Discussion sur le secteur bancaire avec Bob Nzoimbengene, Partner chez Deloitte.

Une fois n’est pas coutume, l’analyse du secteur bancaire sera faite cette fois-ci par un ancien banquier. J’ai le plaisir d’accueillir mon bon ami Bob Nzoimbengene, Partner chez Deloitte. Pour ceux qui ne le savent pas encore, Deloitte publie chaque année une étude très détaillée (pour la dernière étude, veuillez cliquer ici) sur la situation du secteur bancaire et il est toujours très intéressant pour les professionnels du secteur d’avoir une perspective extérieure.  

Hervé OTSCHUDI :  Alors Bob, comment se porte le secteur bancaire congolais ? 

Bob David NZOIMBENGENE : Sur le plan purement de la performance vue à travers les indicateurs clés, j’estime que le secteur bancaire congolais se porte bien. Il continue à réaliser des performances très appréciables. Saviez-vous que le secteur bancaire congolais a réalisé une croissance de son résultat net après impôt de plus de 300% en douze ans ? Son résultat net est passé de 7 MUSD (en 2008 année marquée par l’implantation de plusieurs banques) à 28 MUSD (en 2019). 

Le seul bémol est l’instabilité de ce résultat, qui a évolué en dents de scie durant les dix dernières années, au point d’atteindre même les résultats globaux négatifs en 2016 et 2017, pour remonter 66 MUSD en 2018.

Par contre, les autres indicateurs tels que la mobilisation des dépôts, la création de la monnaie et la création de la richesse (PNB) évoluent en augmentation chaque année. Ces indicateurs enregistrent des taux de croissance à deux chiffres presque chaque année. 

Malgré ces résultats, nous pensons que le secteur bancaire congolais peut faire mieux que sa performance actuelle. En effet, suivant une étude scientifique réalisée, qui sera publiée très bientôt, le jour où nous parviendrons à réduire sensiblement le volume des transactions en espèces dans notre pays et par ricochet à atteindre un taux de bancarisation de plus 30%, la taille du secteur bancaire congolais et son résultat net vont quintupler. 

Hervé OTSCHUDI : Quel a été l’impact de la COVID sur l’activité des banques congolaises ?

Bob David NZOIMBENGENE : Comme indiqué dans notre étude (Deloitte RDC) sur le secteur bancaire congolais, la crise sanitaire de la COVID 19 a impacté négativement le secteur bancaire congolais, qui a enregistré une baisse de ses commissions reçues notamment du fait de la réduction des dépenses de consommation et une chute des revenus d’intérêt du fait de la stagnation du tirage sur les lignes de crédit et de découvert (les activités étant en baisse) et de la réduction des transactions. Ce qui a comme conséquence la baisse du Produit Net Bancaire des acteurs. Aussi, nous avons noté une baisse de la qualité du portefeuille des banques, augmentant ainsi le niveau de provisions à constituer, malgré quelques mesures d’assouplissement du régulateur. Cependant, on a noté une appréciation du coefficient d’exploitation de certaines banques.

Hervé OTSCHUDI : Est-ce que, selon toi, les mesures prises par la BCC ont permis d’atténuer l’impact (négatif) de la pandémie sur l’activité bancaire ? Si oui, de quelle manière ? 

Bob David NZOIMBENGENE : La Banque Centrale du Congo a réagi rapidement pour soutenir les banques établies en RDC, en prenant un certain nombre de mesures dont notamment la baisse du taux de la réserve obligatoire sur les dépôts à vue en monnaie nationale (de 2 à 0 %), le report, au mois de janvier 2022, de l’entrée en vigueur des dispositions relatives au relèvement du niveau du capital minimum des banques à l’équivalent en CDF de 50 MUSD, la non limitation du nombre de restructurations ou de rééchelonnements des créances tombées en souffrance durant la crise de COVID-19 et l’imposition aux banques de suspendre l’application des pénalités sur les créances en souffrance pendant crise. 

A mon avis, toutes ces mesures n’ont pas d’impact significatif sur l’activité et la performance des banques. Néanmoins, elles ont un impact sur la conformité des banques à certaines instructions de la Banque Centrale du Congo.

Hervé OTSCHUDI : Certains changements règlementaires. Quels sont les changements qui auront un impact direct sur les clients (particuliers comme entreprises) des banques ? De quelle manière ? 

Bob David NZOIMBENGENE : Nous pouvons répertorier ici deux changements importants :

• La non-limitation du nombre de restructurations ou de rééchelonnements des créances tombées en souffrance durant la crise de COVID-19 et l’imposition aux banques de suspendre l’application des pénalités sur les créances en souffrance pendant la crise constitue une vraie opportunité pour les clients en difficulté, de solliciter le rééchelonnement ou la restructuration de leurs crédits auprès de leurs banquiers. De la même manière, Ces clients vont bénéficier de la mesure relative à la non-application des pénalités de retard. Ce qui impacte positivement leur trésorerie et leur résultat financier de la période.

• Et le seconde est le rappel à l’ordre faite aux banques concernant le paiement de toute somme en francs congolais ou autre globalement égale ou supérieure à 10 000 dollars américains, qui ne peut pas être acquittée en espèces ou par titres au porteur. Malgré la dérogation prévue à l’instruction 15Bis de la BCC, les clients des banques devraient elles-mêmes veiller au respect strict de cette disposition. Car en cas d’inobservance, ils peuvent également être sanctionnés. D’où l’intérêt de limiter les transactions en espèces et de privilégier les transactions (paiements et recouvrements) via le circuit bancaire. 

Hervé OTSCHUDI : Comme tu l’as dit précédemment, cette dernière mesure devrait donner un coup de fouet au secteur bancaire. En effet, fini (officiellement) les achats en cash de propriétés à plusieurs millions de dollars… 

Merci Bob d’avoir pris le temps de répondre à mes questions qui, j’en suis sûr, auront permis à nos lecteurs d’avoir une meilleure compréhension de l’état du secteur bancaire dans notre pays. 

Central Bank of Congo (BCC) has cut interest rate to 15,5%. This is good for investment! Right? hmmmm let's see...

Last week, the BCC has reduced its Prime Rate from 18,5% to 15,5% taking into consideration the positive progress made regarding inflation and FOREX. 

As usual, I have received comments from people with good knowledge of economic theory (not being sarcastic here), telling me how great the news is for investments as banks are going to reduce their own interest rates, which makes sense... in theory.

Below are the two declared objectives of the BCC when reducing the rate:

The first one is to ensure credit is more affordable and accessible to economic agents by reducing the price of money. This should stimulate investment and boost growth by increasing production with the corollary of job creation and consumption

This is only possible thanks to the second objective. Indeed, thanks to this rate reduction, commercial banks will now be able to refinance themselves at a lower from the BCC. Indeed, it is expected from banks to pass on this drop, and reduce the rates charged to their own customers in order to encourage the demand for loans.

As a local banker, let me tell you what is going to happen. For several banks, interest rates charged to customers are flat and will only vary at renewal. Therefore, only new credits could enjoy lower rates. Other banks interest rates are directly link to the BCC rates (BCC rates + margin). In this case, the impact will be immediate. 

All good right? Interest rates charged by banks will decrease eventually, investment will rise blablabla…  

Well, now we need to ask ourselves the most important question of them all. In which currency people borrow in our beloved country? If you read this blog, you already know that our economy is highly dollarized and that more than 90% of banks credit portfolio are in US dollars! 

As a result, the impact of this change will mainly impact the remaining 10% that are usually civil servants’ consumer loans, governmental or local entities that needs to pay salaries, etc. 

The only way for this mechanism (BCC rates transferred to customers through banks) to work is for commercial bank to be indebted to the BCC in the same currency their customers borrow. 

It is worth noting that while CDF rates stand at 15,5% + a margin (I know but banks need to pay salaries too), rates in USD for Corporate customers (the one making the big CAPEX) are on an average at 8%. Consumer and commercial loans are also already cheaper in USD than in CDF. Why would people borrow in CDF if they are offered a choice?...

I argue, once again, that our monetary policy is impotent… but those are only my conclusion…

The DRC economy blog is back!!!

Two years ago, I wrote my last article, and I had no intention to restart writing on the DRC economy for a simple reason: It is too depressing! We usually go from one bad news to another… 

In the meantime, I have received several messages from people I know and even from complete strangers that didn’t understand why I stopped and insisted that they would like me to continue writing simple but relevant analyses on our economy. So here we are…

Soooooo did things improve since my last article two years ago? Let’s see…

When we look at the indicators, it is not brilliant. The Congolese Franc went from 1600 to 2000 to the dollar, this represents a 25% depreciation in two years. The inflation rose to 15,704% according to the Central Bank of Congo (BCC) which is quite high. The BCC prime rate rose to 18,75% p.a., making the real interest rate positive for the first time since the inflation started skyrocketing, which is a good thing for investors in Congolese Francs. 

I know, I know, you are going to tell me that this is all COVID fault but actually this performance was registered before the pandemic started and I have to admit that since the beginning of the pandemic, the depreciation and the inflation are relatively well contained. 

Despite the effects of this pandemic that has destroyed most of the economies in the Western World, it seems that we have managed to avoid our first recession in 20 years!!! Hurray!!! According to the BCC preliminary computation, the GDP should grow by 0,8% in 2020 and by 3,2% in 2021 thanks to a very strong performance of the mining industry (forever our savior unfortunately- read past articles here). 

According to a BCC survey, Congolese businessmen are more and more optimistic about the perspectives of the DRC economy, which is a very good sign. 

On a good note, the copper hit a nine-year peak of US$8,806.50/t on February the 19th. As you know, DRC is the main producer of the metal in Africa and despite the fact that analysts think the fundamentals behind this surge have disappeared, we expect a positive impact on the meager DRC international reserves that currently stand at US$ 693 million. 

In a country where the politics has an immense (usually negative) impact on the economy, we can’t wait to discover the members of the cabinet of the new Prime Minister. The new government is expected in the coming days and its composition as well as its size will give us an indication of the direction we are heading to. 

As you can see, I didn’t respond to my own question. I will let each reader respond for himself…

To be continued…  

The dangers of relying on mining to develop our country...

I am coming back (again) on diversification. This time, we are briefly looking at the prices of two of our most important exports, Copper and Cobalt. 

Cobalt has been on everyone's lips recently due to its crucial role in the manufacturing of electrical vehicles batteries.

As you can see in the graph below, the cobalt has reached 94 500 USD per tonne last year before significantly dropping below 35 000 USD per tonne. Our good old supply and demand friend did its thing again! As prices increased, more people became interested in extracting the stuff that was usually considered as a simple by-product of copper. As a result, the capacity of production significantly increased during the course of the year leading to the price drop. 

The price may eventually increase due to the high demand but we do not really know when and that is the issue. Knowing that at least 76% of our exports comes from those two commodities, we are extremely reliant on the latter when it comes to revenues and FOREX reserves. The issue is that we have no control over those prices and therefore we should not plan our expenses based on uncertain revenues...

you can find more details on cobalt projection for 2019 in this article.

Cobalt price between March 2017 and January 2019 

Evolution du prix du Cuivre sur les 12 derniers mois

Diversifying the economy… Let's go on vacation!!!

Like a lot of people, I love traveling when I am on vacation. Unfortunately (for my own country), I tend to travel abroad to spend my money. One of the reasons is that I want to discover new countries whenever possible. However, the main reason is that our country is not tourists friendly! Traveling within the DRC is very expensive! It can be more expensive than travelling abroad, accommodation are not always adequate, infrastructures  are insufficient, etc. 

In addition to that we need to deal with our immigration services, even as Congolese! And yes, when you travel within the DRC you have to go through immigration and produce useless documents such as « ordre de mission ». Why should I go through the immigration at the airport when I take a flight from Kinshasa to Matadi?! What is even more ridiculous is that I can do the same trip by road and there will be no immigration to go through? So what is exactly the point of controlling us at the airport for local flights? I was once asked for my ID on the parking of the local airport in Kinshasa by a woman telling me she was from the borders police!!! What was she doing on that parking?!?! Maybe I missed something... 

I mentioned in my previous post that it was urgent for that we diversify our economy. Why can we just start with tourism!? It will create thousands of jobs and bring in desperately needed foreign currencies. 

To put this into perspective, let's use some data here. Today, tourism contribution to the DRC GDP is only 1.8% while it represents 8,9% for the South African economy! In relative terms, it is 5 times more but in absolute value it represents more than 31 billion dollars! And 31 billion dollars represents 82% of our own GDP! 

That's right, with tourism only, South Africa is generating as much as 82% of our entire economy!!!

The question is: "Why can't we be a tourism champion?". Personally, I see no reason why. We have one the most beautiful countries in the world and yes I am biased but still! We  have more national national parks than most countries with unique species, we have falls, volcanos, mountains (some with real snow- No need to go in a mall in Dubai) lacs, beaches, forrest and most importantly an amazing friendly people! 

First, if we could simplify the obtention of visa, it would be great! We are behaving like tourists are going to run away with our gorillas or our copper on their back. The difficulty for foreign (both tourists and business people) in obtaining visa is insane! We have colleagues from London asking for visas on arrival because the process to get a visa in our Embassy in London looks like Koh Lanta! 

Second, ... actually it is time to get back to work to make money for my next trip, probably abroad... 

New Year, New President, Same Challenges...

First of all, happy new year to all my readers!!!

For the first time in… hummmm for the first time ever, the DRC has witnessed a peaceful transfer of power in the country, in nearly 60 years. 

The new president is inheriting a country that could be in a better shape economically… Although last year indicators were better than the 2017 ones; there is a lot to be done. 

In 2018, the inflation rate stood @ 7% from 55% the previous year and the Congolese Franc remained stable with a depreciation of only 0,13% against the US Dollar. The Forex reserves remain very low at USD 914 million, representing only 3 weeks of imports. 

The challenges faced by the new president are enormous. Indeed, the DRC is considered as one of the most corrupted countries in the world (ranked 161 on 180 countries by Transparency International) with one of the most difficult business environment (#184/190 according to the World Bank) as well as an extremely low purchasing power with one of the poorest population in the world (#176/188 according to the UNDP).

It is also extremely urgent to diversify to economy. It has to be done and it should not be an empty slogan. The country cannot continue to remain at the mercy of the commodities prices. According to Central Bank of Congo data, mining sector contribution to the country GDP was above 63% by mid-June 2018 and unfortunately, the multiplier effect of this sector on the economy has been very low so far…

There is a lot of expectations from the new president and I imagine he won’t get any grace period. 

I wrote in this article title that the challenges remained the same but I think there will be even bigger for the new president as people's hope has rarely be so high! 

Let wish him good luck for the good of this beautiful country…

H.O.

Quick review of 2018 first semester…

The first of August is a public holiday in the DRC. On that day, we honor our parents, both alive and dead… But today is also a special day as one of DRC main opponents is coming back home after spending 10 years in Scheveningen prison, just six months before the elections due on December the 23^rd.  It promises many interesting months to come…

However, let’s try not to digress into the political space although we have demonstrated at several occasion its impact on the local economy…

When we look at the principal economic indicators, they have all improved since the beginning of the year! The inflation stands at 12% as of July the 27^th after closing the year 2017 at almost 60%! As a result, the Central Bank has decreased its prime rate to 14% from 20% maintaining a positive real interest rate for the first time in many months.

At the end of June, the public finances have registered a small surplus of $ 2,2 million compared to a deficit of $ 23 million for the same period in 2017 according to the Central Bank data.

The Congolese Franc remained relatively stable and the foreign exchanges increased by approximately 40% since January to reach $ 1,2 billion. This is still low by international standards but still an improvement. The country has benefited from an increase in production of its major commodities as well as the increase of their prices, notably cobalt that climbed up to $ 98 000 a ton in April before going down to $ 69 750 this week due to oversupply according to Reuters 

The GDP growth is expected at 4,2% for 2018 compared to 3,7% the previous year. This is an improvement, but it is still too small when compared to the population growth.

The biggest event of the semester is without any doubt the adoption of the new Mining Code. Some important changes were made in the new Code and they include increased royalties from 2 to 3% for copper and cobalt and up to 10% for any commodity designated “strategic substances”. It is a safe bet to say that both cobalt and coltan could qualify as “strategic substances”.  Additionally, a new 50% windfall tax or tax on super profits has been introduced. Super profits are defined as income realized when commodity prices rise 25% above levels in the project’s bankable feasibility study. The state’s free share in mining also increases, from 5 to 10%...

Obviously, major mining companies were not happy about those changes but according to expert, this Mining Code, despite the increase in royalties, remains one of the most competitive in the world.

Personally, I argue that any initiative that will improve public finances without discouraging investments should be encouraged.

Let’s just hope that those additional revenues will be spent wisely…

You can find the new Mining Code here (in French)