Business Daily (Nairobi)
Washington Gikunju
13 April 2008
Nairobi — Just how far is Mr John Ngumi willing to go to reshape the investment banking landscape in sub-Saharan Africa?
It turns out that in the last four years that he has been at Stanbic Bank, he has been quietly playing the role of chief architect, shaping Kenya's dream of becoming the regional financial powerhouse.
Four years, 16 mega deals and more than Sh81.4 billion later, the South Africa-based financial services group has reshaped the world of corporate finance in East Africa.
Now Stanbic wants to use its experiences in Kenya, Uganda and Tanzania to transform itself into the premier investment bank in Africa. Kenya will serve as a hub for operations in sub-Saharan Africa.
The emergence of Stanbic as regional corporate finance powerhouse is a dramatic comeback in the career of a man who despite having been a major force in the modernization of corporate finance in Kenya has yet to get a stab at a CEO job in one of the banks and for a subsidiary that was treated as a backwater at home and as an also-ran in the local market.
"Our main drive has been having a clear objective to take part in mobilization of Africa's resources to solve the major infrastructural problems that plague the continent. We need to plug Africa onto the global economy," said Mr Ngumi.
In the more recent past, Stanbic has benefited from the huge demand for infrastructure finance in energy and telecommunications sectors and used its presence in Kenya, Uganda and Tanzania to drive its deal pipeline.
Indeed, judging from the small rooster of clients such as Celtel, Safaricom, Telkom, MTN, Tanzania Electric Supply Company (Tanesco) and the Ugandan Civil Aviation Authority that generate most of the business, Stanbic has barely scratched the surface of the regional investment banking industry's potential.
As Stanbic embarks on its mission to conquer the continent, it is taking on a turf that Standard Chartered Bank-owned, First Africa Capital has dominated over the past decade.
In its wake however, it is leaving behind well-established players like Barclays Bank Africa that have had a well-established footprint and a deeper historical connection with the continent.
As Africa embraces free markets, opens up its politics and reacts to the hunger for natural resources by the world's leading economies such the United States and China, Stanbic is repositioning itself to dominate the financing of multi-billion shillings worth of investments opportunities that are emerging.
A decade ago, global corporations such as Citibank, Barclays and HSBC would naturally have been expected to lead the modernization of corporate finance in Africa. In reality, however, it is regional banks from South Africa and Nigeria that are now well armed to take on the job.
Yet, the market was not destined to go this way.
At the turn of the century, the hostile economic and political environment in African forced the likes of Barclays to scale down their investment banking and corporate finance divisions and other players who would have been interested in taking this route were discouraged.
Indeed, the idea of setting up an investment banking division went out of fashion and corporate finance boutiques started emerging.
Stanbic, which was at the time a poorly run bank suffering under a mountain of bad debts would have been the last lender to take the investment-banking route. Commercial banks were not interested in anything beyond selling overdrafts and term loans to corporate clients.
However, a radical decision by Stanbic to lure Mr Ngumi from Citibank in Nairobi four years ago started the revolution.
"When people heard that I was leaving Citi to join Stanbic," said Mr Ngumi, "they thought I was mad." Though Citibank in Nairobi served as an outpost for the New York based multinational bank's clients and some blue chip firms in Nairobi, it was considered very prestigious among bankers.
Stanbic, which was going through a restructuring, was considered a backwater in the South African bank's empire in Africa.
Mr Ngumi, who had been part of the team that helped the Central Bank of Kenya (CBK), Capital Markets Authority (CMA) and Nairobi Stock Exchange (NSE) develop a modern Treasury bond market - that helped Treasury lengthen the maturity profile of the national debt stock, said he saw potential. At Citibank, Mr Ngumi worked on Kenya's biggest corporate bond deal launched by Safaricom.
He dug into the job with zeal pushing-what was in 2004-audacious deals such as corporate bond the programme that allowed Celtel to borrow Sh6 billion to finance its expansion and reorganize its balance sheet.
This deal transformed the regional credit market, such that in 2006, Stanbic was tapped in advising on a Sh12 billion balance sheet restructuring and financing deal for Safaricom.
The decision to set up an independent investment banking unit charged with arranging big ticket corporate deals became a near revolution in the local market that is turning into an lucrative business and is re-defining Standard Bank's African business model.
Africa's biggest financial services group by both profitability and asset base is re-drawing its continental boundaries with an aim of mapping out its key profit hubs and using them as launching pads to the wider virgin markets.
The decision has also paid off for Mr Ngumi, who was recently named the regional director for investment banking in Stanbic East Africa to take up a bigger role as the region's point man, reporting directly to the bank's board in Johannesburg.
Mr Ngumi has until this latest re-organisation been reporting to the managing directors of Stanbic Bank Kenya, Tanzania and Uganda and the head of corporate and investment banking (Africa), Standard Bank Africa, Johannesburg.
He will, however, be stationed in Nairobi, the Central and Eastern Africa's chosen hub for the financial services multinational.
Nigeria remains the gateway for Standard Group's west African operations and the nerve centre for the bank's investment banking strategy in the region. This is underlined by the recent merger between Stanbic Bank Nigeria and a leading investment bank, IBTC to form Stanbic IBTC Bank.
It has not been an easy ride for Mr Ngumi who has steered the region's investment banking sub-division to relative success in an environment dominated by the commercial banking ideology.
Mr Ngumi reckons that investment banking is a different trade from the more common savings and current account services that banks offer in the region. He says that the culture of commercial banking characterized by services such as export-import facilitation, provision of overdraft facilities and short-term working capital arrangements is prevalent in the local scene owing to the colonial legacy.
Investment banking however is all about advising clients on different capital raising methods. It involves establishing a wide network of contacts and having a big nose for sniffing out major deals before competitors.
"Investment banking is very competitive and a lot of times ego driven, it is for people who believe in pushing deals through," said Mr Ngumi.
In the four years that he has been at Stanbic, Mr Ngumi boasts of having had a hand in nearly all the big regional corporate financing deals either as the sole or as a joint lead arranger.
The deals include the Sh5.85 billion ($83 million) Telkom Kenya syndicated loan to help the state corporation undertake a restructuring process last year.
Others include arranging loan facilities for Tanzania Electricity Supply Company, Civil Aviation Authority, MTN Uganda, Celtel Tanzania, Safaricom, Shelter Afrique, Celtel Kenya, East African Development bank, Athi River Mining, Faulu Kenya and Celtel Kenya.
Mr Ngumi is a first class honours graduate from St Peter's College of Oxford University and started his career at National Westminster Bank in London as a management trainee.
He reckons that the local investment banking environment is becoming increasingly competitive with most players having realized its enormous potential to become major revenue streams for commercial banks.
Other commercial banks that have investment banking licenses include Barclays, Commercial Bank of Africa, CFC, NIC and Equatorial Bank.
Leading local investment banks that offer corporate advisory services but do not have commercial banking licenses include ApexAfrica Dyer and Blair, African Alliance, Suntra, Standard, Kestrel Capital and Faida.
Renaissance Capital, the Russian-owned investment banking multinational acquired a local operating license last year.
Africa as a whole is thought to have a huge potential for investment banking given that its annual infrastructural needs are estimated at about $15 billion.
With Kenya being the continent's fifth largest economy, Mr Ngumi says that Standard Bank is positioning itself to be at the window of opportunity when the investment opportunity finally opens up.
"We know where we want to be when the market opens up but we are still figuring out how to get there," says Mr Ngumi.
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