The world over, scholars have heaped Africa’s post-colonial economic problems on its leadership. In Uganda, the ruling National Resistance Movement [NRM] has almost solely taken the blame for the economy’s poor performance, in the recent past.
Not known to locals, NRM and other African governments are puppets being strong-armed by imperialists, sadly, to their detriment. Most of the troubles synonymous with the NRM’s ceaseless stay in power: corruption, broken-down health and education sectors, sale of government enterprises, unemployment, and the like; are the fruits of policies that weren’t of their own making.
Rather, these are policies that were carefully crafted and superimposed on them by authoritarian organizations. One such organization is the International Monetary Fund [IMF]; with their louche Structural Adjustment Policies [SAPs].
SAPs are a series of economic programs/reforms designed by the IMF for developing countries that they must adhere to if they are to secure a loan from the IMF and World Bank. Some of these policies are removing subsidies and price controls, charging for basic services such as education and health, devaluing a country’s currency, and privatization.
These policies look good on paper but are impossible to implement by political leaders without dire social and economic consequences. In Uganda, the most familiarized of these reforms was privatization which led to the selling off of government enterprises. These enterprises were big and were to be broken up into several entities with the hope that they would create more jobs.
According to imf.org, “[...] as of end – 1997/98, a total of 85 enterprises had been privatized,” in Uganda.
One of the pitfalls of privatization was that it precipitated corruption because it domiciled inside deals in the sale of government enterprises and created losers who sought to profit from the enterprises once the ones they were benefitting from were sold.
One such enterprise that fell because of privatization is Uganda Commercial bank [UCB], now Stanbic bank, in 2002. Overcome with a great sense of nostalgia for the days UCB was active, wondering what could have been; I have decided to follow up the acquirer — Stanbic Bank, to appraise if the takeover was worth the squeeze.
Like any other bank, Stanbic, a subsidiary of Standard Bank SA, runs a robust public relations campaign and superficially exudes excellence. Agonizingly, when you lift her skirt, the findings are grotesque!
On the whole, it was shocking to discover that since Stanbic took over UCB, it has only added two branches to their network! In 2002, when Stanbic acquired UCB, it [UCB] had 67 stations. As of their 2020 annual report, Stanbic’s branch network is made of 69 outlets!
To assess the true value of this performance, UCB’s former CEO and now deceased Dr Frank Alfred Mwine expanded the bank’s branch network from 64 to 189 branches in his five-year tenure at the top during a tumultuous period [1987-92]. This Dr Mwine did without the then sole owner, Government, injecting a nickel as divulged by Dr Ezra Suruma in September 2001 [in a statement before the parliamentary committee on Finance, Planning and Economic Development].
On the other hand, Centenary bank opened two branches in 2020 in Busia and Bweyale. To put it plainly, what Stanbic added to their footprint in 18 years, Centenary added in one year!
This recision in branch extension can be explained by agency banking that has been used as a replacement for the brick-and-mortar banking model with many banks seeing no need to open up new branches. Rather, they are focussed on creating agents to extend their services to the masses.
Even so, agency banking is heavily flawed because of its non-exclusivity: agents transact on behalf of more than one bank. This makes it hard for one agent to recruit customers for two or more banks. On top of that, security provided for the agents isn’t solid.
It [agency banking] is more disposed to fraud; not even yet considering that banks shouldn’t outsource their transactional sector because it’s their bread and butter, especially in a cash economy.
In contrast, expanding and creating new branches means creating new jobs and promoting old staff in the newly created branches; and most importantly, taking services closer to the people.
The digitalisation of the world doesn’t diminish the relevance of bank branches as a 2019 survey — Recognising the value of bank branches in a digital world conducted by the Deloitte Centre for Financial Services unearthed.
“Most customers prefer branches over digital channels when opening new accounts for both simple savings accounts, debit cards,” the survey reports. This goes for loans too; in developing countries — Mexico, Indonesia, and developed countries — Japan and Germany alike.
By nature, the branch experience influences human touch which yields loyalty, advocacy and customer satisfaction across generations more than digital channels. By and large, it’s common-sense that Stanbic continues to expand its physical branch network while taking on agents that will solely represent it, rather than abandoning its branch network expansion altogether.
It was further appalling to discover that under Stanbic’s charge of the bank, it has created only 412 jobs in 18 years [23 jobs a year] up until 2020. I chose to use 2020 as a base year because it was the last ‘normal’ year before structural disruptions occurred due to the Covid-19 pandemic.
When Stanbic acquired UCB, it (UCB) employed a staff of 1,200. In their 2020 report, Stanbic outlined that they employed 1,612 people. That’s an inferior number when compared to their challenger Centenary bank, who by 2020 had 2,815 hires, employing more people than Stanbic even though the latter is the bigger bank by assets!
Uganda has a high unemployment problem and banks are critical when it comes to supporting the communities in which they operate because these communities reflect the banks. They [banks] can’t change unless the communities they are in have more wealth. Therefore, job creation should be Stanbic’s business objective, because clearly it isn’t.
In a substantial way; Stanbic’s investment approach is idle because it’s mainly focused on government bonds — inflation unprotected bonds. This remains the case even when the Capital Markets Authority Act CAP. 84, Section 90B makes provisions for securities to be offered to a person in Uganda regardless of where the allotment occurs, or where the issuer is resident, incorporated or carries on business.
This act clarifies that a security can be offered to a person in Uganda if the offer will be received by the person in Uganda.
Despite the law making such provisions, Stanbic has maintained its lackadaisical investment approach centred around cashing in on inflation by concentrating on lending to the Government of Uganda.
Instead, Stanbic could have introduced her clients to the biggest stock exchange in Africa — Johannesburg Stock Exchange [JSE] through forming alliances with depository institutions/banks in South Africa [where they have an upper hand because their parent company originates there].
This could have interlined their Ugandan customers with the JSE by way of depository receipts — South African Depository Receipts [SADR], and later, other markets like the Egyptian stock exchange also through depository receipts.
This financial instrument [depository receipt] links foreign clients to major exchanges, yet they charge low fees [~two cents a share for American Depository Receipts, implying a much lower charge for SADR]. Besides, they are translated into the client’s local currency to avert foreign exchange exposure.
Stanbic should have emulated their parent company Standard bank that has familiarized its clients with low volatility stocks in the USA, UK, and Australian markets through financial instruments they named the Deposit Plus Issue.
The lack of initiative on Stanbic’s investment front has left a group of stuck, and dissatisfied clients on their register. Beyond all doubt, the goal of Stanbic is to maximize profits for shareholders while the goal of UCB was to serve the public and give Ugandans an identity — ‘bank yaffe’ while making a profit in the process.
Unlike the NRM government that had its feet fettered in its infancy; Stanbic has had it good from the start: having UCB handed to it on a silver platter. This advantage should be manifested in its ground expansion, innovation, genuine supremacy, and public appeal because as is, we were better off with UCB.