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IOL News
08-07-2025
- Business
- IOL News
Why this fintech founder thinks 'patient capital' is killing African investment
Ethiopia has newly liberalised its financial sector. Image: Fanuel Leul on Unsplash Last month, news broke about Kenya's KCB Group being on track to become the first foreign bank to secure entry into Ethiopia's newly liberalised financial sector. This represents a historic shift ending five decades of state control dating back to the 1974 Derg nationalisation. It's the kind of development that Bernard Laurendeau spent years laying critical groundwork for during his time embedded within Ethiopia's government machinery, though not all his efforts bore fruit. Government whispering After 15 years advising Fortune 50 clients (from Google and Cisco to UAE's Ministry of Finance), Laurendeau returned to Ethiopia in 2019 to serve as senior advisor to the jobs creation commission under the Prime Minister's office. The work wasn't always successful. For instance, a startup act he helped draft "never saw the light of day," he admits, though he declines to elaborate on why it stalled. What did emerge was his theory of "Gov-preneurship": the idea that Diaspora professionals should embed with African governments to transfer knowledge and build institutional capacity. "A lot of the leaders in Africa turned out to be very authentic, very genuine about what they're trying to do for their country, but they're lonely," he explained during a recent African Tech Roundup Podcast conversation. The timing proved fortuitous, if not entirely by design. Laurendeau had spent years watching Japanese companies struggle to decode African markets, relying on outdated World Bank data and Geneva-sourced reports. When Safaricom secured its Ethiopian telecoms licence in 2021, he found himself simultaneously building a fintech company and helping incumbent banks navigate potential mobile money disruption. This dual role raised eyebrows. "People think there was some conflict," he reflects, "but financial services sovereignty was always the goal. We needed to ensure technology transfer, knowledge transfer, and that we're really building institutions." Video Player is loading. Play Video Play Unmute Current Time 0:00 / Duration -:- Loaded : 0% Stream Type LIVE Seek to live, currently behind live LIVE Remaining Time - 0:00 This is a modal window. Beginning of dialog window. Escape will cancel and close the window. 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Text Color White Black Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Background Color Black White Red Green Blue Yellow Magenta Cyan Transparency Opaque Semi-Transparent Transparent Window Color Black White Red Green Blue Yellow Magenta Cyan Transparency Transparent Semi-Transparent Opaque Font Size 50% 75% 100% 125% 150% 175% 200% 300% 400% Text Edge Style None Raised Depressed Uniform Dropshadow Font Family Proportional Sans-Serif Monospace Sans-Serif Proportional Serif Monospace Serif Casual Script Small Caps Reset restore all settings to the default values Done Close Modal Dialog End of dialog window. Next Stay Close ✕ Whether by careful positioning or fortunate circumstances, the approach appears to have yielded results. Laurendeau revealed that Arifpay is now poised to issue dividends (a rare milestone for African fintech) on the back of securing partnerships with Safaricom's M-Pesa and, more recently, local heavyweight Nib International Bank. Rather than the mobile money whitewash many feared ahead of Safaricom's (Vodafone) market entry, Ethiopia's payment landscape now features multiple players competing on service rather than regulatory capture. Capital myths But Laurendeau's most contrarian insight targets the "patient capital" narrative that dominates African investment discourse. Having relocated to Tokyo specifically to bring African market intelligence to Japanese boardrooms, he's witnessed firsthand how this positioning backfires. "Investors don't want to think long term," he proffers bluntly. "They can either invest on the stock market, whether in Tokyo or the US, and they have options. So if you tell them, 'Oh, you need to think long term,' that's not the right type of answer." Instead, his firm delivers what he calls "execution horsepower": the project management, policy design, and actionable expert insight that enables rapid decision-making. It's management consulting adapted for emerging markets, where the gap isn't capital but institutional capacity. Unglamourous wins This philosophy extends to his concept of "Gov-preneurship": embedding with governments to build the unglamourous infrastructure that makes everything else possible. Think core banking systems, Bloomberg terminals for local stock markets and payment rails that actually work. The unglamorous foundations that Silicon Valley-inspired entrepreneurs skip in their rush toward "fancy AI machine learning." "We cannot always do the fancy stuff," Laurendeau argues. "We need to do the boring stuff as well—building hospitals, infrastructure, the boring aspect of technology." It's a message that hasn't always landed well with African audiences expecting more inspirational rhetoric. But recent developments suggest the approach has merit. Ethiopia's banking liberalisation required years of policy groundwork, regulatory design, and stakeholder alignment; apparently, the kind of institutional building that Gov-preneurship enables. Quality standards The irony isn't lost on Laurendeau that he's making this argument from Tokyo, having positioned himself in the backyard of companies with 30-year track records of systematic African engagement through Tokyo International Conference on African Development (TICAD) summits. Japanese organisations bring uncompromising quality standards to everything they touch ("there's no such thing as downgrading") while creating superior knowledge transfer opportunities for African partners willing to meet those standards. "Sometimes we see all these new terms (crypto, AI, even entrepreneurship became very trendy)," he observes. "But innovation can make you lazy because it's basically pushing you to not do the mundane." Sovereignty test As KCB prepares its Ethiopian expansion and other regional banks eye similar opportunities, Laurendeau's thesis faces its ultimate test. Can African markets compete on execution quality rather than narrative sympathy? Can governments become genuine partners rather than supplicants seeking patient capital? His own trajectory offers a template for this transition. From mechanical and aerospace engineering at ENSTA France and Georgia Tech to consulting at BNP Paribas, from Silicon Valley big data analytics to Ethiopian policy design, Laurendeau has systematically positioned himself where technical expertise meets institutional need. The approach landed him everything from BBC World Service hosting gigs to Fortune 50 consulting mandates. By that token, it does appear that strategic positioning beats geographic sentiment. The bet now is whether an entire continent can make a similar transition at scale. Andile Masuku is Co-founder and Executive Producer at African Tech Roundup. Image: Supplied
Zawya
01-07-2025
- Business
- Zawya
Regional subsidiaries boost profits for Kenyan banks
Virtually every aspect of lend- ing for the big banks, says Ronny Chokaa, a senior ana- lyst at Nairobi-based Capital A Investment Bank, 'was almost flat in Kenya [over the last year and more], but in the subsidiaries, it went up. Most of the external economies were growing faster than Kenya. So, banks benefited from actual lending outside Kenya.' Nearly all Kenya's banks wit- nessed a surge in external profits in 2024, with Equity Group generating the highest at Ksh24.4bn ($188.9m), accounting for half of the total Ksh48.8bn ($377.7m) net profit. Its closest competitor and the largest bank in Kenya, KCB Group, reported that 30.3% or $144.7m of its total net profit of $478.3m came from foreign subsidiaries, while NCBA Group achieved $24.8m, representing a 13% share of the total. The profit share from I&M Group's subsidiaries also rose to 29% or 46.4m in 2024, despite its Mauritius sub- sidiary, Bank One Limited (acquired in 2008), plunging into losses. I&M had a total net profit of $128.5m during the period. The increase in profit contribution, cou- pled with the potential for more dividends from foreign subsidiaries in the near fu- ture, highlights the gradual maturity of these external investments after years of capital injection by parent banks. Lawrence Kimathi, KCB Group CFO, says robust external subsidiaries are important 'to diversify and de-risk Kenyan con- centration' while Equity Group's CEO, James Mwangi, views the Kenyan unit as 'a sleeping giant that can push back. 'The strategy of regional expansion is truly effective. This diversification aids us in managing economic shocks. It will be intriguing to see Kenya regain its posi- tion as contributing more than 50% of the profit,' Mwangi notes. The decline in the contributions of Ken- yan domestic units coincides with slower GDP growth, projected at 4.7% in 2024, down from 5.6% in 2023. This growth lags behind peers like Rwanda, Tanzania and Ethiopia. Tight monetary conditions, which per- sisted until mid-2024, when the Central Bank of Kenya (CBK) initiated minimal cuts in benchmark interest rates, con strained private sector lending, with banks prioritising government debt over riskier retail and individual loans. Commercial bank lending to the private sector contracted by 1.4% in December 2024 compared to a year previously, due to several factors including reduced demand for loans amid defaults. Banks lagged passing on the benefits of the benchmark rate cuts to Kenyan bor-rowers, citing costly funds tied to locked deposits. The reduction in interest rates is anticipated to encourage more borrowing for consumption and investment, thus stimulating economic activities in 2025. Kenya's economy is forecast to rebound this year at 5.3%, attributed to improve- ments in the agriculture and service sec- tors. However, this growth will still lag behind countries such as Rwanda, DRC and Tanzania, where growth rates are expected to exceed 6%. 'Interest rates are inching down, and inflation remains under control. We are remaining at the table with other Kenyan bankers to see how we can quickly transmit changes in in- terest rates,' says Paul Russo, KCB Group's CEO. The strengthening of the shilling against the dollar, which led to cur- rency translation losses, also partly reduced the value of assets and earn- ings, especially in Kenya, South Sudan and DRC, where lenders have signifi- cant holdings in dollars. The Kenya shilling appreciated from a high of 160 per dollar in February 2024 to 129 last December. DRC is the key Big lenders KCB Group, Equity Group, DTB Group, NCBA, and I&M Group have op- erations across Tanzania, Uganda, South Sudan, the Democratic Republic of Congo (DRC), Rwanda, Mauritius and Burundi. Outside Kenya, DRC tops the profit chart for Kenyan banks, buoyed by a large un- banked population and the arrival of global firms seeking investments in the mineral sector. The central African nation is esti- mated to have $24trn-worth of untapped minerals such as cobalt, gold and copper, needed in the fast-growing e-mobility sector. Both Equity Banque Commerciale du Congo (EBCDC) and KCB's Trust Merchant Bank (TMB) achieved double-digit profit growth in DRC last year, reaching $120.7m and $80.5m respectively. Equity enjoys a bigger market share than KCB in DRC, having entered the popu- lous country earlier through a series of acquisitions that began in 2015, to spur market penetration. Today, EBCDC, with 79 branches, is the second-largest in DRC af- ter Rawbank, boasting an asset base worth $5.1bn, more than double KCB's $2.1bn. As in DRC, Equity has outperformed KCB, I&M Bank, and NCBA in Rwanda. The lender commands an asset base of $962.1m and generated a net profit of $41.8m in 2024 in Rwanda, while KCB reported $23.2m profit from its $712.1m assets. NCBA, which holds 3.5% of Rwanda's banking sector, reported a gross loss of $1m last year, with the management not- ing in its outlook that 'Rwanda is clouded by external vulnerabilities due to escalat- ing conflict with the DRC'. 2024 marks the second consecutive year that NCBA's external subsidiaries collec- tively realised a profit growth, turning from a combined gross loss of $12.8m in 2021 to $24.8m profit last year. NCBA Group, which heavily relies on its do- mestic Kenyan unit, has three exter-nal banking subsidiaries in Rwanda, Tanzania and Uganda, along with digital operations in Côte d'Ivoire. In Uganda and Tanzania, the Ken- yan lenders are struggling to grow and challenge other institutions like South Africa's Standard Group (Stan- bic), which maintains a relatively firm grip of those two markets. NMB Bank and Cooperative Rural Development Bank (CRDB) are also dominant in Tanzania, collectively commanding about 43% of the mar- ket. While the performance of Kenyan banks improved in those two markets in 2024, the profit contribution from the Uganda and Tanzania units was low last year, ranging between 0.6% and 5% for Equity, NCBA, and I&M Group. 'We are exploring ways to achieve a breakthrough in Tanzania because it is a strategic market. Starting in 2025, the group will invest heavily and put a lot of focus on Tanzania,' says Equity CEO James Mwangi. (See page 87.) However, there are still stark risks in the DRC and South Sudan, as military clashes intensify amid faltering peace talks. Kenyan banks operate branch- es across various locations in the DRC, primarily in Kinshasa, Lubumbashi and Goma. KCB has over 110 branches in different parts of the DRC. Its operations in eastern DRC, where Rwanda-backed M23 rebels have gained control, have already reported a 10% impact on their revenue within the first two months of 2025. This impact translates to approximately $23.2m in revenue loss that could worsen if the conflict spreads to other parts, espe- cially Lubumbashi, DRC's commercial and industrial hub located in the southeast. 'Luckily, eastern DRC is not that big and not very economically advanced or densely populated. If the situation continues and escalates, it could worsen. For now, we can absorb the 10% impact we've experienced,' says Russo of KCB. Foreign interest in DRC mines has partly exacerbated ongoing geopolitical tensions, with the US reportedly a frontrunner in sealing a mineral pact with Kinshasa in exchange for military support to neutralise the M23 rebels. Similarly, the war in South Sudan, the world's youngest nation, has led to deaths, disrupted businesses, and threatened oil exports, the country's primary source of revenue. Equity, KCB, and Co-operative Bank, which together control nearly 40% of South Sudan's banking sector, had mixed performances in that market in 2024. In South Sudan, KCB grew faster than any other Kenyan bank, reporting a 53% year-on-year rise in revenue to $31.8m. Equity and Co-operative Bank experienced profit drops of 40% and 98%, respectively, in Juba due to decreased cus- tomer deposits and rising loans. The South Sudan unit is the sole external subsidiary for Co-operative Bank, which it co-owns with the national government. Mixed dividend pay-outs The overall profit increase by Kenyan banking heavyweights resulted in record dividend pay-outs. The top nine banks declared a combined dividend of Ksh85.3bn ($660.2m). However, the dividend pay- ments from players like KCB, Equity, NCBA, and Co-operative Bank, compared to for- eign banks in Kenya, fell short of market expectations, given their impressive fi- nancial performance. Some analysts believe this is a conserv- ative approach as a result of the lenders aiming to build more capital for growth in external markets, particularly in Ethiopia, which some are targeting once banking regulations are finalised. KCB, for instance, paid $74.3m in dividends, reflecting just 15.5% of the total $478.3m net profit. It froze dividends in 2023 after a profit drop. Equity paid a $123.8m dividend, a modest 6% annual increase, while NCBA offered $70m. 'The low dividends are part of a long-term strategic plan targeting a stronger capital base now that regula- tors in various countries are increas- ing minimum capital requirements for banks,' argues Chokaa at Capital A Investment Bank. 'We also antici- pate that Kenyan lenders, primarily KCB and Equity, will pursue future acquisitions in Ethiopia or markets where they have weak penetration,' he adds. Amid impressive performances, many external subsidiaries may soon begin con- tributing dividends to their parent banks in Kenya. Aside from the Kenyan unit, Equity currently receives dividends from Rwanda and South Sudan, with Mwangi noting that the other subsidiaries are 'ac- cumulating capital and retaining every- thing to sustain growth.' KCB also expects its Rwanda, Tanza- nia and DRC units to start contributing dividends in 2025. However, the CEO says DRC might be exempt, given the ongoing military wars. Dividend payment by external sub- sidiaries is 'something that gong forward will be a push and that will improve our pay-out ratio ultimately,' says Lawrence Kimathi, KCB's CFO. n Nearly all Kenya's banks witnessed a surge in external profits in 2024, with Equity Group generating the highest at Ksh24.4 bn ($188.9m). There are still stark risks for banks in DRC and South Sudan, as military clashes intensify amid faltering peace talks. © Copyright IC Publications 2022 Provided by SyndiGate Media Inc. (
