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Team of the monthDecember 1 2007

BMCE Group bridges out

The success of Morocco’s BMCE Group could become a beacon for other African countries that are beginning to see growth and stability. Neil Sen reports.
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Othman Benjelloun stepped up in 1995 to become president and CEO of Banque Marocaine Du Commerce Exterieur (BMCE) for one year, to take on an interim role in a bank that had been newly privatised. Or so the engineering graduate thought.

Twelve years on, Mr Benjelloun still leads the bank in which his family, through the company Finance.com, is the largest shareholder. As he discusses the past and unveils his new pan-African vision for BMCE’s future, he shows no sign of weariness.

“I have enjoyed my role much more than I expected to,” he says. “I have relished the challenge of converting a state-owned bank into a private one, and I have seen huge growth in revenue.”

Rise in profits

BMCE Bank Group’s results in the first half of this year showed profits rise 85% to MAD932m ($118m) and total assets up 28% to MAD98bn. Previously a specialist in corporate banking, since 2002 BMCE has developed a strong retail banking operation and is now the third largest bank – and the second largest private bank – in its home market of Morocco, from which 50% of the group’s profits still come.

Mr Benjelloun is enthusiastic about the way that technology is transforming the retail side of the business: “We are developing a system to enable our customers to pay by mobile telephone, avoiding credit cards and signatures,” he says.

He believes the bank is now ready for an ambitious expansion programme, which will embrace the African continent.

“Our success in Morocco has given us the confidence to grow beyond our home market. We are now present in 15 countries in Africa but, in perhaps 20 years’ time, I want us to have a presence in all 57 countries in banking, insurance and telecoms. I want us to replicate and transfer our know-how into every country. I want the bank to be a pioneer in bringing modern banking practices to the whole of Africa,” he says. “Corruption has been a problem but we have shown that it is possible to succeed in Africa without resorting to bribery.”

Economic potential

When asked if he thinks his plans for a profitable pan-African bank are realistic, Mr Benjelloun says that people in Europe and North America underestimate the economic potential of Africa. “The continent has a large population of one billion and vast wealth in the form of natural resources – minerals and oil and gas. All the wealth that attracted the imperial powers in the 19th century is still very evident. Africa needs to put in place the right systems to exploit this wealth, but this is beginning to happen.”

BMCE’s ambitions will first concentrate on French and Portuguese-speaking Africa. Mr Benjelloun says: “Apart from the French banks, there is very little choice for customers in French-speaking African countries. There are enormous opportunities for us, far more than in the relatively well-banked English-speaking countries.”

BMCE has shown recently that it is willing to take on considerable risk in sub-Saharan Africa, notably in Senegal. Earlier this year, it provided a bridging loan alongside BNP Paribas worth €100m for the construction of a new airport in Dakar.

This was regarded as a big step in Senegal, where infrastructure projects had previously had to rely on funding from the African Development Bank and other donors rather than commercial banks. BMCE also arranged a €67m financing for a Senegalese power station and could soon be involved in more. Furthermore, together with Goldman Sachs, the bank was mandated to manage the auction of the third mobile phone licence for the west African country.

The BMCE group established a Dakar office four years ago and has since extended from this bridgehead to countries such as Tunisia, Mali and the Democratic Republic of Congo (DRC). One of the principal vehicles of growth for the bank is the Bank of Africa, in whose Luxembourg-based parent company, Africa Financial Holdings, BMCE took a 35% stake in March.

Retail brand

Based in Mali, Bank of Africa is the third largest bank in the West African Economic and Monetary Union and has a presence in 10 African countries, principally French-speaking ones such as Benin, Niger, Côte d’Ivoire and Burkina Faso, but also in Kenya, Uganda and Tanzania. It will provide the brand for BMCE’s retail activities throughout the continent.

While the Bank of Africa network has about 2000 employees today, Mr Benjelloun hopes the group will employ 25,000 people in 20 years’ time, although he declined to speculate on what its revenue figures might be.

The other vehicle for the BMCE group will be MediCapital, the new London-based arm of BMCE, which will offer wholesale and investment banking to clients in over 15 African countries.

If, as some economic analysts argue, Africa’s biggest problem is a lack of globalisation, then BMCE is operating on the right lines. The group’s offices in Europe, the Gulf and Asia are all intended to lure investors into Africa.

BMCE takes a long-term view, as its attitude to corporate and social responsibility shows. Some 4% of its banking revenues are given to the BMCE Foundation, which has built about 100 schools in impoverished rural areas of Morocco. In the future, as the group expands, the foundation could fund the building of schools elsewhere in Africa.

Going it alone

Mr Benjelloun says that BMCE has recently been approached by UK and other banks with a view to forming partnerships. “We have become something of a magnet for other financial institutions recently, but we believe that we are better off on our own for the moment.” BMCE already has a close relationship with France’s Crédit Industriel et Commercial, which in 2004 bought a 10% stake in the Moroccan bank.

TABLE: SELECTED BMCE GROUP DEALS SINCE 2000

THE SCRAMBLE FOR AFRICA

Macro-economic indicators now support Othman Benjelloun’s optimistic view of sub-Saharan Africa’s prospects. According to the International Monetary Fund, the region saw gross domestic product growth of more than 5% in 2006 and could see more than 6% this year.

In a report published earlier this year, the IMF wrote: “The higher growth in the region is attributable both to positive external developments, such as strong foreign demand, and to strong domestic investment and productivity gains supported by sound economic policies in most countries.”

And in its latest report on the region in October, the IMF said the “economic impact of financial market turbulence on sub-Saharan Africa should be limited” provided that “global growth remains robust”.

Debt relief and political reforms have also helped to improve conditions. A measure of the changes is that a decade ago only one sub-Saharan country was rated but now more than a dozen are.

According to Deutsche Bank, Africa has 60% of the world’s proven resources of diamonds, 40% of its phosphates, 30% of its cobalt and 7% of its oil and gas.

There is arguably a new scramble for Africa taking place. The Industrial and Commercial Bank of China’s acquisition of a 20% stake in South Africa’s Standard Bank followed the Chinese government’s agreement to provide $5bn of infrastructure finance to the Democratic Republic of Congo in return for access to its minerals.

There has also been plenty of Chinese investment in a number of other countries in the region. China’s intense interest in Africa looks set to prompt previously indifferent Western investors to see the continent as a big opportunity. Several new funds specialising in Africa have been set up, notably New Star’s Heart of Africa Fund and Cru Investment’s Africa Invest.

Across the region, countries that until recently were torn apart by conflict, such as Sierra Leone, Mozambique, Liberia, Burundi and Rwanda, are becoming more stable and enjoying rapid economic growth. They will offer plenty of opportunities to banks.

Perhaps the most conspicuous example is Angola. The second largest oil producer in sub-Saharan Africa after Nigeria, it became a member of Opec last year and has an economy that could expand by 23% this year, according to the IMF. A study by Luanda’s Catholic University projects that Angola’s economy could be bigger than Nigeria’s by 2010. Portuguese banks such as BPI, which has an extensive network in Angola, can expect some tough competition soon.

Some experts are cautious about Africa, however. The UN Economic Commission for Africa warned in a recent report: “The current growth momentum rests on a very fragile foundation. The continent continues to rely on primary commodities whose prices have been major sources of trade shocks.”

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