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E&M Magazine: How US Banks Are Replacing Europeans in Africa

E&M Magazine: How US Banks Are Replacing Europeans in Africa

As European banks move away from Africa, North Americans are doing the opposite, although still reluctantly in retail banking.

European banks are retreating in Africa, while North American competitors are advancing. In October, Jamie Dimon, CEO of JP Morgan, the world’s largest bank, said: ‘We want to [expand our presence] in Africa every two or three years.’

The enthusiasm is shared by others. ‘Africa offers immense opportunities for our clients, particularly in the sectors of critical minerals, technology, energy, natural resources and infrastructure development,’ emphasises Yvonne Ike, head of Bank of America’s (BofA) business in sub-Saharan Africa.

In French-speaking Africa, ‘Côte d’Ivoire has it all,’ says Ike. ‘A diversified economy, a dynamic private sector, oil and gas resources and currency stability. We’re excited to establish a stronger presence in Côte d’Ivoire and Senegal, which also has great potential.’

The belief of the world’s largest bank

Citigroup prefers to let the numbers do the talking. It is present in 12 African countries, compared to two (soon to be four) for JP Morgan and just one each for BofA and Goldman Sachs. Citi’s first African office dates back to 1920 in South Africa. However, it is not expected that private clients will be able to open accounts with US banks in Africa in the near future.

Africa in the near future. ‘The rate of return in retail banking is generally not very attractive,’ explains Otaviano Canuto, a former vice-president of the World Bank and currently a senior researcher at the Policy Centre for the New South, a think-tank in Morocco.

Citigroup, which posted revenues of 20.3 billion USD in the third quarter of 2024, and is led by Jane Fraser, has an advantage in Africa thanks to its long presence

‘Operating in this sector requires local knowledge’ and this ’is not the strategy of US banks.’ Canuto also mentions regulatory obstacles. ‘The US authorities can be ruthless if some transactions or clients seem less than transparent. The cost-benefit analysis does not favour a foray into commercial banking,’ he stresses.

Dominance in mergers and acquisitions

Meanwhile, Citigroup, Bank of America, JP Morgan and Goldman Sachs have been strengthening corporate services and consultancy work for African governments. In the first half of 2024, the top five M&A advisors in sub-Saharan Africa were all American banks.

This year, South African television giant Canal+, owned by Vincent Bolloré, hired BofA Securities and JP Morgan as financial advisors in its acquisition of Multichoice. The five largest US banks accounted for 94 per cent of the global value of transactions in the period, according to data from LSEG Data & Analytics. Morgan Stanley led the way with transactions worth 15.4 billion dollars.

Citigroup, which recorded revenues of 20.3 billion dollars in the third quarter of 2024 and is led by Jane Fraser, has an advantage in Africa thanks to its long presence, and is determined to profit from this position. ‘The era of the all-powerful state will give way to local and foreign private investment,’ says Papa Sall, Citi’s director for West and Central Africa.

‘Private sector growth will drive the next expansion in most of our markets. This is our natural strength, because we already serve these same multinationals and large local companies as they expand in the infrastructure, agriculture, natural resources, health and other sectors.’

In 2022, Citi granted a 125 million dollar revolving credit line to Airtel Africa and helped Ghanaian health start-up mPharma raise 35 million dollars. Jamie Dimon’s recent trip to the continent highlighted JP Morgan’s commitment to regaining ground.

Boom in trade

US banks are prepared to act as soon as the African Continental Free Trade Area (AfCFTA) materialises. ‘JP Morgan or Goldman Sachs will follow the movement as soon as the number of transactions increases,’ says Canuto. ‘If the capital markets develop, particularly with integration between central banks, the risk-return ratio will become very attractive.’

Meanwhile, US banks are betting on a circuit that is already on the rise: financial and commercial links between Africa and the Middle East.

In 2022 and 2023, the Gulf Cooperation Council (GCC) countries will finance around 113 billion dollars in direct investment in Africa, more than they channelled over the entire decade from 2012 to 2022 (102 billion dollars). The circuit works both ways. Many African companies, particularly Nigerian ones, use Dubai as a hub to reach markets in the Middle East and Asia.

An innovative agreement in Gabon

US banks continue to dominate the historic area of sovereign debt issues. In 2023, Bank of America, in collaboration with the US International Finance Corporation, led a $500 million swap of Gabonese debt. Two weeks after the agreement was finalised, a coup overthrew the Gabonese government. However, the bonds continue to trade well.

Lobito Corridor

All eyes are on the Lobito Corridor, a vast infrastructure project designed to facilitate the transport of critical minerals between Angola, Zambia and the Democratic Republic of Congo. However, will a second Trump administration continue to invest in Africa? The continent’s record of being sidelined during his first term in office is not encouraging.

President Joe Biden, who visited Angola in December, personally supported the project, with Washington investing more than 4 billion dollars. US banks are deeply involved in the financing.

See Also

‘The next government will continue to encourage efforts to build solid partnerships with African states and local companies in order to resist international competition,’ says an inside source.

J. Peter Pham, Trump’s former envoy for the Great Lakes and Sahel region, believes that the US will continue to focus on African minerals essential for energy transition and advanced technologies.

However, he questions South Africa’s status in AGOA (African Growth and Opportunity Act), criticising Pretoria’s stance of condemning Israel for the humanitarian catastrophe in Gaza.

Why does it matter? Because South Africa is the main gateway for American banks into Africa.

Text: Alberto Rodrigues – Photo: D.R.

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