Enterprise Banking Group is Looking to Invest US$25m to Help SMEs in Africa

Enterprise Banking Group (Pty) Limited (“EBG”), a regional banking group focused on banks that service small and medium sized enterprises (SMEs), is pleased to announce that it has opened its holding company office in Gaborone, under the Botswana International Financial Services Centre (IFSC).

EBG invests in banks and other financial institutions in sub Saharan Africa, and works with them to provide financial services to the SME sector. Its first two investments are in Fina Bank Kenya and the now privatized Banque Continentale Africaine (Rwanda) (“BACAR”). The board and management of EBG have extensive banking experience in sub Saharan Africa and are looking to invest over US$25 million in Africa over the next three years.

Botswana was identified as the most appropriate location for managing the group’s regional initiatives because it is a country on mainland Africa with no exchange controls, a very attractive tax incentives package, as well as a sound legal and regulatory framework.

Peter Hinton, CEO of EBG said, “We are very pleased to be registered under the tax efficient Botswana IFSC and also be licensed by the much respected Bank of Botswana. Botswana provides a tax efficient location for our shareholders with no capital gains tax and a corporation tax rate of 15 percent. It is also an attractive location for reasons of political stability, economic growth, no restrictions on currency flows, low levels of corruption and easy access to Johannesburg from where we can fly all over Africa. We definitely prefer being on the Africa mainland, operating in an English speaking society and being on the same time zone as most of the continent.”

CEO of Botswana IFSC, Alan Boshwaen, said: "We are very excited at the establishment of Enterprise Banking Group in the Botswana IFSC. Enterprise’s decision to make Botswana its hub for driving regional expansion is directly in line with our mandate for developing the country into a regional centre for facilitating the growth, development, and expansion of African companies into international operations. The success of projects such as this will result in greater exposure for Botswana as an attractive location for cross-border transactions, which in turn, will translate to more projects offering exciting and challenging employment opportunities for Botswana citizens".

He added, "The Botswana IFSC definitely has a role to play in assisting companies with regional ambitions to realize their goals. We have created an environment that facilitates cross border business enabling companies to raise capital in international markets for reinvestment into the rest of the continent"

According to the 2004 World Investment Report, the level of FDI in Botswana in 2003 stood at US$86.3 million. Shareholders in Enterprise Banking invested over US$3million in Botswana in 2004, thereby driving the overall level of FDI up for 2004. They will invest at least a further US$2.3 million this year. Botswana will also benefit from the jobs and revenues generated by a successful EBG. Enterprise’s focus on SMEs and development will demonstrate that Botswana as a country is, through Enterprise, contributing to the development of other African countries.

Peter Hinton commented, “This is completely consistent with Nepad and demonstrates that EBG, in Botswana, can attract international capital for onward investment in Africa.”

EBG’s objective is to deliver unique, tailor made financial products and services to SMEs in Africa. It will do so by acquiring significant stakes in banks and finance institutions. Through the application of modern management techniques, the Enterprise business model, training and sophisticated technology, EBG will transform the financial institutions in which it invests into profitable commercial enterprises and refocus them on servicing the SME sector.

EBG has identified the SME sector as its target market because it recognizes that although SMEs are an economic driver of developing countries across Africa they usually experience great difficulty securing adequate funding through the traditional banking channels. Moreover, in recent years some international banks in Africa have sought to consolidate their businesses to focus more on the multinational and large corporate client base. This leaves SMEs with even less access to finance that they need to grow.

The management of EBG have successfully applied its business model in other African countries. In Uganda, an under-performing development bank, Development Finance Company of Uganda, applied the Enterprise Banking model and became the second largest financial services group in that market in five years. The entity was listed on the Kampala Stock Exchange in October 2004 when the Government of Uganda sold its 18% stake for over US$7m.

EBG will also focus on attracting under-banked individuals – often working for the SME customers EBG targets – and developing a strong deposit base. Most African economies are still cash based and have low savings rates relative to developed countries. Through the use of appropriate technology, Enterprise will mobilise deposits and attract the under-banked into the formal banking system.