Home Economy Banking in North Africa to Overtake South Africa by 2020: Report

Banking in North Africa to Overtake South Africa by 2020: Report

Rabat – Banks in North Africa will overpower revenue shares in South Africa by 2022, according to a recent report on retail banking in Africa from the management consulting firm McKinsey and Company.

North African revenue shares before risk costs are predicted to reach 30 percent in 2022, up from 28 percent in 2017 and 24 percent in 2012.

South Africa will see its share fall to 26 percent in 2020, down from 30 percent in 2017 and 37 percent in 2012. Central Africa exhibits the same downward trend.

“There is a shift underway in exchange rate adjusted revenue pools towards North Africa, East Africa, and West Africa, and away from South Africa and Central Africa,” said the report.

The same report indicates that about 65 percent of African banks’ profitability and 94 percent of their revenue growth, are attributable to their “geographic footprint,” with Morocco featuring among the leading countries.

“There are huge variations in growth and profitability at the country level, with nations such as Côte d’Ivoire, Ghana, Kenya, Mali, and Morocco featuring positively.”

Morocco, along with South Africa, Nigeria, Egypt and Angola account for 68 percent of the total banking revenue pool for the 54 countries on the continent, “leading to some inevitable fragmentation of the banking opportunity.”

Between 2017 and 2020, Africa’s banking revenue pools are expected to grow at 8.5 percent each year between 2017 and 2022, bringing the continent’s total banking revenues to USD 129 billion.

“Africa’s banking markets are roaring to life. They will grow robustly over the next five years, and as a group, Africa’s banks are second-most profitable on a global level”, writes the McKinsey group.

USD 53 billion will be produced in retail banking, compared to the USD 35 billion generated in 2017, recording a growth of USD 18 billion.

Three-quarters of the USD 18 billion in absolute retail revenue growth will be concentrated in 10 countries; though the greatest retail growth will be in South Africa, Morocco will feature among the leading growth markets in the sector.

Nevertheless, the report explains that with such remarkable growth, certain challenges are inescapable: Africa’s banking markets face a high percentage of low-income customers, high cash usage, and low levels of physical distribution and variation flowing from the relatively advanced markets of South Africa and Morocco to the nascent markets of Ethiopia and the DRC.

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