Numerous reports indicate the intention of the State of Senegal to buy Société Générale Sénégal.
This buyout, announced for 268 million euros according to the newspaper Les Echos, or around 175 billion FCFA, is not yet official. It should be remembered that the announcement of the withdrawal by Société Générale from certain African markets is not new. The Group, as part of an asset disposal strategy with the objective of refocusing on other international markets, justifies these departures in a press release as follows:
“Africa is a geographical area with growth potential where the Group has built a historic presence and intends to concentrate its resources on markets where it can position itself among the leading banks, in synergy with the Group’s other businesses and with a critical size allowing a satisfactory and lasting contribution to value creation.”
IN REALITY SOCIÉTÉ GENERALE IS CONCERNED BY THE STEEP COMPETITION FROM NEW PLAYERS
After leaving Congo, Chad, Benin, Burkina Faso, Mozambique and Mauritania, the bank announced its withdrawal from Guinea and Ivory Coast
These withdrawals from the Société Générale du Continent remind me a little of the recent and under pressure from the European Union from the fishing sector in Senegal motivated by a fierce desire of the new authorities to control the country’s fishing resources.
Concerning Société Générale, it is clear that in a banking and financial context marked by strong competition with the arrival of very aggressive new players, the bank has lost market share. The group has also experienced many problems internally in a post-covid context and political instability.
Société Générale has been active in Senegal for several decades, and holds 63.31% of the capital of its Senegalese subsidiary. 35.13% of the shares belong to Senegalese private individuals and a small portion, 1.56%, is owned by the Société Générale de Banques en Côte d’Ivoire (SGBCI), the leading bank in the UEMOA (Economic and Economic Union). West African currency).
Until recently, Société Générale Sénégal posted total assets of 1,391 billion FCFA, or 10.8% of market share in terms of assets on the local market. It occupies second place after the CBAO.
The posture of the new Senegalese authorities is to be welcomed
The strategy of the new Senegalese authorities of wanting to strengthen the national financing system is to be welcomed.
We cannot over the next 5 years envisage carrying out an economic program of more than 18,000 billion FCFA and not think about the financing modalities.
One more Senegalese public bank is appropriate in a Senegalese banking system which currently suffers from several constraints linked in particular to:
1 Control of most banks set up by foreign interests.
2 The mismatch of the financing objectives of these banks (often speculative and short-term) with our priority long-term needs for financing our development.
3 Inappropriate financing conditions (insignificant amounts of financing granted, prohibitive interest rates, excessive guarantees, long file processing times).
4 To a monetary system (FCFA) that is restrictive and crippling for our economy.
Strengthening the endogenous financing system will allow the State of Senegal to strengthen its support tools in favor of SMEs and the informal sector which represent a very small share of financing.
However, whatever the bank to be acquired, Senegal should pay attention to the quality of the bank’s customer portfolio, particularly its degree of claims experience, and accurately assess the impact of ongoing litigation and hidden defects.
In certain operations, it is better not to accept the principle of goodwill (speculative goodwill considered as valuing a future advantage which will result from the repurchase). Western sellers often find through goofwill a way to “make money” in transactions
Recapitalization needs should be carefully identified to avoid unpleasant surprises.
The ideal would be to go for a net asset approach (difference between assets and debts)
Also study the relevant alternatives available to the State of Senegal
Furthermore, as part of the search for better efficiency in a context of a declared desire to place public action around sovereignist values and also in a tense budgetary environment, three alternative options are available to the authorities.
Option 1 The creation of a new bank (LA BANQUE DU SÉNÉGAL) could be studied alongside the possibility of acquiring a bank potentially in difficulty, regardless of its notoriety.
Option 2 Thoroughly restructure the national company La Poste and transform it into a postal bank
This institution is owned by the State of Senegal which certainly has organizational and financial difficulties but which has the advantage of having a large network of agencies at the national level and a large land asset. The State can rely on this postal lever within the framework of regional planning and pole financing policies.
I hope his land assets were not squandered by the former team.
The need for recapitalization is estimated at 174 billion FCFA, almost at the same level as the sale price set by Société Générale. Given a debt of the same amount that the Post Office owes to the State, the latter could just reconvert its debt into shares and not have to disburse cash. The sale of part of the land assets could normally finance the recovery plan.
Option 3 Examine the possibility of financially strengthening the National Economic Development Bank (BNDE) after an in-depth audit which could also extend to the Fongip Guarantee Fund and the Sovereign Strategic Investment Fund (Fonsis). BNDE is 81.8% controlled by the State. If the Société Générale buyout operation ever proves appropriate, it could be done through BNDE.
Also in the dynamic of the excellent cooperative relations between Senegal and Saudi Arabia, it is especially necessary to approach Saudi investors with considerable financial potential and who are seeking to penetrate the sub-Saharan African market.
Positioning the new bank as an Islamic institution could attract significant volumes of capital, particularly Arab capital.
It is useful to remember that no initiative tending to consolidate the financing system can prosper without an in-depth reform of our current monetary system based on the FCFA. The current system considerably hampers our exports, does not promote the appropriate financing of our economies and slows down integration between member countries.
Magaye Gaye
international economist
Former executive of BOAD and FAGACE
