Do not get me wrong. I have no qualms against foreign participation in any sector of the economy. But one logic I agree with wholeheartedly is no country has seen sustained growth and development with foreigners at the helm or in charge of any sector – be it banking, mining, agriculture, oil and gas, education, health or technology.
In Europe, China, United States of America (USA) and other developed economies across the globe, the biggest and most dominant players in all sectors, including banking, are local institutions manned by indigenes.
For example, the 10 biggest banks in the USA are local banks – including Bank of America, JPMorgan Chase, Wells Fargo and Citigroup. In the United Kingdom, the largest banks are indigenous – including Barclays, HSBC, Royal Bank of Scotland (RBS), Standard Chartered, Lloyds and others. The same applies to China, Japan or any other developed economy in the world.
But the same cannot be said of Ghana or Africa in general. A quick glance through the B&FT’s annual banking survey for 2016 shows that only four local banks can be found among the top-10 banks in terms of assets and profitability. Of the total 34 banks, half are foreign and half are local – and even these local players have foreign shareholders in the minority.
It therefore does not surprise analysts or industry experts that the current data show local banks own and control less than 30 percent of the industry’s total assets – and with the latest directive from the central bank to increase stated capital, that local ownership will further dwindle.
In our neighbour Nigeria, local banks are the biggest players including First Bank, Access Bank, Zenith Bank, Guaranty Trust Bank and Union Bank – with the only foreign representation in the top-10 being Ecobank Nigeria, which is actually an African-focused financial player.
In Ghana, our investment laws and incentives do not oblige investors to keep a portion of their profits in the country. The law allows total repatriation of profits, and this is done via foreign exchange – especially the US dollar, which further depresses the local currency.
One of such incentives includes: “guaranteed unconditional transfer through any authorised dealer-bank in freely convertible currency of (a) dividends or net profit attributable to the investment, (b) payments in respect of loan servicing where foreign loans have been obtained, (c) fees and charges in respect of any technology-transfer agreement registered under this act, and (d) remittance of proceeds (net of all taxes and other obligations) in the event of sale or liquidation of the enterprise or any interest attributable to the investment.”
Yes, Ghana’s growing banking sector has created jobs and opportunities for thousands of Ghanaians. Since opening-up the sector, banks from west, north, and south Africa have entered the market, with additions from Asia – and even some American and European giants opening up representative offices.
The opening-up of the sector has led to innovation, with customers getting the best of services backed by technology. Today, no bank can tell you that without a certain amount of money you cannot open an account: the next bank can easily open a zero-account for you.
But the laws of the land are, in my view, allowing more harm than good from these investments in the country. The repatriation of dividends is putting the cedi under immense pressure. No wonder the cedi falls drastically in the first and second quarters of every year. This is because multinationals and foreign banks repatriate their profits around that time.
Also, the attitudes of authorities toward FDIs are more favourable than to local players wanting to expand their operations or start new businesses.
GH¢400m pushes industry further into foreign hands
The latest directive from the central bank, which stipulates that all banks raise their stated capital from the current GH¢120million to GH¢400million, is a good one welcomed by all players…both local and foreign.
But there is growing concern that the directive will further push the industry into the hands of foreigners. Several local bankers, who spoke to the B&FT about their preparation toward reaching the expected amount by December 2018, have all confirmed that they are in talks with both local and foreign investors – and it is all but certain that 80 percent of the new capital will come from foreign private equities or investment funds.
What this means is more of the sector will be under the direction of foreigners, and when dividends are declared the share of these foreign investors will have to be repatriated as usual. No one seems to bother much on the side of the regulators and government, because their main concern is bigger banks to undertake the so called ‘big ticket’ transactions.
Meanwhile, local banks can be empowered to undertake such transactions. For a start, government can deliberately allow only local banks to handle its transactions.
John Awuah, Chief Executive Officer of Universal Merchant Bank (UMB), recently advocated that there must be a deliberate national policy to build the capacity of Ghanaian banks.
“Just as we talk about buying made-in-Ghana goods, people forget that it is important to talk about buying made-in-Ghana financial services as well. How do you do that? Just like in the oil sector, where there is a percentage for local content and the rest goes to others who have the capacity, I think government should not hide on the back of ‘they are too small to handle this transaction’ and give local banks the opportunity. Government can say ‘We want local banks to handle national interest transactions,” he said.
No foreign bank is interested in banking the unbanked – SMEs, the informal sector and rural areas – knowing the risks involved. Only three or four banks have footprints in almost every corner of this country: GCB Bank, GN Bank, Beige Bank and Fidelity Bank have over 200 branches, locations or agents in every corner of this country. They are all local institutions.
About five years ago a foreign bank closed some of its branches, and last year another one followed. Reason? Those branches are not generating the revenue expected. Meanwhile, the local players mentioned earlier are still in those locations.
Only local banks have the interest of Ghana at heart, and therefore need support to grow, expand and become the drivers of growth and economic development. Until the day our leaders and authorities get this straight, we shall continue to remain in this quagmire of dancing to the tune of foreigners whether it suits us or not.