31 Mar 2021 / Article

“We are competing against cash usage”

Ade Ayeyemi, CEO, Ecobank Group

Ade Ayeyemi, 58, has led Ecobank since September 2015. Interviewed before the Africa Financial Industry Summit of March 10th and 11th, 2021, he discussed the consequences of the Covid crisis in Africa. Optimistic for the future, the Nigerian banker sees the pandemic as a challenge that the finance and banking industries have been able to face. 2020 was crucial for Ecobank – a pan-African bank present in 33 countries on the continent, with offices in South Africa and Ethiopia, the bank was able to make it through this crisis by supporting African states and the private sector. A source of pride for the group’s CEO, who is pleased with the agile and proactive way in which Ecobank is tackling the situation.


As a banker, what outlook do you see for Africa’s growth in the short term (this year) and medium term (post-Covid)?

2020 was a challenging year. When Covid-19 first hit, a large swath of the world didn’t know what to do. Panic set in and the economy was shut down. In 2021, we’re no longer focused on shutting down the economy; we’re trying to put an end to the pandemic. Our recovery partly depends on that of our trading partners who will recover first: China, the West and so forth. By summer, a significant portion of their populations will have been vaccinated and the most challenging chapter of the pandemic will be behind us. Tens of millions of people across the globe have been vaccinated to date. We‘re seeing the first signs of recovery this year and the process will continue into 2022; by then, we’ll have overcome the challenges 2020 sent our way. We’ve also observed that Covid-19’s impact on Africa hasn’t been as bad as we thought it would be last year. It’s not as though the pandemic hasn’t affected us, but deaths have been lower than what was projected, so I think the potential for recovery in 2021 and 2022 is strong. For a very short time in 2020, oil prices were lower than transport and storage costs, which meant that oil prices were negative for a brief period. In early March, the price per barrel was close to $70, so that gives you an idea of the outlook.


What lessons have you learned from 2020 and what do you think should be done to aid Africa’s recovery?

Africa has the tools to turn around the situation we’re in. To help respond to the Covid-19 pandemic, we are seriously entertaining the idea of doing some light manufacturing ourselves. Countries like South Africa, Morocco, Ghana, Senegal and Kenya are able to get involved in the manufacturing of vaccines, PPE and so forth. So, it’s not just a question of responding but also of building back better. With the positive forward momentum that the AfCFTA is expected to create, we should start seeing people build capital and found companies targeted at delivering supplies to the rest of the continent. When markets expand, people can make investments which create human manufacturing capabilities that can be leveraged to supply a larger component. I can see people expanding their cement manufacturing operations in places like Nigeria. I can see people expanding their FMCG [fast-moving consumer goods] manufacturing capabilities into West, East and North Africa. I can see companies in Europe saying, “We can base our manufacturing capabilities in North Africa because that brings us closer to other African countries and allows us to supply them.” I also hear people say, “We need to build manufacturing facilities nearer to the source of raw materials.” Why do we export raw materials but import manufactured products? If we put our money where our mouth is, it’ll drive investment, wealth creation, earnings and banking capacity.


Are you concerned that Africa will be last in line for vaccines and that this will delay its recovery?

This shouldn’t be a cause for concern. Vaccines will be administered in Africa; not at the same pace as the rest of the world, but by the end of this year or mid-2022, more and more Africans will be vaccinated. You have to take into account that Covid-19-related deaths are not as high in Africa as in other parts of the world. So, if we want to reduce the likelihood of a global disaster, there’s nothing wrong with Africa’s recovery being delayed somewhat. Of course, if we don’t manage to vaccinate the most vulnerable among us, then that’s definitely a cause for concern, but also a call to action. The African Union (AU) is working with the World Health Organization on the COVAX initiative. Towards the end of 2021, supply will exceed demand, which means that vaccines will be much more widely available. In early February, the global vaccination rate was already five million doses per day. That figure can double quickly. And that is how Africa will get vaccines.


As the CEO of one of just a handful of pan-African banks, what role do you see yourself as having in the recovery?

When tragedy struck in 2020, we made our financial products available to governments so that aid could be distributed to the people who needed it. We provided training to educate people on how to protect themselves from Covid-19 and used our technology to support such initiatives. We were able to continue to serve our customers because we have the technology that enables them to consume financial services from the comfort of their homes. We worked with other institutions on the continent, such as the AU, to examine the small- and medium-sized enterprises (SMEs) that have been significantly impacted by the pandemic. But we also started thinking about how they could build back better if we allocated capital and provided training and support to all SMEs. And how we could use our voice as a rallying cry to unite other players, and by doing so ensure that Africa comes out of the crisis in a much stronger position. Part of our role is to be able to see beyond the challenges of the moment in order to focus on the opportunities they create – and how we can allocate capital to seize such opportunities. We don’t want people to be perplexed by the challenges; we want people to be energised by the opportunities. When you’re energised by the opportunities, then you become a force for good and can turn this particular moment we’re living through into a better future for the continent.


Despite the implementation of the AfCFTA on 1 January, some African private sector voices continue to complain about the difficulties encountered when making payments between two entities based in two different African countries. Can you tell the continent’s CEOs with certainty that this is a problem they won’t have to face forever?

The answer is yes. Our bank is set up in such a way that all our countries of operation are connected to one unique data centre, which means that we’re able to send money from one country to another instantly. Payments and transfers are two things: information and liquidity, and they can move as quickly as a WhatsApp message. But people are also looking at how quickly the payment confirmation arrives. That’s how you know that the payment has been approved and will arrive soon. What we need to focus on is not the instantaneity of payment, but the certainty of payment. And Ecobank has an edge over all its African competitors on that front because our payment confirmation is instant. If the payment is made in a different currency, the confirmation will arrive the next day, and if it’s made in local currency, it’s instant. What poses more of a challenge today is currency conversion, not payments. But that problem is out of our hands.


What’s your company’s take on the fierce competition we’re seeing in the payments industry between fintechs, banks, telcos and other players, and how do you think things will play out?

We are competing with the use of cash. So, if we want to be able to compete with cash, it’s vital that we team up with various players because cash is expensive. It’s valuable, it needs to be protected and once it’s inside an ATM machine, it goes nowhere, it only consumes capital. We view fintechs and telcos as our partners because their business solves the last mile problem and they make innovation happen. That’s why we encourage them, why we create fintech challenges, why we bring our partners together and give them prizes, why we incubate some of them within our environment and why we open our doors to them, providing a sandbox where they can test out their ideas. We currently have partnerships with more than 20 fintechs. We also have our own fintech called e-Process which is incorporated and provides technology services to Ecobank as well as to third parties.


Have you been tempted to acquire any of the fintechs you work with?

Our investment approach to fintechs is that we want them to expand and to be successful, which is why we try to give them opportunities. We don’t think about fintechs in terms of “buying equity”. Instead, our goal is to become a catalyst in the ecosystem that enables all these companies to thrive and grow. Acquiring them before they reach their maximum potential would mean that they are supplying just one bank and that would limit their opportunities. Why would we decide to do that when they’re the ones expanding the market and competing with cash?


Are you seeing a shift take place whereby a vast majority of Africans will be able to access financial services?

The challenge of financial inclusion is, how do you deal with the last mile? How do you deal with somebody who can’t get all the documentation required today? Financial inclusion will come about thanks to two overlapping initiatives. First, governments are providing every citizen with official identification. When you have this kind of document, you can have a digital identity, and that means you can participate in the formal economy. Identity documents also make it easier for a person to start a business, as all you need is a mobile phone to do so. More than 10 million Ecobank accounts have been opened via mobile phone. Another aspect of financial inclusion is capital allocation. Small- and medium-sized enterprises will be able to obtain loans to keep their businesses running. And loan access is expanding rapidly. Finally, to make financial inclusion a reality, we need to figure out how to give ordinary people access to capital so that they have money for their day-to-day lives. In many of the countries where we operate, people are increasingly getting loans digitally. So, with all that going on, it’s clear that financial inclusion will continue to progress in leaps and bounds. And it doesn’t take a long time for this growth to become exponential.


Big Tech, GAFA and BATX are also expected to enter the industry soon. Do you feel they pose a threat to traditional banks like yours? And do you think African regulators will be able to move quickly to ensure that companies of all stripes are treated the same?

First, we can’t ignore the invaluable role that Big Tech, GAFA and BATX played in the Covid-19 pandemic response. For one, this interview we’re doing right now is taking place without me having to leave Côte d’Ivoire [Editor’s note: the interview was conducted over Zoom]. So, if they bring that part of their skills and resources to solve financial challenges across the continent, it’s as good as foreign investment to the extent that they are coming to add value, appropriating a share of that value for themselves and then leaving the remainder for society. The role of government in that space is to make sure Big Tech, GAFA and BATX play by the rules. If they do, we’re here to support them. After all, a large portion of the technology we’re using today to enable the last mile, for mobile network operators to do what they do, was invented by them. The ability to make international phone calls at almost no cost contributed to their rise, so we can’t say, “We like what they do, it makes our life easier but we don’t want them to get involved in finance.” Ultimately, what’s important is what value they create for society. If there are certain market failures that end up having an adverse impact on society, then governments should step in and regulate. But we should react with hope instead of fear.


Are all these changes we’ve discussed impacting Ecobank’s business model?

Yes, they’re impacting our business model. How we deliver businesses and the environment are changing. Our employees no longer need to go to an office to work. We no longer need to visit customers in person; we can engage with our customers digitally. All of that and more is changing our business model.

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