I read the issue of Megabank in one of the online Gambian newspapers with keen interest. I am not sure if the story is true or 100% accurate but I feel compelled to make suggestions that will be in our national interest and the long-term prosperity of Gambians. Even if the facts are inaccurate, this conversation is very relevant regarding Megabank and other potential foreign investments in the country.
The history of Megabank started with the old famous BICI that used to be Senegalese-owned and controlled. I remember a few decades ago when Gambians were complaining about lack of respect for Gambian employees since management control was in the hands of Senegalese expatriates and overall control was exercised from Dakar. These were the days when there were very limited number of banks in the country and of course an average Gambian did not have a bank account and have nothing to do with banking services. Due to labor disputes and successive mismanagement, this bank has been resold or taken over in one form or the other as it changed names to IBC Ltd, PHB Bank, Keystone Bank and Mega Bank. In each of these cases, the bank was taken over by foreign investors including Mauritanians and Nigerians. This Megabank, including its predecessors, is probably one of the oldest banks in the country, save Standard Chartered Bank and probably Trust Bank (with its predecessors Maridien BIAO and Gambia Commercial and Development Bank).
The Central Bank of the Gambia (CBG) needs to be commended for taking bold steps and took over Keystone Bank in 2014 and ensured stability in the banking sector. If this bank was allowed to collapse like Continent Bank did in early 2002, it would have sent shockwaves in the financial sector and destabilize the whole Gambian Economy. That could have been our Bear Stearns/AIG moment! Now that it seems the dust has settled and we are out of the woodwork as Megabank starts making profit under CBG control or supervision, the question now is what do we do next? The current CBG arrangement is supposed to be temporary, primarily meant to protect the bank’s customers so that they do not lose their deposits or experience disruptions in their banking services and most importantly, maintain overall confidence in the banking sector and for that matter in the economy as a whole. A logical answer to the above question will be to find another foreign buyer for the bank since this is going to inject much needed foreign capital into the economy. However, just another foreign buyer taking over megabank may not necessarily be a good solution as we have seen how many times this bank changed hands in the past decade or so. The solution lies in a model similar to the one used to transition Trust Bank Ltd from the collapsed of Meridien BIAO Bank for very good reasons.
Megabank should ultimately be a majority Gambian-owned bank. Foreign investors should be encourage to invest in the new bank as major shareholders but CBG should reserve at least 50% or so of the shares for Gambians, to be sold to Gambians and Gambian institutions and Employee Share Ownership Scheme (ESOP). Government institutions like SSHFC should be encouraged to partner with any potential foreign investor even if it will eventually sell its holdings to the general public in the future. CBG could also sell shares in reasonable bundles to individual Gambians and businesses, both at home and abroad. This approach, rather than a wholesale to a foreign investor who will only be interested in repatriating as much profit as possible from the country, is desirable for the following reasons:
• When Trust Bank (G) limited (TBL) was established, the biggest individual shareholder was a foreigner who brought in much needed foreign capital and expertise. However, this investor was far from being the controlling owner as more than 50% of the ownership of the new bank was held by Gambians and Gambian institutions like SSHFC. In the case of TBL, the entire management remains in the hands of Gambians while the major foreign investor maintained strong relationship and influence over the management that led to eventual success that created wealth and dignity for Gambians. CBG was fully involved in this process and they can use this experience in weaning Megabank.
• By selling some shares/ownership to the general public, we will be encouraging domestic investment and wealth creation. I am sure there are many Gambians home and abroad who will be more than able and happy to invest say D30,000, D60,000 or even a few hundred thousand Dalasis in equity that can potentially pay them dividends as well as capital gains in years to come. We do not have to rely on or allow only a few millionaire Gambians to partner every potential foreign investor. Without proper planning, we will find ourselves dealing with acute income inequality in the next few decades with all its attendant problems.
• The government’s recent pronouncement that it is committed to “reducing domestic borrowing’ and ending “CBG deficit financing” is huge and has a lot of implications. Since government borrows domestically through treasury bills, this will free up a lot of funds that Gambians and institutions throw into safe investment of treasury bills. These surplus funds can be invested in equity stocks not only of Megabank, but also in partnership with potential investors in other strategic areas of the economy. In other words, there are enough funds at the disposal of Gambians both within and outside the Gambia to partner with foreign investors so that we will have stakes and control in our economy. The government’s role has to be to provide the avenue, educate and encourage the population and harness the resources.
• When any nationals and for that matter Gambians have stakes in domestic companies, however small or big these stakes may be, they feel invested in these ventures and assert some level of control and parts of the returns on the businesses stay in the country. Again, the discrimination whether perceived or real by foreign investors is mitigated. If a Senegalese or a Ghanaian buys Megabank, we should not be surprise when they stack top management with their own nationals who are not better than our Gambian professionals. Trust Bank (G) Ltd provides clear empirical evidence to this effect. This did not happened at Trust Bank (G) Ltd because Gambians were invested in the company. This will also mitigate animosity and jealousy, weather perceived or real towards foreign investors who have every right to protect their investments to maximize returns. A classic example is the Chinese investors who invested heavily in mining industry in Zambia and ended up not only bringing in Chinese Management Teams to run these companies but even Chinese labor who do the same job but are paid higher than their Zambians counterparts. This unjust and unfair treatment of the local population resulted in multiple labor disputes which turned violent in many occasions with resultant fatalities.
• With the new-found freedom and confidence in our political, legal and economy slowly returning, government should harness investment from diaspora Gambians. Since it is unrealistic and unwise to expect Gambians abroad to return home in masses with their capital to invest, we should design creative ways to get these monies invested back home. One way is to pull these resources together and invest in productive sectors of our economy. For example someone with $10,000 in Canada may not be able to buy a bank or a hotel in the Gambia by himself but will be happy to buy equity in a business venture. Our collective efforts, maybe through Gambia Investment and Export Promotion Agency (GIEPA), is to use unorthodox and novel ways to get these diaspora Gambian capital home. Individually these funds may be small but when pulled together, they can impact any sector of our economy. I recently got an email from a bank in the Gambia saying that they are reducing their base lending rate from 23% to 18% due to a change in policy rate adopted by CBG. This is very good news for the economy as it means reduction in the cost of borrowing and cost of doing business. What this mean is that CBG is reducing the interest rates it is paying on treasury bills and commercial banks will also have to reduce the interest rates they pay on savings and other deposit accounts. This is an opportune time to encourage and direct funds that are held in treasury bills and savings accounts in the banks towards direct investment in productive sectors of our economy.