The sale of Société Générale Côte d’Ivoire (SGCI) poses significant challenges, primarily due to its strategic position in a high-growth economy.
The French banking giant Société Générale, currently engaged in a program to scale down its operations in Africa, faces critical decisions concerning the sale of its Ivorian subsidiary.
Beyond the political stakes and SGCI’s dominant position in the West African Economic and Monetary Union (UEMOA), the valuation of the subsidiary considerably narrows the pool of potential buyers.
Contrasts with Other Markets: The Ivorian Complexity
Unlike the situation in Morocco, where Société Générale successfully divested its subsidiary to the Saham Group in a mature banking market, the context in sub-Saharan Africa presents a different scenario.
While solutions were found for smaller subsidiaries in countries like the Republic of Congo, Chad, Mozambique, Benin, and Togo, the situation in Côte d’Ivoire is proving to be more intricate.
Valued at approximately 637 billion CFA francs (about $1.02 billion) on the stock market, SGCI is estimated to have a growth potential of 32%, according to some analysts.
Its price-to-earnings ratio indicates a potential for upward movement on the Abidjan Regional Stock Exchange (BRVM). This suggests that when determining the sale price, the possibility of capital gains will be factored in, which could drive up the selling price.
SGCI’s Financial Performance: A Beacon of Growth
SGCI’s audited financial performance in 2023 is remarkable, with net profit increasing by 30.1%, surpassing its five-year average growth rate of 16%.
According to data reviewed by Ecofin Agency, several indicators position SGCI ahead of its international peers.
The 26.7% return on equity in 2023, coupled with a reduction in debt, reflects effective management. Additionally, SGCI has consistently increased its dividends since 2018, enhancing its appeal to investors.
The High Stakes of Selling in a Promising Economy
The divestiture of SGCI remains challenging, especially given its presence in a high-potential economy. Côte d’Ivoire, the world’s largest cocoa producer and an emerging player in oil, gas, and gold, offers some of the highest growth prospects in sub-Saharan Africa.
One strong hypothesis is that a solution may emerge from South Africa. Several South African banking groups are eyeing Francophone West Africa, and in this context, Ecobank, whose largest shareholder is the South African Nedbank, could be a serious case study.
Conclusion
The sale of SGCI is not just a financial transaction but a strategic move that requires careful consideration of various factors, including market potential, political implications, and the subsidiary’s valuation.
As Société Générale navigates these complexities, the eventual outcome will be closely watched by stakeholders both within and outside Africa.