Tuesday, July 13, 2010

BUSINESS BEST HOPE FOR REGIONAL INTEGRATION

This week Kenyan based Equity Bank officially launched itself on the Ugandan market.

Last year the bank acquired Uganda Microfinance Ltd whose existing 21 branches will serve as a useful launching pad for Equity Bank’s ambitions to dominate the Ugandan market.

Equity Bank, which has retained its microfinance roots even as it has expanded into higher end finance, has about half of Kenya’s total customer deposits and over the last five years has seen its net profits doubling every year.

The Equity Bank model is based on the belief that everyone has a right to financial services and has contrived to be the provider of that right. A model that was the foundation for many of our high street banks centuries ago, but which they have forgone to chase the easier corporate business.

Its entrance into the Ugandan market promises to see a greater emphasis on serving the unbankable masses – a high street euphemism for people without formal employment. Assuming Equity Bank can sustain their business model and manage their geometric growth, our banking industry will never be the same again.

Not to be outdone Uganda’s Riley Packaging made a bid to take over the distressed Panpaper Mills in western Kenya.

Panpaper Mills, the largest producer of pulp and paper in the region, is currently staggering under the weight of more than sh,4000b in debt was recently put under receivership.

Riley – a joint venture between Mukwano industries and the Mara Group, interest in the firm is understandable, being a key client.

When history is written these kind of cross border business interactions will show much greater return on investment than the taxes we pay to finance the East African secretariat in Arusha.

In the history of the world you will be hard pressed to find successful transnational unions built because far sighted politicians (an oxymoron if ever there was one) decided it should be so, you are more likely to find that the more sustainable ones were driven by businessmen with cross border interests.

The political unions like the Soviet Union and Yugolsavia have not passed the test of time but the European Union, which begun as the European Coal and Steel Community after the second world war, has a better chance of living on.

It is obvious to anyone who comes from the border areas how cosmetic and sometimes redundant our political borders. Tribes, even families have found themselves separated by boundaries, which make little difference to their relationships, with cross border visits being effected in total disregard to visa requirements.

But our blood ties can not generate sufficient momentum to erase these boundaries and forge larger states. You need bigger institutions that can seat across from governments and negotiate as equals. And that is where business comes in.

The original East African community was based on the exploitation of the region’s natural resources for British industry. Left to our own devises we let petty differences come in the way and in the absence of sufficiently influential interests we scuttled a good thing.

Maybe East African business, or more specifically Kenya Inc, has attained such size that it needs to break out of the confines of its home borders. We know that the Kenyan business lobby at EAC negotiations is significant enough to influence policy.

But Kenya has no choice, South Africa Inc is beating determinedly on the region’s doors and out of pure self preservation Kenyan business needs to respond.

Naturally nationalist muck rackers will raise their heads in defence of this or that indigenous industry, but the momentum by consumer demand and the regional reality means these will at best, be voices in the wilderness. And they should be.

East African businessmen should be allowed even encouraged to expand out of their borders, exploit existing markets and develop regional economies of scaleto the point that this will be springboard into foreign markets.

Let us habour no illusions. It is only through mutual interests that transcend blood, cultural and religious ties, read business, that we will have a sustainable East African Community.

So we should salute these trailblazing entrepreneurs and governments should offer them support by way of better infrastructure, affordable financing and beneficial fiscal policies as a way to accelerate East African integration.


Published April 2009, New Vision

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