A better banking environment in Angola

Angola

Luís Gonçalves, president of the executive commission of Banco de Fomento Angola (BFA), talks to The Energy Year about the impacts of the ongoing reform of Angola’s exchange rate regime and investment opportunities in the local market. BFA is a universal credit bank providing services in Angola to both corporate and individual clients.

This interview is featured in The Energy Angola 2021.

How has the new foreign currency policy affected the relationship between banks and oil operators?
Oil companies were selling US dollars and other currency to the bank even before the recent change the BNA [National Bank of Angola] implemented in the foreign exchange markets. This change allowed these kinds of companies to sell directly to more banks and made the market more competitive. Before, the market was concentrated in a small group of banks. As a result, the amount of foreign currency we are able to buy is less than in the past.
The oil sector demands a lot of money. These companies need dollars or euros because they make payments outside of Angola. If the Angolan banking sector had a lot of difficulty in accessing foreign markets, it would be impossible to be involved in the oil sector in this way. So to secure our presence in this sector, we need to try to involve foreign partners.
The BNA is really pushing to have some equivalence to the European system in the next few years, and there is a programme under way to make our system more compatible with the European markets. This could provide additional access abroad, which could help. Without access to foreign markets, it would be very difficult.
The Angolan banking sector is only involved in the oil industry in terms of accounts. International transfers and letters of credit are the main products that banks in the system offer to clients. We do not provide money to that market. We do not have loans directly linked to new exploration, for example. The loans we have in the sector are more related to companies that provide services to the main contractors, but we are not involved in financing the main contractor.
I think we could have some opportunities in financing with, for example, the refinery project in Cabinda. The banking sector has to evolve. This could become a new revenue opportunity for banks.

What impact has the government’s ongoing reform of the exchange rate regime had on the banking sector?
The reforms that the BNA has been trying to implement are good. Banks in Angola don’t have access to the US dollar market, mainly because people feel we are not compliant with best practices terms or we do not have a good asset quality basis. The BNA understands that we need to make our banking system more robust and more compliant with international rules and best practices. In the near future, we may see some consolidation (M&As) since it may be difficult for smaller banks to achieve a higher rating or a good level of asset quality.
From our asset quality evaluation, one can understand that BFA does not need to implement anything new. This is one of the reasons that we’ve been doing well during the pandemic. We have always tried to achieve very high standards, including good loans analysis, very good anti-money laundering policies, very good risk management policies and good governance policies.
We feel that we have a very solid balance sheet and most of our assets are what we consider good assets. In terms of the non-performing loans environment, I believe the market average is above 30%. Our numbers are less than 10%. We are on a completely different page. We try not to be as aggressive in giving loans to clients. BFA has very robust loan policies, and we try to keep the loans under control.
But we also understand that we, as a country, need to achieve a better environment with better control of our finances, and try to make things good for companies – including BFA – because it will be very difficult to achieve a better investor rate if the country does not perform better.

What lessons did BFA learn during the Covid-19 pandemic?
The Covid pandemic has created a lot of challenges for us. Right now, we have almost 300 people who are working at home or not working because we have had to organise our services to try to keep our people and clients safe. At the same time, we understand that we need to keep working and serving our clients.
That is why implementing the digital programme is our main objective for the next two years. We still need to maintain our governance model and remain compliant with the rules. We can say that 2020 was not a good year – there were a lot of issues – but we were able to manage the moment very well.
We think that next year will also be a challenge, and we are preparing the bank to face the uncertainties we anticipate. But we truly believe BFA will continue along this path and will continue to be one of the best banks in Angola. We don’t think we will lose our leading position in the Angolan banking system.

What role does digitalisation play in BFA’s strategy for capturing new business?
In Angola, we are still at the beginning of the digitalisation process. BFA started its digitalisation department in 2018, and we expect that in the next one to two years we will be more digitalised. I cannot say that we will be fully digitalised, but more than 70% of our operations will be.
In 2019, we achieved the goal of 2 million clients. This year, we want to add another 100,000 new clients to that mark. What we are doing has really transformed the bank. Most of our clients are individuals and small businesses. Our digital transformation programme will try to gain more of these kinds of clients.
Right now, most of our operations depend on the clients going to the branches in person. We cannot open an account digitally, for example. Starting in 2021, we will be able to provide that kind of service to our clients. We are already in the process of transforming the bank to make it more agile, to keep the business growing – even while we are facing a downgrade in our economic situation.

What investment opportunities does the local market present?
The programme the government has implemented to divest state companies, for example, is a new business emerging right now. The bank is looking for opportunities in this field to take a share of these markets. We are preparing to be a leader in this field as well.
We are already the biggest player in the capital markets in Angola. Right now, it is mostly government debt, but next year we could see some corporate business in this field. The government still really wants to have IPOs next year because they have a few companies to try that with. However, I am not sure if that will be possible. It is a new market, and I don’t think we can see an IPO in one year.
We need foreign investment in Angola. Our economy is very small, and it will not be possible for us to significantly grow our economy alone. Allowing foreign investment to come to Angola under a much better investment law has been a step forward. However, we have not seen a lot of improvement in foreign investment. This might be because the global economic situation is not so great right now.
With regard to BFA, we will keep helping the country to develop, and we are always open to new opportunities.

What can be expected from the Angolan economy in 2021?
I think we can achieve a small increase in the GDP if the oil price stays above USD 40. Below that price, I think it would be very hard for our country to achieve even a 0% change in the GDP. In 2021, if we are very optimistic, we will no longer be in the middle of the storm.
Consolidation is very important for us – working towards a smaller government, keeping the fiscal situation under control and making the right investments the country needs. The government is too big for the kind of economy we have. A large amount of the liquidity we have in the market is taken by government necessity. We really need to keep pushing for the diversification of our economy.

What are BFA’s mid-term objectives?
It is our goal to maintain our good asset quality, and keep the bank aggressive in opening new accounts and finding new business and new opportunities.
The first goal is to complete our digitalisation programme. We think this is the only thing that will allow us to keep growing in terms of our number of clients and transactions. For us, this programme is very important. Our focus for now is to make the bank more digital, which will help us achieve more clients and will help our clients make contact with the bank without having to come into a branch.
Many of our clients are small businesses and individuals with small wages. These kinds of clients cost the bank a lot; they make small transactions, and the BNA does not allow us to charge these types of clients fees for having an account, a debit card and so on. This kind of model is very costly, and we need to transform. The only way we can maximise the value of these kinds of clients is by using the digital platform.

Read our latest insights on:

• Angola
• Ghana