Some Banking Sectors Still Profitable

Certain sectors of the banking industry were profitable in 2008, bucking the worldwide trend.

Export credit agency SACE recorded a net profit of €349-million on a pre-tax profit of €530-million for its year to December 2008, with profit only marginally down by 7,5 percent.

SACE provides financial guarantees on Italian-based exports and projects to Africa and recently opened an office in South Africa.

“At a time marked by unfavourable international market conditions and as the full force of the economic and financial crisis began to be felt in the last quarter of 2008, the SACE group maintained its core business operating results on a par with the previous year,” says Johannesburg-based SACE Sub-Saharan head Michael Creighton.

SACE has concluded or is close to concluding transactions valued at over R12-billion in Sub Saharan Africa since 2006.

The types of assets financed include vehicle fleets, heavy transport, aircraft, mining equipment and construction projects. SACE is not a direct lender, but offers a range of products that can facilitate the raising of finance that can facilitate trade on an open account credit basis.

In 2007 and 2008 approximately 37% of the transactions were in Nigeria, 21% in Angola and 22% in South Africa. Other countries included Senegal, Tanzania, and Cape Verde.

The projects include the construction of a road in Mozambique. This is a strategically important transaction as it will assist in the economic development of a rural section of the country. Other projects involve the construction of a strategic section of a power plant within Africa.

Sonangol in Angola received a structured financed deal for US$250-million, and an oil and gas refinery and liquefied national gas plant in Nigeria received US$210-million project refinancing. In Cape Verde, Cabo Verde Airlines received funding for US$25-million and Precision Air in Tanzania raised €8-million funding to facilitate the purchase of aircrafts.

Other projects included the upgrading of a freight rail network and the supply of heavy duty trucks for the construction industry. SACE has also been involved in facilitating interbank lending to assist various African banks in the raising of foreign currency.

The group strategy for 2009-2010 will focus on traditional activities to support exports and foreign investments. It also envisages the consolidation of the new scope of operation which covers guarantees for bank loans to SMEs, renewable energy sources and strategic infrastructure and significant growth in the surety businesses.