 Banking |
 from slush funds to bureau de change to structured finance |
Angola's banking sector is in its infancy. Due to mass nationalisation following independence there were only two banks until 1991: The Banco Nacional de Angola (BNA), which combined central and commercial banking functions, and the Banco Comercial Angolano (BCA) a retail bank. Reforms in 1991 restricted the BNA to central banking activities and ended the state monopoly on financial services. The state owned BCI was founded and the BPA changed its name to Banco de Poupanca y Credito (BPC).
Since then, three Portuguese banks and two Angolan private banks, the Banco de Investimientos de Angola (BAI) and the Banco Comercial Angolano (BCA) have joined the state owned banks in providing regular commercial banking services, mainly outside the oil sector.
'The banking sector was dormant for a number of years' explains Mario Pizarro, Managing Director of the BCA, Angola's most recently founded private bank. Indeed until recently, due to excessive controls and regulations, the banking sector was limited to serving as a bureau de change for Angolan businesses, with no effective role in financing their development. However, the promulgation of a new legal framework in 1999 has resulted in the introduction of a floating exchange rate, freedom to open accounts in foreign currency, the introduction of the Kwanza as the national currency replacing the 'Kwanza Reajustado' at the rate of 1 to 1,000,000 and the introduction of freely negotiable interest rates between banks and clients. Mr. Pizarro is quick to add: 'Thanks to recent economic reforms, new opportunities have been created in financial intermediation, structured finance and consumer credit'. This opinion is backed up by businessmen as well. Etienne Brechet, Managing Director of Jembas, Angola's largest technical assistance company, explains: 'Some years back, there was huge inflation and you had to do business in the local currency. That has changed; we are now able to buy foreign currency very easily to import the goods we need.'
New bank branches are springing up on Luanda's tree lined avenues. The Banco de Fomento, a Portuguese bank is building a new 12-story office block, and the BCI recently inaugurated its new building in downtown Luanda. New York based Citibank, London based HSBC and Paris based BNP-Paribas have all representative offices in Luanda, but so far they have limited their activities to providing oil guaranteed non concesional loans to the government and SONANGOL - the state oil company. 'Most potential investors see Angola as a high risk country' explains Mr. Pizarro who recently convinced a Portuguese bank to add 30% to BCA's capital. And his ambitions do not stop there: 'we aim to double our capital with an Anglo Saxon partner because we believe a large amount of British, American and South African companies will be moving to Angola over the next few years'.
| A difficult task in an environment where most of the bank's profit goes to hedge against the risk of inflation. Last year, BCA made an operating profit but central bank regulations oblige it to make a provision to protect the dollar value of its paid out capital against devaluation of the Kwanza. With inflation running at 268% in 2000, profits were absorbed by this provision.
While the government has come a long way towards liberalising the financial sector, inflation remains the main obstacle to the success of the banking industry. 'We have to apply interest rates as high as 120%' explains Mr. Pizarro. But with inflation running at 268% last year, real interest rates remain highly negative which is discouraging personal savings and provoking the dollarisation of the economy. Well aware that imposing a fixed exchange rate would simply push the foreign exchange market back into the street, the government is encouraging banks to become more sensitive to interest rates and to set the level of their interest rates in Kwanza denominated loans and deposits higher than the rate of inflation. To this end and in accordance with the IMF staff monitored program, the BNA began selling central bank bills through competitive bidding by commercial banks and private sector agents in January.
A law allowing foreign banks up to 100% participation in local banks has brought the privatisation of the two state owned banks onto the government's agenda. Indeed, the government has set out to recapitalise both BCI and BPC and has announced its intention to shed at least 51% of BCI to a strategic investor by June 2002.
With 18 branches and 400 staff, BCI is the second largest bank in Angola. The management is confident that privatisation will be a success, boasting entirely computerised systems that allow transactions to be executed in real time and reduce operating costs. Staff is also an asset having developed a strong sense of customer service through training programs overseas. Recently, the bank diversified into property sales, pension fund management and intends to participate in Angola's newly liberalised insurance market.
BPC, Angola's largest bank, had a paid out capital nearing $6 million and total assets worth close on $300 million at the beginning of 2000. With 39 branches spread over 10 provinces the bank is currently undergoing a restructuring process involving the computerisation of its entire network and the strengthening of its sales and marketing department targeting small and medium size businesses, a priority for the government's economic development strategy. Indeed, BPC is not on the list for privatisation as the government intends to make it the main financial channel for its investment operations.
While inflation remains high, banks are still reluctant to finance the growth of small and medium size businesses. In the meantime, the government has created the Fondo de Desenvolvimiento Economico y Social, a development fund aimed at financing Angola's new entrepreneurs.
Asked what factors are likely to affect the future progress of Angola's fledgling banking sector, Mr. Pizarro points out that 'over 80% of the financial flows from the oil sector currently transit outside Angola's banking system. The government accepted that situation many years ago because the financial system was neither credible nor efficient'. Today, the government's compliance with IMF guidelines is changing that view. Should the government consider changing that situation through new regulation, billions of dollars would start to transit through the Angolan banking system; a strong argument for prospective investors. |
