According to the World Bank’s Doing Business report, Mauritania is one of the world’s most challenging business environments. Africa-focused private equity group, Emerging Capital Partners (ECP), however, chose to rather focus on the North African country’s potential when it invested in Mauritania’s BACIM Bank. How we made it in Africa asked Ferdinand Ngon, managing director at ECP, about the investment and Mauritania’s business environment in general.
Why did ECP initially decide to invest in Mauritania’s banking sector?
ECP decided to invest US$15.9 million in BACIM bank, the seventh largest banking group in Mauritania, in April 2008 because we recognised the opportunity for growth posed by the Mauritanian banking sector. It showed, and continues to show, solid macroeconomic fundamentals, an emerging consumer market, and a growing corporate sector. BACIM bank in particular stood out as having a sound track record and a reputation for developing innovative Islamic products – such as Mourabaha or housing savings products – for Mauritania. Combined with Financial Bank’s management control (since June 2009), we want to contribute to the deepening of the financial services industry of the country were demand exceeds supply by far.
How developed is Mauritania’s banking and financial services sector?
Mauritania’s financial system includes eleven retail and commercial banks, most of which began as joint ventures between the state and foreign or domestic investors, and were progressively privatised. As of December 2010, the eleven banks had aggregate assets of $1.2 billion and managed approximately 173,000 bank accounts, making Mauritania’s banking penetration rate a mere 4.2%. This is one of the lowest across all of Africa and particularly in the surrounding Maghreb countries, where banking penetration rates are around 50%. However, bank deposits have recently registered an annual growth rate of 11%, and the arrival of new international players reflects the greater attractiveness of the sector.
What are some of the largest challenges facing the Mauritanian economy?
Some of the largest challenges currently facing Mauritania are the level and quality of physical infrastructure, which must be improved dramatically; a certain lack of public service efficiencies; and an underequipped financial sector to support economic growth. In some cases, it is these challenges that pose the best opportunities for private equity investment. A good example is ECP’s investment through the Moroccan Infrastructure Fund in Almes, the holding company of Entreprise Marocaine de Travaux (EMT), which is a construction company specialising in public works infrastructure projects such as dams, levees and airports across Morocco, Libya and Mauritania.
Which sectors of Mauritania’s economy hold the most potential for further investment?
The World Bank’s Doing Business report ranks Mauritania in 165th position (out of a total of 183 economies) for ease of doing business. Is this a true reflection of the situation on the ground?
In spite of the political will to change, and although we see can some improvements on the ground, doing business in Mauritania remains rather challenging if compared to other African economies with similar income levels. It is essential, when investing in the region, to have an on-the-ground presence with the ability to recognise the challenges present there.