The Central Bank of Kenya has cleared the last big regulatory hurdle standing in front of Nedbank's Kenyan purchase. It approved the acquisition of up to 66% of NCBA Group on 28 August, under section 13(4) of the Banking Act, and published the decision on Monday. Nedbank told the JSE the same morning that most of the approvals it needs are now in hand.
What it is buying is a tier-one Nairobi lender with 122 branches, banking subsidiaries in Uganda, Tanzania and Rwanda and a joint venture in Cote d'Ivoire. NCBA was formed in 2019 out of the merger of NIC Group and Commercial Bank of Africa, and serves more than 60 million customers. The price was struck at about R13.9 billion in January, structured as 80% new Nedbank shares and 20% cash.
The rails belong to somebody else
NCBA's most striking business is one it does not own outright. Roughly a third of its pre-tax profit last year came from digital lending, through Fuliza and M-Shwari, on Business Daily Africa's figures. Both products run on Safaricom's M-Pesa infrastructure rather than anything NCBA built. Fuliza alone has 33.4 million users and has lent out KES 2.9 trillion since it launched in 2019.
What happened the last time
South African banks have spent most of the past decade getting out of the rest of the continent, and Nedbank was one of them. It has bought African growth before and it went badly. It paid $500 million for 21.2% of the Togo-based Ecobank Transnational, and sold that stake in December for $100 million.
Business Day reported that the decade in between produced R400 million in dividends against R6.9 billion of unrealised losses and a $293 million impairment. A Nedbank spokesperson told the paper that material conditions were completely different when the original decision was made, pointing to the outlook for West Africa, and Nigeria in particular, at the time.
The structure is different now, and that is the argument. Nedbank is taking control rather than a minority position it cannot direct. NCBA keeps its board, its brand, its local management and its Nairobi listing, and the other 34% carries on trading there. Nedbank runs only a representative office in East Africa, so there is nothing to merge and nobody to integrate.
Shareholders holding 79.90% of NCBA accepted the offer when it closed in July, and Nedbank turned down 228.99 million excess shares to hold itself at exactly 66%. The outstanding approvals are expected towards the end of the third quarter, which leaves roughly a month.
