SA's change of tack in Kenya banking takeover unsettling

A traditional Zulu homestead in South Africa. The South African banks’ new entry strategy is borrowed from Shaka the Zulu’s war strategy. [XN Iraki, Standard]

South Africans are not done with their renewed foray into Kenya.

After buying into NCBA and Safaricom, they want more shares in Absa Bank Kenya, formerly Barclays Bank, which defined Kenya’s old money and status.

I had an account at Barclays when I was younger and more innocent. My branch was at Sonalux House, where queuing was a test of endurance.

No wonder some of us appreciate online banking. Can anyone remember the queues in Electricity House in the central business district as Kenyans paid for power? We have come a long way.

That progress also helps explain why South Africa is now looking closely at Kenya’s financial sector.

Back to South Africa. Why the interest in Kenya’s financial sector? Why now?

If you recall, South Africans struggled to get into the Kenyan market with ShopRite, Massmart and Castle as the key casualties. You can add to the list.

Failure to understand our mind and culture may have made the firm’s exit from our market, which most admit is peculiar, more like Ol Kalou. South Africans simply transplanted their firms into the Kenyan market without any customisation. When I got into ShopRite for the first time at Westgate, I felt out of place, maybe out of my hustler background. It was too “neat and clean”. We love some “disorder”.

Why else are low-end bars and restaurants, or “joints”, patronised more than five-star hotels?

South African firms must have gone back to the drawing board. They probably borrowed from the past. Their new entry strategy is borrowed from Shaka the Zulu.

It’s the horn strategy: attack from the flanks, not directly. South Africa started by directly entering the Kenyan market, the frontal attack. The new strategy is through acquisition: no cultural shocks and assured continuity.

The strategy also borrows from the stealth bomber: be invisible. Go to sectors where visibility is low – no better than the financial sector! Money is money; it does not matter the bank, and you can even keep the local names after the acquisition.

Shoprite or Castle was “visible”. Banks and Safaricom are invisible in services.

In addition, acquire firms in a sector you have a head start and sophistication in: the financial sector. The oldest bank in South Africa was established in 1838.

The South African Central Bank was established in 1921. The strategy is wider and bolder, borrowed from the US and part of Collin Powell’s doctrine. 

“If you must use American power, you must use it overwhelmingly.” South Africa has used its economic power overwhelmingly, not just to buy the banks but also to go into the financial payment system – M-Pesa.

The success and boldness of this strategy make me speculate there must be invisible forces facilitating it either within the country or outside the country. Remember, South Africa is the entry point of any serious investor into Africa. It is possible that South Africans buying into the Kenyan financial sector are not really “South Africans”.

Who owns Absa, Nedbank, and Vodacom? The other bidders for Kenyan financial institutions are Nigerians, Egyptians, and Mauritians. But South Africans beat them all.

Whatever the strategy and its success, the financial sector is profitable. And that’s a key attraction. In addition, the Kenyan banks have been diversifying and growing into other African countries. Who would not want to ride on that success? Ever wondered why Google bought YouTube? Why did Facebook buy WhatsApp? But why now?

The South African buyers must figure out that the current political environment has created uncertainty for the bank owners who have diversified their risks by “selling” themselves to big and globally diversified banks.

Historically, big multinational firms are more secure politically than small local firms. You can flatten a kiosk but not a listed firm.

Should we worry over South Africa’s acquisitions in Kenya?

I’m not an economic nationalist, but the financial system is the country’s economic nervous system. Should we lose sleep if it’s controlled by someone else? Someone might quickly add that we have the Central Bank of Kenya (CBK) to regulate all banks; it does not matter. The truth is that key economic decisions involve banks and now M-Pesa.

Add the fact that politics and economics are intertwined in Kenya. Would controlling the financial system also imply controlling politics? Why did colonial powers ensure their banking systems followed them into the colonies and remained long after they had left?

Why do our presidents love owning stakes in banks?

Some, myself included, fear that once South Africans control our banks and financial systems, they could remake them in their own image. I am surprised that M-Pesa flopped in South Africa.

Will the new owners catalyse or slow down the innovations that characterise our financial system? Which other bank besides NCBA and Absa has South African links?

Others fear the acquisition of the key financial assets indicates our economy is “hollowing out”, left without a core. The counterargument is that the biggest banks in Kenya are owned by Kenyans.

But check their key shareholders beyond the minority shareholders. The South African interest in the Kenyan financial sector may have been driven by history and nostalgia.

South Africans are returning to Kenya. The Afrikaners (Boers) and 1920 settlers lived in Kenya from around 1900 to independence. The Boers ended their Great Trek in Eldoret and Nyahururu. It’s possible the money South Africans are using to buy Kenyan assets was made in Kenya in that period. The listing of South African firms like Absa, Nedbank, and Vodacom means more South Africans beyond the two groups are buying into Kenyan firms. Did I find some black South Africans in some Commonwealth cemeteries in Kenya?

While we love talking about the excesses of colonialism, particularly mistreatment of natives, we are mute on where and how the profits made on plantations were invested.

Maybe South Africans played the long game when leaving Kenya after independence and biding their time until the memories of colonialism and apartheid had faded. South Africans could be closing another history loop; they helped secure Kenya during World War II (WWII). I recall finding the wreckage of WWII bombers in the Aberdares piloted by South Africans. Time to be rewarded?

Curiously, I have heard a rumour in the White Highlands that whites buried treasures in secret places before they left.

Could the rumour be prophetic, referring to the choice assets they are buying in Kenya today?

As you finish reading, tell me where the July cold has gone.