Thank you for receiving us today Mr. Pizarro. It is interesting to meet with somebody from a 100% privately owned Angolan bank. Angola's banking sector is in its infancy since the country has recently gone from being a planned to a market economy. Could you introduce the BCA by giving us a brief history of its background and how it came into existence.
The BCA was inaugurated in March 1999. The idea of the BCA came a couple of years before from a group of people who thought there was space for a new initiative which could be 100% Angolan since the government has just moved towards a more open/ liberal economy.
We have 25 shareholders with an equal shareholding. We are a very small bank. In defining our strategy we thought it would be very important to have a foreign partner. As you know, in the past the government has defaulted on its foreing debt and directly or indirectly any Angolan bank would suffer in terms of credibility without a foreign partner and would gain in terms of financial strength.
Most potential investors see Angola as a high risk country and that precluded a number of potential investors from going into partnership with us. Finally we reahed an agreement with a portuguese bank.
World Investment News Ltd: Can you tell us which one?
Originaly it was the Caixa General de Depositos which was to have 45% and another portuguese shareholder was to have another 10%. In other words the foreign shareholders would have 55%.
Unfortunately the government did not approve our application for unknown reasons. Accoding to the law the foreign investor can have as much as 100% of the shareholding in a bank or any other company in Angola.
This forced us to negociate another partnership with another bank which has accepted to be the minority shareholder. We expect that by the end of the first quarter 2001 this new bank will be in our capital.
Can you tell us which bank this is?
It is too soon. Although we are convinced that the government will approve this partnership we never know if for unknown reasons it may change its mind?
Could the government's objection with the first partner have been the new partner obtaining a majority shareholding in BCA?
Yes, that was one of the reasons. There are other reasons, which I prefer not to comment on, however.
Have any other private sector banks been created since then?
I am expecting this. There are two branches of Portuguese banks here that have applied to become fully Angolan registered banks. Should the government approve these banks the foreign partners will have a majority shareholding. By then we would expect some explanation.
What figures can you give us regarding BCA?
BCA is a very small bank, it has 20 employees, a paid out capital of $4.000.000 and total deposits between $15.000.000 and $20.000.000
Central Bank regulations oblige us to make a provision to protect the dollar value of our paid out capital against devaluation of the Kwanza. This means that in conditions of high inflation a good part of our profit is absorbed by this provision. Being a small bank, last year the volume of our transactions was not enough to offset all those provisions. In other words, while we made an operating profit last year we recorded a final loss after making the provision for inflation. So all the profit went to hedge against the risk of inflation.
What new banking services did you plan to bring to Angola when you founded BCA?
The financial system was dormant for a number of years. Thanks to recent economic reforms new opportunities have been created in financial inter-mediation, structured finance and consumer credit. We have to fill this gap and next month we will start by introducing new products for consumer credit.
What is your competitive advantage?
We are a small / flexible bank which allows us to give our clients a VIP treatment and process their transactions faster than other banks on the market place.
Which is the most profitable activity of BCA since its creation?
Because of economic imbalances the bread and butter of most banks in Angola is foreign exchange and we are also very active in that area. However, we feel that it is not an area for the future; we should be attracting deposits to our bank and redistributing them through loans. Of course, inflation is a major obstacle but we have to be innovative in this field.
In which sectors of the economy are you seeking customers for your structured finance department?
There are a number of areas, the fishing industry is one and there are other areas where it is possible for us to do business.
Some businessmen we have spoken to in Angola have expressed concern that in certain areas of industry the government finds it more convenient to import than to support local industry.
I would not phrase it that way. Previous policies of fixed exchange made it easier to import thanks to an artificially high exchange rate. Now that we have a floating exchange rate this is no longer the case. In the past if you needed foreign exchange you needed friends in the banks. Nowadays you need local currency to obtain foreign currency and in order to have local currency you need good management. So things are completely different now. Companies that were apparently in good health four years ago are now in difficulty because those companies have not got good management.
| It seems that the biggest obstacle to your business is the instability of the Angolan Kwanza?
Yes, we have to apply interest rates as high as 120%.
Since when would you say the government has been taking the necessary measures to bring inflation under control and stabilise the country's economic growth?
Over the past ten years we have had approximately eight different central bank governors and eight different finance ministers which allowed no coherence in the government economic policies. However, since May 1999 economic policy has been more coherent.
What measures marked the beginning of this period?
The liberalisation of exchange rates and interest rates as well as new financial regulations.
What more can you tell us about a partnership with a foreign bank?
We are adding 30% to our capital thanks to our new Portuguese partner and we aim to double it 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.
How are you going about finding an Anglo-Saxon partner, what are their concerns?
We have talked to a number of potential partners. They still think the country is at war and they do not think the government is sufficiently reliable. Therefore they feel they can find a similar return on investment in lower risk countries.
What is your answer to those objections?
My answer is that now is the right moment to be present in Angola because the sooner you come the better you position yourself for future challenges.
Ccan you tell us which banks you have approached so far?
We have approached some South African banks and some American ones.
Would you be the first bank in Angola with an Anglo Saxon partner?
Not exactly, I believe that BAI (Banco Africano de Investimientos) have an Anglo-Saxon partner with a symbolic participation. We would be seeking a more active partner with 10% to 15% of the equity so that we can involve him in our management.
BAI describe itself as an investment bank. Is investment banking an area BCA is looking to go into?
We don't wish to compare ourselves with BAI since none of our shareholders are state owned companies because we want to preserve our independence.
For an investment bank to be profitable it must have the right environment. This environment still does not exist here. Therefore I am sure the bank you mentioned is a lot more active in retail banking than investment banking. We will seek to provide investment banking services when we feel the enabling environment is there.
You have mentioned that an increasing amount of foreign companies are showing interest in Angola. Apart from the oil sector, which areas of Angolan industry currently have the highest growth rate?
Fisheries and agro-industry are the most important. Construction is another growth area. Despite the war and with the right economic policies many fish and agricultural products could be produced here instead of being imported. However, economic liberalisation has only gone half way to allow the transition from consumption led growth to investment led growth.
To finish off, what factors are likely to affect the future progress of Angola's fledgling banking sector?
· There will be substantive political changes in the near future to put an end to the current situation of low intensity war in Angola.
· The SADC (South African Development Community) region will go from being an organisation of political dialog to a group of economically integrated countries.
· The Central Bank of Angola / ministry of Finance's compliance with IMF guide lines will increasingly give foreign investors a better impression of Angola. For example, more than 80% of financial flows in the oil sector in Angola are done through offshore banks. The government accepted that many years ago because the financial system was neither credible nor efficient. I am convinced that this situation has changed and that the government will consider changing those regulations which means that billions of dollars will start to transit through the Angolan financial system.
There is no reason why an Angolan bank or a foreign bank in Angola can't make the same transactions with the same efficiency as a bank in New York or Boston. Why should Chase Manhattan or Citibank handle all the transactions from an oil company registered in Angola?
that must be an extremely strong argument when convincing foreign partners to come into BCA's capital.
Yes of course. |
