24 Mar 2021 / Article

“The ‘post-Covid world’ will come about by realigning financial flows to serve the real economy”

Serge Ekué isn’t one to cut corners, even though he was appointed president of the West African Development Bank (Banque ouest-africaine de développement – BOAD) three short months after joining the financial institution as an adviser to his predecessor and fellow countryman, Christian Adovelande. The Benin-born Ekué, a banker who loyally served Natixis for 13 years, has made his way back to the continent after working around the globe in places as far afield as Hong Kong and London. The new man in charge of the Lomé-based institution is silver-tongued, clear-spoken and even-keeled – in sum, he possesses all the qualities of the ideal diplomat or teacher. As head of the BOAD, a development bank that thinks outside the box, Ekué needs all the help he can get. In stark contrast with its continental peers, the BOAD’s financial ethics are radically focused on sustainable development and sometimes go against the grain of an Africa caught between two centrifugal forces: sustainable development on the one hand and plain old development on the other. With 500bn CFA francs in loans granted in 2019, the BOAD intends to make the most of its influence, no matter what the world throws its way. We had the occasion to chat with Ekué about what the bank’s strategy looked like during the pandemic and what lies ahead in the post-Covid era.


What has the BOAD’s strategy towards the financial sector been like since the outset of the global health crisis?

The halt in global trade crippled West Africa’s economy. It was critical for governments to have liquidity on hand so that they could cover state and private spending, which is why we provided emergency liquidity assistance to the tune of 100bn CFA francs through refinancing facilities for commercial banks, while reserving 200bn CFA francs for governments, with rapid disbursement. Regarding the private sector, these funds were meant to help businesses continue to operate so as to protect jobs, as well as to get the recovery into gear and maintain capital investments to foster business growth. The BOAD was fortunately not the only institution to embrace this type of countercyclical policy in the region. The Central Bank of West African States [BCEAO] and our governments also rose to the occasion.


Beyond the short-term policy measures undertaken, many observers and actors from the development world have displayed a willingness to ‘build back better’ in the wake of the crisis. What is your position on this issue and what role do you think Africa’s financial sector can play in achieving this goal?

Nobody wants to go back to the way things were. This crisis has given us an opportunity to acknowledge our weaknesses and readjust our economy. A financialised economy that is out of touch with real-world issues isn’t sustainable. The ‘post-Covid world’ will come about by realigning financial flows to serve the needs of the real economy, achieving the UN’s Sustainable Development Goals [SDGs] and implementing the Paris Agreement. Social and environmental challenges should be central factors in economic decision-making. Yet, all these costs – climate change, poverty, inequality and the attendant human impacts – aren’t taken into account by our economies or markets. And that’s why impact measurement and the monetisation of externalities are the future of our economy. The Covid-19 pandemic won’t be the last systemic shock we experience and tomorrow’s resilient institutions will be those that manage to balance the three ‘Ps’: people, planet and profit. Sustainability is an imperative. We need to build a virtuous economy and we’ll only be able to do so if we make sustainable finance a priority. In the West African Economic and Monetary Union [UEMOA], the loans granted by the banking system represented 27% of GDP in 2019. The financial sector has to step up and drive the economic recovery once Covid-19 is behind us. Based on a principle of subsidiarity, the BOAD will be standing by to support the commercial banks involved in building back better.


Despite the massive amount of funding available for green finance projects, Africa’s private banks don’t seem to be seizing all the opportunities out there. Why do you think this is the case? And what’s the solution?

Green finance and, more broadly, socially responsible investment [SRI] are major paradigm shifts. The Friedmanesque [in reference to economist Milton Friedman] focus on financial returns is no longer cutting it. Non-financial criteria related to environmental, social and corporate governance [ESG] factors are being integrated into the decision-making process, which puts additional demands on banks. A cash flow statement in Excel doesn’t cut it anymore; a much more in-depth look at underlying factors is necessary. Institutions are unlikely to be motivated to meet these extra demands, especially since the existing frameworks aren’t binding. This is one reason why green finance requires political will, although there’s undeniably an economic rationale for embracing it. We demonstrated this recently when we issued Africa’s first sustainability bond. By agreeing to impose stringent, contractually binding specifications on the projects we will finance through the funds raised, we managed to secure a €750m loan at a concessionary rate of 2.75%.

Investors ultimately entrusted us with €4.4bn, as our offering was about six times oversubscribed. That signals that the market is starting to internalise the risk of unsustainability, the risk of not being resilient and the systemic risk posed by climate change, poverty and inequality. The current crisis demonstrates that ecosystemic balances cannot be upset with impunity. We need to get past ideological conflicts. It’s a matter of economic survival. Sooner or later, sustainable finance will be the new normal and each economic actor will have to quantify its externalities and impact.


Has the implementation of the African Continental Free Trade Area [AfCFTA] changed the BOAD’s strategy or initiatives in some way?

The entry into force of the AfCFTA on 1 January 2021 resonates strongly with our mission, which is to act as a catalyst for regional integration, as well as with our strategic plan for 2021-2025, known as ‘Plan Djoliba’. The balanced and sustainable development of our region, which is overseen by the BOAD, can only be achieved by strengthening regional integration in order to promote trade and industrialisation, accelerate the opening up of the region and develop regional value chains to create value and decent jobs on the continent. So, the AfCFTA provides us with an opportunity to step up our efforts in terms of market and economic integration. Currently, we’ve joined forces with partners like KfW [the German development bank] to set up a fund to promote the digital transformation of administrative procedures in West Africa. With the entry into force of the AfCFTA, the digitisation and automation of administrative procedures could simultaneously increase government revenues, reduce transaction costs and increase transparency, as well as considerably reduce the level of corruption.


West Africa, including Nigeria, has a dearth of ‘pan-African champions’ in the banking sector. Why is this the case?

The banking sector used to be dominated by foreign and state-owned banks. Ever since the sector was restructured and privatised in the 1990s, national champions such as Ecobank, Bank of Africa and Banque Atlantique have arrived on the scene. As the 2000s got under way, Moroccan banking groups were ascendant and launched an aggressive strategy of acquiring or taking over existing financial institutions in sub-Saharan Africa. Today, the UEMOA is witnessing the emergence of banking groups promoted and majority owned by nationals from the region; this is true of Coris Bank International, Banque de Développement du Mali [BDM], Bridge Group and SONIBANK, for instance. That’s a strong signal. When it comes to management and governance, such owners have proven their ability to run institutions and mobilise resources.


We’re currently seeing a new round of expansion, this time driven by Kenyan and Nigerian banks – such as Equity Bank and KCB – in East and Central Africa. Why do you think this is happening now? Is the time ripe for the emergence of full-fledged ‘champions’ in sub-Saharan Africa, or even global champions?

The opportunity for a bank to expand outside its historical area of operation has to make economic sense. In markets that have reached their maximum growth potential, expanding means reinforcing gains and serving as a catalyst for innovation, in cooperation with fintechs, for example. Now that governance rules are virtually the same from one region to the next, a bank’s international expansion simply involves replicating the strategies and approaches already proven in established markets. The fact that some African banks are expanding to other regions and gaining a foothold outside the continent may be weak signals indicating that global champions are on the rise.

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