2020 was an unprecedented year, for the industry, for Absa and yourself as a leader. It was a year of many firsts. But regardless, Absa emerged strong— stirred, but not shaken. What would you say were the key highlights?
I think 2020 by all intents and purpose, was a challenging year. It was unprecedented in the sense that no one would have predicted the way it turned out to be. The health and economic impact of Covid-19, in Uganda and all over the world has been and continues to be unmatched. 2020 was filled with a lot of uncertainty. True, we always make plans, budgets and strategies for a certain level of uncertainty, but not to the extent that we saw in 2020.
For us as Absa Uganda, the first major highlight is the ability to survive it. When the pandemic started, the most important thing was how to protect our staff? Followed by, how do we protect our customers? Next was, how to continue running a sustainable business? Those were the most important things- taking care of our staff, then customers and catering to the survival of the business.
Our resilience aside, the fact that we continued to serve our customers and support them through the difficult times with measures such as credit relief with guidance from the Central Bank, was quite a significant success.
Additionally, the fact that we were able to deliver a profit, obviously not to pre-COVID levels, despite a tough 2020, was another achievement worth being proud of.
What are some of the key moves made by Absa that explain this performance? And what were some of the key lessons learnt in 2020?
One of the biggest lessons from 2020 is obviously around uncertainty. Uncertainty has become a certainty now! Change is a constant and as businesses and individuals, we need to be agile, resilient, and responsive to the changing environment. Change is a constant- we need to anticipate, plan and provision for it. Secondly and relatedly is innovation. 2020 put pressure on every organization to evolve and adapt to new ways of servicing customers, a new model of the route to market. So, as an organization, there must always be a pipeline of innovations ready for deployment both for good times and tough times.
If you recall, the first three months of the lockdown, only essential services could operate, and yes, banking was one of those services, that were open, but many of our customers were not able to move freely. So, our operations and how we served our customers had to be reconsidered to take the banking services to where the customers were.
We refreshed our internet and mobile banking platforms with greater functionalities; introduced contactless Visa debit cards as well as introduced Novo FX, a mobile app that facilitates affordable and fast cross-border payments. We launched Chat Banking (Abby), the next phase in our conversational journey, enabling customers to make payments, buy airtime and check their balance via WhatsApp. We also introduced the first-ever trade finance portal enabling our customers to apply online for loan facilities, reducing the need to come to the bank.
From a humanitarian perspective, I think the value that we placed on life was a key learning that came through in 2020. Whereas health was not a big deal and more often taken for granted, following the onset of Covid-19, waking up alive and anxiety about staying alive became so important. From a human point of view, transcending beyond business, the value that we attached to life as humanity became more pronounced than ever before.
Given the challenges above, from a strategic perspective, it meant that we needed to rethink our strategy and the risks that are attached to the execution of that strategy. We had to also reevaluate the original risk assumptions. One of the key things that underpin our strategy is service, so we had to rethink, how we were going to serve our customers in a more efficient and user-friendly manner going forward. One of the things that we were already driving, but became more pronounced during the pandemic, was around how we used digital platforms. Moving forward, we are now looking at how to continue to improve the customer experience as well as increase the rate of digital adoption and utilization and the way we transact with the customer- customers are now more discerning, they’re more demanding, they’re looking for efficiency, they’re looking for solutions that address their daily needs.
True, from a supply perspective, we’ve seen a lot of digital deployments made by Absa, but from the demand and uptake perspective, how is the market warming up to the digital channels? It has been a mixed reaction.
Some discerning customers want convenience, speed and are pressed for time. These are usually the personal and retail customer, who want an account to keep their money, a solution to make payments for utilities, insurance, education, and things like that. So, if this can be addressed digitally, as we have done, then their need to walk into the branch reduces and continues to reduce as they discover more things that they can do with our digital suite of solutions.
But if you travel, outside Kampala, there is still that customer that has the thrill of walking into the branch and speaking to the branch manager daily. There are still customers that demand that face-to-face experience. And these are usually SME or corporate customers that want to interface, interact with the frontline staff in the business.
The behavior that you see from individuals has evolved. The volume of transactions through the branch is now less than what we typically do using our electronic channels. So, we have seen that migration and that change in customer behavior, especially individuals and retail customers, using electronic channels, other than walking physically into the branch.
We are approaching the half-year of 2021 and given the changing environment and resurgence, how is the year panning out for Absa Bank Uganda?
Looking at the fundamentals on the ground, 2021 is a year of optimism, cautious optimism. When you speak to most business owners or major economic players, they will tell you that full recovery of the economy, to pre-COVID levels, is all predicated on how quickly we roll out the vaccine and then subsequently how quickly the world opens to international trade.
As we speak, last night, I was reading an article about Seychelles, which has one of the highest vaccination rates, but suddenly, the daily rate of infections has shot up. Yes, in certain markets and jurisdictions such as Israel, you’ll see certain levels of overall stability. Uganda is a good example. Uganda has predominantly been stable as far as infections are concerned. Although over the last two weeks, we’ve seen a slight spike in terms of new infections, the recovery rate remains high and the death rate low, which is a good thing. So, if the resilience that the Ugandan measures have shown continue at the rate that they are; if we’re able to vaccinate our people, and contain new infections based on the current SOPs, then I do see opportunities for an accelerated journey to full recovery.
But certain sectors remain stressed because of the measures that have been put in place. It is no secret that sectors like trade and hospitality or tourism, remain subdued and have not recovered much from 2020.
Irene Mwoyogwona: Beyond the Numbers – How Pride Bank's Award-Winning CFO Combines Profitability and Social ImpactBut my cautious optimism is informed by the way we have been able to contain the spread of the pandemic. And we have seen the economy begin to open at least if you go by the purchasing managers index scores. In January 2021, we saw a slight dip below— to about 50% but from February, once we were past the elections and everything normalized, we have seen an uptick, and I think the latest results we saw from a PMI perspective have reached around 57 in April 2021. These are indicators of recovery with certain sectors such as agriculture, wholesale, construction, and manufacturing typically beginning to recover.
As we approach the first half from the Absa perspective, the first four months have been positive. I think we’ve managed to post positive results as a business, and we are maintaining that positive forward momentum in all the businesses that we drive, and we continue to be cautiously optimistic.
As I’ve said, we are not out of the woods yet. I like to say that this is a 12-month year, and until you have run the entire 12 months, you can’t celebrate.
That said, there are good opportunities on the horizon. The signing of the three oil and gas agreements last month presents a wonderful opportunity for our nation of Uganda, and it opens opportunities across the value chain from an upstream perspective, midstream and downstream perspective. As Absa, we are well-positioned and with the requisite products and experience to play at all levels of the value chain as far as oil and gas are concerned. Whether it is the construction of the pipeline, the development of the wells or supporting the large corporates or SMEs that are involved directly and indirectly in the upstream production and or construction of the infrastructure, we have the relevant abilities, people, and expertise as well as the right financial base to play there.
Particularly for Ugandan companies, in business banking or SME sector, we have a lot of interesting solutions for supporting especially those businesses that will be participating in the activities that have been ringfenced for Ugandan companies like transportation, logistics, and the like. So, it’s a fantastic opportunity and we are all looking forward to a point when the big projects begin to kick off and we see activities begin to take off the ground. So, I am quite optimistic from that perspective, but, with caution.
You previously worked in the market such as Zambia and Botswana that have slightly more developed extractives sectors. Given your experience there and what we are doing here in Uganda- especially on local content/national participation, would you say we are on the right track?
One of the critical lessons that I’ve learned when it comes to extractive industries, is that for Uganda to benefit holistically, we need to have clear intent from the onset, in terms of retention of resources, participation of citizens, and how the financial resources from that natural resource are captured and retained within the economy.
One of the things that have intrigued me about the entire process in Uganda, is that from projected investments in terms of capital investment estimated at USD15 to $20 billion, there’s around $5 billion or so that has been ring-fenced to go towards Ugandan companies. That is a positive development.
If you borrow from cases such as Botswana- why they have they done well is because they have 50-50% ownership in terms of shareholding, that is between the government of Botswana and DeBeers. This means that resources have been ringfenced for Batswana.
If there are dividends, profits, then you are confident that those resources will remain in the country for the locals.
Positive strides are being made in terms of intent. The emphasis on local participation in certain sectors and activities which are being preserved for local entrepreneurs, is a positive development.
The retention or application of the resources that Uganda shall earn from oil and gas, in terms of providing social services with resources generated from oil and gas being invested towards health system, infrastructure development such as roads, education, and subsequently how that investment is going to circulate within the economy. Those are some of the learnings I think that I have picked up and from the intent that has been expressed by the government here, to the extent that they execute on those commitments, I do see this presented as a great opportunity for Uganda to benefit from the oil and gas industry.
The Ugandan banking industry is top-heavy with the top 5 banks commanding about 70% of the market share. Given the Covid-19 pressures especially on the smaller banks, would you say there is likely to be some mergers and acquisitions on the horizon? And as Absa, would you warm up to acquiring perhaps a smaller bank?
It’s too soon to tell, to be honest. But I believe, for most of the industry, 2021, is going to be about recovery. However, as Absa, from a capital and liquidity perspective, we are still very strong. At this stage, I think it would be premature for me to either confirm or state that we are going to consider an acquisition or not. I should also add that for such a decision to be made, being part of an international franchise, we’ll have to go through a rigorous process of engagement with the local board, the regional board and you know, the Group board before such a decision has to be made. At this stage, no such decision has been tabled, and no such consideration is on the horizon, but as they say, never say never.
As for the other players, it is up to them and their shareholders to evaluate and determine.
Right now, out there, there is someone out trying to decide on which bank to bank with and they are possibly spoilt for choice. If you were to meet them, to make a pitch for Absa, what would you tell them about Absa?
The key message from Absa and particularly at this moment is that Absa Uganda is open for business. We have and continue to invest in innovation to provide convenience for our customers and increase efficiencies. I think taking 2020 as an example, we invested in several new products on the market- products such as contactless debit cards and Novo FX, online account opening and more.
Absa is here to bring your possibility to life. I can pledge that service and digitization shall remain the focal point of what we do. We intend to deliver a premium experience to all customers that come to bank with Absa.
