A report released by Mckinsey, a global consultancy firm has said that only five countries, South Africa, Nigeria, Egypt, Angola and Morocco currently account for 68 per cent of Africa’s total banking revenue. It said that about 60 percent of the total retail revenue growth of nearly $18 billion expected over the next five years will be concentrated in South Africa, Egypt, Nigeria, Morocco and Ghana. The report said “Where you are in Africa matters – in a big way,” the report said. “About 65 percent of African banks’ profitability and 94 percent of their revenue growth are attributable to their geographical footprint.”
The report said that though only 15 percent of Africans had annual income above $5,000 last year, the McKinsey’s research indicated that nearly 70 per cent of retail banking revenue growth through 2025 will come from customers earning between $6,000 and $36,000. According to Mckinsey “Africa has emerged as the world’s No. 2 banking market in terms of growth and profitability. Low banking penetration and income levels, as well as economies that are largely cash-based and viewed as a high credit risk, have long been considered major obstacles to the development of the continent’s banking sector.
However the McKinsey report drawing on performance data from 35 of Africa’s leading banks and surveys of banking executives and customers said the number of banked Africans grew from 170 million in 2012 to nearly 300 million last year. The figure is expected to rise to 450 million in the next five years, with banking revenue rising to $129 billion from about $86 billion now.
“Globally, the banking industry is facing disappointing returns and sluggish growth,” the report said. “Africa’s banking sector provides a refreshing contrast. Its markets are fast-growing and nearly twice as profitable as the global average.” However, that growth is by no means evenly spread, either geographically or among income groups. Meanwhile, heavy staff costs and labour-intensive, paper-dominated processes hold back productivity, the report said. Credit risk also remains a concern, with non-performing loans accounting for more than 5 percent of African banks’ portfolios.
