Equity sets sights on Kenya, South Africa trade route – Business Daily

Equity Group chief executive James Mwangi. FILE PHOTO | NMG
Equity Group #ticker:EQTY has set aside Sh500 billion to finance businesses seeking to trade or invest in Africa as part of a move to expand its business and grow across the continent.
Equity Group chief executive James Mwangi spoke to the Business Daily on the expansion plan and bilateral agreements.
EQUITY HAS AN INTEREST IN FUNDING SOUTH AFRICAN FIRMS, WHY DON’T YOU OPEN AN OFFICE IN THE COUNTRY?
Banking is very interesting because you can complete a transaction across the region using other banks. We need not necessarily be in South Africa physically, because what we want to do is to facilitate South African-Kenyan trade.
We want to facilitate importation of capital goods and open the market for Kenyans to export in South Africa.
The President will lead a delegation on November 22 to go and see whether we can open more opportunities for Kenyans to export or be given preferential trade agreement with South Africa.
Equity is taking the opportunity to fund exports of key products like tea and coffee to South Africa and buying of capital goods to help in processing of the country’s agricultural produce. We also want to help showcase Kenya to the deep capital entrepreneurs in South Africa to set up subsidiaries in Kenya.
ARE YOU AFRAID OF COMPETING WITH OTHER BANKS SUCH AS ABSA GROUP AND STANDARD BANK IN THE SOUTH AFRICAN MARKET?
I have a lot of respect for other banks in all other markets. But we have a very unique business model. When we went to DRC seven years ago we were number eight based on market share but now we are leading. In Rwanda and Uganda we are among top banks. So we go and compete. We believe Equity is innovative enough to compete in an open market.
DO YOU PLAN TO ACQUIRE ANY BANK IN SOUTH AFRICA?
At the moment, we are focused on growth markets. South Africa is this time a mature market. The banks in the country have done an excellent job in banking South Africans. Looking at countries like Ethiopia and DRC, the bulk of the population has not been banked.
We are driven by opportunity and there are bigger opportunities in sub-Saharan Africa than going to South Africa.
SOME SOUTH AFRICAN FIRMS HAVE FAILED IN KENYA, WHY ARE YOU STILL INTERESTED IN FUNDING FIRMS IN THE COUNTRY?
We believe South Africa has very well established firms but the terrain in East Africa is very different and that is why we are promoting collaboration for investment and partnership between the companies.
There are local companies doing well and it means there may be need for local knowledge and information into the market, network and understanding market nuances that East Africa can help the South Africa community to be successful in the region.
We want Kenyan companies to hand-hold them and help them settle. We are helping in matchmaking so that they can do partnerships instead of only coming and investing as South Africans. We want to promote business in Africa as whole.
WHICH SECTORS ARE YOU TARGETING WITH THE FUNDS?
The half-a-trillion investment will be offered to the private sector to bounce back. We want to leverage on the sectors that the government prioritised such as food security, agro-processing, manufacturing, low-cost housing, and health because the government has already has given incentives, and the government is spending its budget in those sectors.
This is the alignment we need. We have come to this conclusion because of the way we worked with the government to manage the Covid-19 shock.
ANY LARGE COMPANIES THAT YOU PICKED OUT?
We have, for instance, John Deere, the biggest American manufacturers of agricultural equipment with African office in South Africa. We visited them in their offices and we are trying to bring them here to mechanise our agriculture.
Others are mining companies that we can partner together and do mining in DRC. We are open to not just Kenyan opportunity, but as well as regional opportunity because of our presence in the region.
WHAT KIND OF TALKS ARE YOU HAVING WITH THE COMPANY?
We want them to open offices in Kenya. They deal with manufactured capital goods in the agricultural space. We want that equipment to be readily available for our people to see the opportunity of value addition in our agricultural products.
The local offices should also do service of tractors so we don’t import equipment that doesn’t have servicing capability.
HOW WILL THE ENTRY OF DRC INTO THE EAC IMPACT ON THE BANK?
Through the EquityBCDC, our DRC banking subsidiary, we will optimise opportunities and support business growth for SME entrepreneurs by leveraging on the over 100 million population.
We will be showing entrepreneurs the untapped opportunities within the market to access one of the world’s largest economic frontiers like natural resources, such as cobalt and copper, hydropower potential, and agriculture, education, health, tourism, housing and infrastructure development.
WHERE WILL THE BANK’S NEXT GROWTH COME FROM?
Last two years we have learned many lessons. The first lesson is the power of complementing government and keeping the lights of the economy, like when we gave interest repayment breaks by saving customers’ businesses.
We have realised we can work with government to help the businesses and the private sector build back better and bounce back quickly to become more resilient to future shocks.
But more importantly, to grow rapidly and replace global supply chains that are broken and see whether Kenya can be a manufacturing hub for the region so that we replace the global input supply chain with our regional export supply chain.
That is what we see. But we have realised that to be able to do that we have to work with the government.
If you look at Kenya, like the trade mission in DRC, we are leveraging on trade and investment bilateral agreements Kenya signed with DRC.
ARE THERE OTHER FIRMS THAT YOU PLAN TO ACQUIRE LOCALLY OR REGIONALLY?
You can grow organically or inorganically though acquisition or mergers. We have grown to have over Sh1.2 trillion balance sheet. We see this as a huge opportunity. Instead of acquiring, we chose to be more innovative and attractive.
Equity is investing heavily in digitisation, so that we can acquire the youth by giving them very strong devices like apps and USSD capabilities of banking.
This is how we have chosen to grow. However, if there are opportunities that are worth looking at, we could do it because we have done that in DRC where we have grown quickly by acquiring.
IS THEIR PROGRESS ON ENTRY INTO ETHIOPIA WITH ESCALATION OF CONFLICT?
We have a representative office doing a lot of trade business. However, the country has not opened the market for international banks for deposit mobilisation or the full banking licence.
So we are still waiting and studying the situation as it evolves. The situation might be very different tomorrow. We take a long-term view while investing in the business.
WHAT ABOUT THE RISK-BASED POLICY FOR LENDING RATES?
We have agreed with the central bank on almost all the products but still negotiating on how to harmonise interest rates between fintech and mobile lenders with the mobile lending with the bank, while also harmonising interest rates between microfinance because we have never abandoned this class where we started.
We expect them to be different from unsecured mobile borrowers, group and corporates and blue chip companies that can issue commercial papers. We are still engaged, we haven’t signed off.
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