It has been two years since Dangote Cement came to the scene of the country’s cement industry. Instantly, the products of this factory dominated the market in four corners of the country. The company owned by a Nigerian multi-billionaire Aliko Dangote has become a pioneer in delivering its products to the gates of its customers using 180 “low bed” trucks with a capacity of carrying 400 quintals. It invested a total of 450 million dollars to join the cement industry in the country.
Until Dangote came into the scene, Messebo Cement Factory Plc used to control the northern and northeastern cement markets of the country, and Derba, owned by the Saudi multi-billionaire Mohammed Hussein Al Amoudi, controlled the market in the central Ethiopia. This stayed the case until Dangote joined the market and flooded it with its products at the speed of light.
It was in the presence of these local factories that the new entrant into the market had its lease, investment license and trade license, and registration. They did not give an ear to the awakening alarm of the coming of this giant African business tycoon and they were still daydreaming when their market territory was invaded by the bags that carried an eagle’s logo. It was too late when they woke up.
It constructed a 2.5 metric ton capacity factory and started delivering to its customers, for either big orders in the thousand tonnes, or small orders in tens of quintals, causing a headache for the existent manufacturers in the country.
The same seems to be the fate of the Ethiopian banking industry, which is slumbering waiting for a ‘Dangote’ to come and stir their industry.
The same story follows the movie industry in the country. Before Kana came to the country almost a year back, no matter what the reaction from the audience, Ethiopian movie makers used to make “movies” with the aim of making money – no concern for the quality of production as well as the story.
When Kana came, the movie industry suffered a shock and they even started crying out on media and different platforms about the effects of Kana on them and the country’s culture as the station continued transmitting dramas from Turkey, India and Korea dubbed into Amharic.
The banking industry in the country seems to live in this similar comfort zone without preparing itself for challenges to come if anything happens in the market.
The Ethiopian banking industry is characterized by high profit and high return on investment. The profit of the banks in the country is seen increasing year to year with earning per shares rising along. In the first half year of the 2016/17 fiscal year, the industry total profit increased by 14.6 percent with the total loans and advances growing by 35 percent. The profit growth of the sector is commended by industry experts as “pretty remarkable.”
But, the growing profit of the banks in huge sums has left the banking industry in an eternal comfort zone like that of the cement factories and movie makers.
Apart from ATM installation, software upgrading and putting visions to see themselves among international and African standard banks, there is no much activity seen by the Ethiopian banks to reach that level.
One thing the banking industry players could do is the planting their name and values deep into the public as well as in the international arena. This requires, apart from spying on one another and counting the ATM numbers of neighboring bank, branding oneself.
Branding is both the science and art of positioning oneself in the competitive market with a recognizable image.
Once one of my co-workers told me that, when discussing branding with one of the late entrants in the Ethiopian banking industry, he asked them what the representative offices for different banks are doing in the country. The bankers had no answer for that and they even did not suspect that they might be looking for the market potential in the country. They did not know which banks have representative offices in the country.
“One even was surprised when I told him that Standard Bank has a representative office in the country,” he told me.
Which bank from Ethiopia has a representative office abroad, at least to inspect how others operate and get experiences?
Bank of Abyssinia once had announced that it was working with a consultant to be an international standard bank. Others might consider working with international consultants to develop their services by installing ERP or other technologies, but the banks have to go further.
There needs to be rigorous new products development with increased regulatory lobbying to create a more enabling working environment. Banks also need to work closely, merge if necessary, to strengthen themselves and be ready for competitions to come in the future. Why wait until the egg opens from an external force?
What I have seen from the banks in the country is that, the same as neighborhood residents do, replicating the products one bank brings. Mobile and agent banking were common news.
In the 2015’s Economist Summit held at the Sheraton Addis Hotel in September, it was hinted that the banking sector in the country will open up sooner or later and some of the international banks were warming up to get into the sector when allowed.
The force from the government to hugely capitalize the banks is a commendable move, as capital is the major competitive advantage for whoever is operating in the financial sector. But, regulatory measures like allowing foreign nationals of Ethiopian origin to buy shares in the market helps the banks to get international experiences as well as strong capitals.
The banks also have to be more creative in capitalizing themselves – probably diversify investments and using liquid resources wisely.
But what matters most is not what is in the outside, but what’s in the inside – the banks have to get ready by themselves for competition.
The coming of one European American, even African, bank will bring a “Dangote catastrophe” with it for the slumbering banks in the country.
Waking up soon is the solution rather than stumbling when the time comes like the cement factories in the country running to catch up with Dangote.
Two weeks ago, a landslide in the Repi area of Addis Abeba, commonly kn...
The health sector has always been an issue that has long concerned the...
There could perhaps be no political party in the wo...
In today's growing market place, many businesses are trying to make pro...
Uncertainty surrounding one of President Barack Obama’s signature...
There are some studies which suggest the primary reason for the creatio...
It has been almost six months since the announcement of the state of em...