KAMPALA – If you took a closer look at the business fraternity in Uganda, you would realise that in the last 30 years; behind the collapse of prominent, and self-made local businessmen, is a common denominator — Banks, commercial banks to be precise.
Even in the few and far-in-between occasions when the government has been genuinely supportive of the entrepreneurs, banks have ‘gone for blood’. This, the recently deceased Christopher Sembuya, coproprietor of Sembule Group a conglomerate of steel, banking; insurance, and electronics spelled-out in a January 2014 interview on NTV Uganda.
In the interview, Sembuya disclosed that after getting a loan in 1997 from a one PTA bank, the bank took over Sembuya’s factory to oversee its operations in an effort to safeguard their principal and to overlook the exercise of getting their money back.
This led to the bank running the enterprise to the ground; and it never recovered from then on.
Sembuya further revealed that the government stepped-in and paid off his loan to PTA bank, redeeming his business, but the damage was already done.
To put it in context, Sembuya was saved by the government; only to be obliterated by another bank — Baroda.
In all this, banks have continued to benefit off of customers with no forethought for their futures.
Overcome with a great sense of nostalgia for the days when Uganda Commercial Bank (UCB) the ‘people’s bank’ was active, wondering what could’ve been; I’ve doubled down on doing my civic duty by following up the acquirer — Stanbic; to appraise if the takeover was worth the squeeze.
Like any other bank, Stanbic a subsidiary of Standard Bank SA, runs a robust public relations campaign and superficially exudes excellence. Agonizingly, when you lift up her skirt, the findings are grotesque!
On the whole, It was shocking to discover that since Stanbic took over UCB, it has only added two branches to their network! In 2002, when Stanbic acquired UCB, it (UCB) had 67 stations. As of their 2020 annual report, Stanbic’s branch network is made of 69 outlets!
To assess the true value of this performance, UCB’s former CEO, and now deceased Dr. Frank Alfred Mwiine, expanded the bank’s branch network from 60 to 180 branches in his five-year tenure at the top during a tumultuous period (1987-92).
Surprisingly, Centenary bank opened two branches in 2020 in Busia and Bweyale. To put it plainly, what Stanbic added to their footprint in 18 years, Centenary added in one!
Expanding and creating new branches means creating new jobs and promoting old staff in the newly created branches; and most importantly, taking services closer to the people.
The digitalisation of the world doesn’t diminish the relevance of bank branches as a 2019 survey — Recognising the value of bank branches in a digital world conducted by the Deloitte Centre for Financial Services unearthed.
‘Most customers prefer branches over digital channels when opening new accounts for both simple savings accounts, debit cards…’: the survey reports. This goes for loans too; in developing countries — Mexico, Indonesia, and developed countries — Japan and Germany alike.
Naturally, the branch experience influences human touch which yields loyalty, advocacy and customer satisfaction across generations more than digital channels.
By and large, Uganda isn’t digitally sophisticated enough to justify Stanbic’s stagnant branch footprint.
Correspondingly, it was appalling to discover that under Stanbic’s charge of the bank, it has created only 412 jobs in 18 years (23 jobs a year) up until 2020.
When Stanbic acquired UCB, it (UCB) employed a staff of 1,200. In their 2020 report, Stanbic outlined that they employed 1,612 people. That’s an inferior number when compared to their challenger Centenary bank, who by 2020 had 2,815 hires.
Uganda has a high unemployment problem and banks are critical when it comes to supporting the communities in which they operate because these communities are a reflection of the banks.
Again, banks can’t change unless the communities they’re in have more wealth. Therefore, job creation should be Stanbic’s business objective; because clearly it isn’t.
Next, Stanbic’s investment approach is idle because it’s mainly focused on government bonds — inflation unprotected bonds. This remains the case even when the Capital Markets Authority Act CAP. 84, Section 90B: makes provisions for securities to be offered to a person in Uganda regardless of where the allotment occurs, or where the issuer is resident, incorporated or carries on business.
This act clarifies that a security can be offered to a person in Uganda if the offer will be received by the person in Uganda.
In spite of the law-making such provisions, Stanbic has maintained its lackadaisical investment approach centred around cashing in on Inflation; because bonds’ yields are higher when inflation is high, seeing as bonds are a tool governments use to control inflation.
Bonds are an instrument for government borrowing; so, the bank has settled for being a government lender as its sole investment strategy. In the process, undercutting its clients because inflation eats into the bonds’ yields especially as Ugandan bonds aren’t inflation-protected.
Alternatively, Stanbic could’ve introduced her clients to the biggest stock exchange in Africa — Johannesburg Stock Exchange (JSE) through making meaningful partnerships with depository institutions/banks in South Africa (where they have an upper hand because their parent company originates there).
This could’ve interlined their Ugandan customers with the JSE by way of depository receipts — South African Depository Receipts (SADR), and later, other markets like the Egyptian stock exchange also through depository receipts.
This financial instrument (depository receipt) links foreign clients to major exchanges, yet, they charge low fees (~2 cents a share for American Depository Receipts, implying a much lower charge for SADR). Importantly, they are translated into the client’s local currency to avert foreign exchange exposure.
Stanbic should’ve emulated their parent company Standard Bank that has familiarized its clients to low volatility stocks in the U.S., UK, and Australian markets through financial instruments they named the Deposit Plus Issue.
The lack of initiative on Stanbic’s investment front has left a group of stuck, and dissatisfied clients on their register.
And then there’s their business incubator. Established to train small and mid-size enterprises (SMEs); lucratively enough for the incubator, the training is offered at a price. At the completion of the instruction, the trainees are discharged with no form of funding whatsoever; ignoring the biggest challenge SMEs face — funding.
This raises the question: What good is it if it doesn’t address the ‘elephant in the room’? This tutelage would make perfect sense if it was followed up with some sort of seed funding. As is, this initiative passes for some marketing scheme paid for by the SMEs especially because this information is available for free online.
As the financial services sector evolves with new forms of finance taking shape: DeFi (Decentralised Finance), Savings and Credit Cooperatives (SACCOS), the latter especially in Uganda. Now is not the time for (the) key players in banking to be passive as a new and knowledgeable tech-savvy generation comes of age, one that’s self-serving and will want exposure to foreign markets.
As for Stanbic, it has got to back up its claim of being the biggest bank in Uganda by total assets with: innovation, ground expansion, and business aggression.
Because right now, Stanbic is looking like an Albino masquerading as a Mzungu!
Mark Kidamba is an Independent Financial, Investment Analyst