THE recent decision by the Competition and Tariff Commission (CTC) to block CBZ Holdings from increasing its stake in First Mutual Holdings Limited (FMHL) beyond 31,22% poses a significant setback for the bank’s strategic ambitions.
CBZ had aimed to create a formidable financial conglomerate by integrating its banking operations with FMHL’s insurance services, attracting international investments, and positioning itself as a competitor to regional powerhouses such as Old Mutual.
This development comes against the backdrop of Zimbabwe’s challenging economic environment, where banks increasingly rely on non-interest income due to a prolonged currency crisis that has undermined traditional banking models.
Zimbabwe’s banking sector has shifted its revenue model from interest-based income to non-interest income due to hyperinflation and economic instability.
The persistent volatility of the Zimbabwean dollar has eroded the viability of earning revenue from interest on loans, leading banks to depend on transaction fees, service charges, and other non-interest income streams.
This pivot is a necessary adaptation to survive in an environment where lending is fraught with high risks and uncertainties.
In contrast, Access Bank in Nigeria has successfully implemented an aggressive expansion strategy across Africa. Their acquisition of Bidvest Bank Holdings Limited for approximately US$159 million aligns with their 2027 goal to become one of Africa’s largest lenders.
Access Bank’s growth has been propelled by diversification, digital innovation, and a strong customer focus, establishing it as Africa’s largest bank by customer base, with operations in 23 countries and 60 million users.
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CBZ Holdings currently holds a 36,35% stake in FMHL, with 31,22% acquired in a transaction finalised in September 2023. Initially, CBZ’s ownership in FMHL was indirect, but it was later consolidated into direct control.
The CTC’s intervention, citing potential adverse effects on competition and market dynamics within Zimbabwe’s financial services sector, has forced CBZ to rethink its growth strategy.
This regulatory decision, while aimed at preserving competition, underscores the broader challenges within Zimbabwe’s financial landscape, particularly in the context of an unstable currency.
Meanwhile, Access Bank’s success is underpinned by strategic acquisitions and organic growth.
By acquiring financial institutions such as Bidvest Bank, National Bank of Kenya, and others across Africa, Access Bank has significantly expanded its regional footprint and diversified its service offerings.
The bank has leveraged local expertise to create synergies between its acquisitions, strengthening its market position.
Moreover, Access Bank has embraced digital transformation, which enhances customer experience and operational efficiency. Investments in mobile banking apps, internet banking, and digital wallets have allowed Access Bank to reach a wider customer base and streamline its operations, particularly in markets with high mobile penetration.
Access Bank’s customer-centric approach has also been integral to its growth. By offering tailored financial products and services, the bank has met the diverse needs of its customers, fostering strong relationships and loyalty.
This includes a range of products, from personal loans to wealth management services, catering to both retail and corporate clients.
For CBZ to emulate Access Bank's success and become a regional powerhouse, it must adopt a multi-faceted strategy focusing on diversification, digital innovation, customer-centric services, infrastructure enhancement, regulatory compliance, and strong corporate governance.
Diversifying through acquiring smaller banks and financial institutions in neighbouring countries can help CBZ expand its regional footprint. Forming strategic partnerships can also facilitate smoother integration and regulatory approvals, opening new growth opportunities in East and Southern Africa.
Embracing digital innovation is crucial for CBZ to remain competitive. Investments in advanced mobile banking systems, internet banking, and digital wallets can enhance customer experience and attract a broader customer base.
Digital solutions can streamline operations and reduce costs, making CBZ more efficient. Additionally, leveraging advanced data analytics can help CBZ better understand customer behaviour and tailor its services accordingly.
Ensuring strict adherence to regulatory requirements is crucial for CBZ to avoid future setbacks. Proactively engaging with regulatory bodies and seeking early approvals can help streamline the acquisition process and mitigate risks. Addressing regulatory concerns can also build trust with regulators and stakeholders.
The African banking market is characterised by rapid growth, increasing digital adoption, and a growing middle class. Access Bank has capitalised on these trends by expanding its services and leveraging digital platforms.
CBZ can follow a similar approach by focusing on digital innovation and expanding its service offerings to cater to the evolving needs of the market. The competitive landscape in Africa's banking sector requires agility and strategic foresight, both of which CBZ must cultivate to stay ahead.
Nonetheless, the path to regional dominance for CBZ involves not only overcoming regulatory hurdles but also proactively adopting a holistic growth strategy.
By learning from Access Bank's blueprint and tailoring these strategies to its unique context, CBZ can enhance its competitive edge and achieve sustainable growth in the dynamic and diverse African market. Addressing these systemic issues will enable Zimbabwe to attract necessary investments, improve its financial sector, and drive sustainable economic growth.
This comprehensive approach will transform the business landscape in Zimbabwe, aligning it with the government's vision of a thriving and inclusive economy.
- Duma is a financial analyst and accountant at Equity Axis, a leading media and financial research firm in Zimbabwe. — twdumah@gmail.com or tinashed@equityaxis.com, X: TWDuma_
