avoid corruption, instead of accepting defeat, local banks must demonstrate integrity and leadership to protect the future of the African people as well as their own reputations.
Source link : https://www.forbes.com/sites/melikkaylan/2024/06/12/africa-must-cure-systemic-corruption-to-become-a-player-in-world-affairs/
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Publish date : 2024-06-12 19:25:09
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