Business & Money

Bank of Uganda Warns: High Staff Exits Threaten Stability

The central bank also stressed the need for more collaboration between banks and fintech firms to reduce the “talent drain” by exploring partnerships rather than competing for the same pool of professionals.

Published

4 months ago

October 4, 2024

Charles Wachira

Dr. Michael Atingi-Ego,Deputy Governor, Bank of Uganda: A significant factor driving the recent wave of staff exits is the rapidly expanding fintech sector, which provides employees with growth opportunities, flexibility, and competitive salaries. Fintech companies are not only attracting talent from traditional banks but are also spearheading the digital transformation of Uganda's financial services landscape

: Bank of Uganda warns in its October report that high staff exits are jeopardizing the stability of the nation’s banking sector.

By Charles Wachira

The Bank of Uganda (BoU) has raised alarm over the rising number of staff exits within the banking sector, citing the trend as a potential risk to the industry’s overall stability.

This concern comes amidst a growing wave of resignations, particularly among mid-level and senior management, which the BoU says could negatively impact the operational efficiency, institutional memory, and strategic direction of banks.

Growing Concern Over High Turnover

In a recent report, the central bank pointed out that high employee turnover within Uganda’s banking institutions is creating a challenging environment.

“The frequency of staff departures, especially at critical managerial levels, undermines the continuity of key functions and may expose institutions to operational risks,” said Dr. Michael Atingi-Ego, the Deputy Governor of the Bank of Uganda.

He emphasized that the problem is more pronounced in private banks, which have been grappling with retaining top talent in an increasingly competitive financial landscape.

According to BoU’s data, some institutions have witnessed turnover rates as high as 25% in management roles over the past year, with many employees leaving for opportunities in emerging sectors such as fintech and telecommunications, where salaries and benefits are often more lucrative.

Implications for the Banking Sector

The central bank highlighted several ways in which this trend is disrupting the sector. A loss of institutional memory is one of the biggest concerns.

When experienced staff leave, their knowledge of the bank’s operations, clients, and compliance systems is lost, and replacing that expertise can take time and resources.

“High turnover, especially in compliance and risk management, puts banks at risk of regulatory breaches,” noted Atingi-Ego.

He added that there is a growing concern about the ability of smaller and mid-tier banks to compete with the larger players who have the resources to attract and retain top talent. For example, smaller banks might struggle to maintain the same level of customer service and operational efficiency due to the frequent replacement of experienced employees.

The BoU also indicated that frequent staff changes could lead to instability in customer relationships. In the banking industry, relationships are often built over time, and customers, particularly corporate clients, value stability.

A rapid succession of relationship managers could weaken client trust and loyalty, potentially leading to a loss in revenue.

The Financial Impact

As a result of these exits, some banks have reported increased operational costs.

Recruiting and training new staff, particularly for specialized roles, is an expensive and time-consuming process.

Moreover, many institutions are offering higher salaries and more comprehensive benefits packages in an attempt to attract and retain qualified professionals.

“It’s a competitive job market, and banks are having to increase compensation packages to keep their best people,” said a senior executive at a leading Ugandan bank, who requested anonymity. “This drives up costs for the banks, but we’re left with little choice if we want to maintain quality service.”

However, despite the challenges, there are signs that some banks are trying to adapt.

Some institutions are investing heavily in employee development programs aimed at improving retention.

Others are exploring automation and digital banking platforms as a way to reduce their dependence on human resources for certain functions.

The Role of Fintech in Attracting Talent

One of the major drivers of the current wave of staff exits is the booming fintech sector, which offers employees opportunities for growth, flexibility, and higher pay.

Fintech companies are not only absorbing talent from traditional banks but are also leading the digital transformation of the financial services sector in Uganda.

“The fintech industry is offering more agile working conditions and better incentives, which is why we’re seeing a lot of movement from traditional banks to these new players,” said Paul Bwogi, a senior HR consultant based in Kampala.

He noted that the competition for talent has never been more intense, and banks need to think creatively about how to make themselves more attractive places to work.

BoU’s Recommendations

In light of these challenges, the Bank of Uganda has made several recommendations to stabilize the sector. First, it suggests that banks invest more in long-term employee engagement strategies, focusing on creating a work culture that emphasizes career development and work-life balance.

“Retention needs to be prioritized, and this means focusing not just on salaries, but on the overall work environment,” said Atingi-Ego. “Banks must work harder to build loyalty among their employees, especially those in key operational roles.”

Additionally, BoU has recommended a more comprehensive review of the compensation structures within the banking sector to ensure they remain competitive.

Conclusion

The ongoing staff exits in Uganda’s banking sector pose a real threat to stability, but they also present an opportunity for the industry to evolve.

By addressing the underlying causes of high turnover, banks can not only mitigate the risks but also position themselves to thrive in a more competitive and rapidly changing financial landscape.

However, this will require deliberate strategies focused on employee retention, adaptability, and stronger relationships between traditional banking and the fintech sector. The coming years will be critical in determining how well the sector can adapt to these challenges and continue to support Uganda’s growing economy.

Keywords:Bank of Uganda:Banking sector stability:Staff turnover:Financial institutions

Economic impact

Business & Money

Ethiopia Attracts $53.5 Million in Q1 Investments, Creates 8,700 Jobs

Published

2 months ago

December 2, 2024

Charles Wachira

: Ethiopia attracts $53.5M in Q1 investments, creating 8,700 jobs. Growth driven
by reforms, with a focus on service and manufacturing sectors.

The Addis Ababa Investment Commission (AAIC) announced a promising start to the
2023/24 fiscal year, with 612 investors registering a combined capital of Birr 2.93 billion
($53.5 million) in the first quarter.

This reflects a 13% growth compared to the same period last year, signalling sustained
investor confidence despite economic challenges.

Speaking at a press briefing on November 30, AAIC’s Director of Communication,
Meseret Woldemariam, credited the growth to policy reforms and enhanced investor
facilitation.

“Our efforts to streamline investment processes and resolve bottlenecks are yielding
results. We remain committed to ensuring investors thrive in Addis Ababa,” she said.

SECTORIAL CONTRIBUTIONS

The majority of the newly licensed investors are in the service and manufacturing
sectors. The service sector includes hotels, tourism, and IT ventures, while the manufacturing
investments span electrical products, steel, wood, and textiles.

These investments have generated 8,707 jobs, comprising 770 permanent and 490
temporary positions created by newly licensed entities.

The AAIC has also initiated field monitoring visits to ensure operational readiness. “Our
team works closely with new investors to address challenges promptly, enabling faster
project rollout,” Meseret added.

CHALLENGES AND REFORMS

Investors continue to face hurdles such as foreign currency shortages and workspace
availability. However, the commission highlighted progress due to macroeconomic reforms,
particularly improving foreign currency access.

“We are actively collaborating with the Mayor’s office to address workspace issues
through professional support in rental solutions and operational guidance,” Meseret
explained.

Recent reforms in the National Bank of Ethiopia’s foreign exchange policy have also
been pivotal. In October, the central bank announced a 30% increase in forex allocation to priority sectors, a move welcomed by stakeholders.

EXPANSION PLANS AND PROJECTIONS

The AAIC aims to capitalise on the momentum, targeting Birr 15 billion ($274 million) in
investments by the end of the fiscal year. A new digital investment portal, launched in November, promises to reduce registration times by 40% and improve transparency.

“We are confident these initiatives will not only attract more investors but also deepen
the trust of existing ones,” Meseret concluded.

INVESTOR SENTIMENT

Prominent business leader Ahmed Yusuf, who recently launched a $3 million IT hub in
Addis Ababa, praised the commission’s efforts.

“The improvements in investor services and forex allocation are encouraging. We hope
to see more streamlined processes for licensing and operations,” he remarked.

As Ethiopia seeks to position itself as a regional investment hub, sustained efforts in
addressing investor concerns and enhancing infrastructure will be critical.

Business & Money

Ethiopia Eyes December Debt Restructuring After IMF Review

Published

2 months ago

December 2, 2024

Charles Wachira

: Ethiopia’s December IMF review may unlock long-awaited debt restructuring,
crucial for economic reforms and stalled projects like the Koysha Hydroelectric
Dam.

Ethiopia’s much-anticipated debt restructuring prospects could gain clarity this
December, as the country awaits the second review under its four-year International
Monetary Fund (IMF) program.

The Extended Credit Facility (ECF), launched in August 2023, remains central to
Ethiopia’s economic reform and debt relief efforts.

Progress Toward Debt Treatment

Last week, Ethiopian authorities reached a staff-level agreement with the IMF tied to the
second review. A comprehensive report on this review is set for release in December, a month many stakeholders, including the National Bank of Ethiopia (NBE), view as pivotal for
advancing debt treatment plans.

“Debt restructuring stands at the centre of our reform agenda. With the report’s release,
we expect rescheduling talks to gain momentum,” said Habtamu Workneh, Director of
External Economic Analysis & International Relations at the NBE.

He added that discussions are focusing primarily on extending maturity dates for Ethiopia’s debts.

IMF Support and Engagements with Creditors

The IMF has provided Ethiopia with USD 2.5 billion under its current fiscal program,
offering critical support to the country’s macroeconomic stabilisation efforts.
In parallel, Ethiopian authorities have engaged with Eurobond holders and the Official
Creditors Committee (OCC).

A debt restructuring proposal was submitted to Eurobond holders in July 2024, following
key discussions in December 2023 and May 2024.

Additionally, a global investor update held on October 1, 2024, highlighted the nation’s
ongoing economic challenges and progress in creditor negotiations.

Shifting Debt Landscape

The government has reported improvements in its debt profile. Planning and Development Minister Fitsum Assefa (PhD) announced that Ethiopia had ceased relying on commercial loans and direct borrowing from the central bank.

She noted a significant drop in the external debt-to-GDP ratio to 13.7 per cent, though
the IMF’s Debt Sustainability Analysis, published in July 2024, pegged the ratio at 18
per cent as of June 2023.

External debt accounts for 45 per cent of Ethiopia’s total public and publicly guaranteed
debt, the report stated.

Financing Challenges Persist

Despite these reforms, Ethiopia’s financing challenges remain acute.
The government is seeking nearly USD 1 billion to complete the Koysha Hydroelectric
Dam project, which has stalled at two-thirds completion due to funding shortfalls.

The project is a critical component of Ethiopia’s development strategy, but its delays
underscore the broader fiscal pressures the country faces.

Expert Views on Economic Outlook

While Ethiopian officials are optimistic about the December review as a turning point,
analysts caution that real progress hinges on creditor consensus and the government’s
ability to implement reforms.

Critics have also raised concerns about inflated GDP growth figures, which they argue
may distort Ethiopia’s true debt sustainability.

Looking Ahead

The IMF review, coupled with Ethiopia’s active engagement with creditors, could mark a
a significant step forward in its quest for debt relief.

December will likely be a defining month for the country’s economic future, with broader
implications for its ability to attract investment and complete critical infrastructure
projects.

Business & Money

KCB Group Surpasses Equity with US$ 342.31 Million Nine-Month Profit

Published

2 months ago

November 21, 2024

Charles Wachira

: KCB Group reports Sh44.5B ( US$ 342.31) nine-month profit, outpacing
Equity Bank. Learn about its 49% growth, challenges, and stock performance this
year.

KCB Group Plc has outperformed Equity Bank to cement its position as Kenya’s leading
lender, posting a net profit of Sh44.5 billion for the nine months ending September

This represents a 49% year-on-year growth, surpassing Equity Bank’s Sh37.5
billion profit during the same period.

Profit Growth Driven by Core Business Performance

The remarkable profit growth was fueled by higher earnings from both interest and non-
interest income streams. KCB’s diverse revenue base has been pivotal in maintaining
its dominance in the competitive banking sector.

Non-Performing Loans a Key Concern

Despite the impressive profit growth, KCB’s non-performing loan (NPL) ratio rose to
18.5%, compared to 16.5% last year. This increase highlights persistent challenges in
managing credit risk, with Chief Financial Officer Lawrence Kimathi acknowledging it as
a “pain point” for the bank.

KCB Stock Outshines Peers on NSE

KCB’s strong financial performance has translated into exceptional stock market results.
The bank’s stock has risen 78.8% year-to-date, making it the best-performing banking
stock on the Nairobi Securities Exchange (NSE).

Plans to Sell National Bank of Kenya

Earlier this year, KCB announced plans to sell its struggling subsidiary, National Bank of
Kenya (NBK), to Nigeria’s Access Bank. While Nigerian regulators have approved the
deal, it is still awaiting clearance from Kenya’s Central Bank. The sale aims to
streamline KCB’s operations and address losses at NBK.

CEO Paul Russo Optimistic About Year-End Performance

“The journey has not been without its hurdles, but our ability to walk alongside our
customers has driven our success,” said KCB CEO Paul Russo. He expressed

confidence in closing the year on a high note, leveraging improving economic conditions
across the region.