Firmly on the radar

With global growth prospects limited, risk ap­petite favours Africa

Finweek English Edition - - MONEYCLINIC -

THREE YEARS AGO United States com­pa­nies had an ap­par­ent al­lergy to in­vest­ment in Africa (“Un­cle Sam doesn’t give a damn”: Fin­week, July 2008) and were con­tent, it seemed, to al­low other coun­tries free range in putting down roots in tempt­ing new mar­kets while they fo­cused on fix­ing their own trou­bles. Any non-US in­vest­ment was fo­cused on the so-called BRICs. Fin­week quoted Bob Ru­bin – for­mer Clin­ton Trea­sury Sec­re­tary and, at the time, chair­man of the Citibank ex­ec­u­tive com­mit­tee, as say­ing: “It’s very im­por­tant for the US to be more in­volved. China is very en­gaged, but Africa isn’t part of the Amer­i­can con­scious­ness – and with­out that there can be no in­ter­est. If we un­der­stood it there would be ap­petite.”

How times have changed. Not nec­es­sar­ily in the un­der­stand­ing, but cer­tainly the ap­petite.

Last month the CEO of the same bank – Vikram Pan­dit – was in Jo­han­nes­burg talk­ing about the group’s Africa strat­egy and how Citibank planned to ex­pand through­out the con­ti­nent. Pan­dit ap­pears set on an or­ganic ap­proach rather than buy­ing scale up­front and is re­al­is­tic about the pace of growth he can ex­pect, point­ing to the dif­fi­cul­ties of set­ting up op­er­a­tions in some of the re­gion’s more in­ac­ces­si­ble but po­ten­tially lu­cra­tive mar­kets.

He’s come to re­alise do­ing busi­ness in Africa isn’t sim­ply a case of drop­ping off “one or two bankers” and ex­pect­ing the job to get done. Hav­ing no doubt stud­ied Bar­clays plc’s Absa strat­egy and ICBC’s ac­qui­si­tion of a 20% stake in Stan­dard Bank, own­er­ship of an ex­ist­ing as­set doesn’t trans­late to au­to­matic re­turns. It was some­thing HSBC ap­peared to re­alise at the 11th hour ahead of its de­ci­sion to aban­don its ex­clu­sive talks with Old Mu­tual over its un­wanted Ned­bank stake.

While for­eign banks snuf­fled at growth op­por­tu­ni­ties and po­ten­tial ac­qui­si­tions, 2010 was also a sig­nif­i­cant year for South African cor­po­rates stak­ing their in­ter­est in grow­ing be­yond the tra­di­tional mar­kets of our im­me­di­ate neigh­bours.

Absa Cap­i­tal CEO Stephen van Coller told Fin­week the group would make greater use of the more recog­nis­able Bar­clays brand in its drive to do more busi­ness in more parts of Africa than it has pre­vi­ously; while Ned­bank and FirstRand – both se­ri­ously un­der­rep­re­sented on the con­ti­nent – have both said they have Africa firmly on their agen­das.

First Na­tional Bank, which has an ex­ist­ing op­er­a­tion in Zam­bia, found it­self in a care­taker role over ri­val Fi­nance Bank re­port­ing to the Cen­tral Bank. FNB ap­pears cur­rently to be the most ac­tive South African fi­nan­cial in­sti­tu­tion in other territories. Those am­bi­tions were spelt out in a Twit­ter mis­sive in De­cem­ber by CEO Michael Jor­daan as hold­ing com­pany FirstRand fur­ther sim­pli­fied its cor­po­rate struc­ture. Jor­daan said: “An­other day, an­other deal. This time sell­ing 45% of OUT­surance to RMBH. We’re now a fo­cused bank­ing group with African am­bi­tions.”

“There’s a very ra­tio­nal, log­i­cal process play­ing it­self out at the moment. For a long time Africa wasn’t on the in­vest­ment map be­cause it was dif­fi­cult and, de­spite the po­ten­tial, growth wasn’t ex­cit­ing enough to com­pen­sate for the chal­lenges,” says Roelof Horne, port­fo­lio man­ager for Africa at In­vestec As­set Man­age­ment. “Growth in the world’s larger economies is go­ing to be medi­ocre for a while. The BRICs are old news: a lot of the di­rect in­vest­ments have been done and there’s more com­pe­ti­tion. Given the progress Africa has been mak­ing over the past 15 years, it’s been un­der­tar­geted – and that makes it in­ter­est­ing.”

It was the prom­ise of African growth that briefly piqued HSBC’s in­ter­est in Ned­bank. HSBC may have balked but the lo­cal bank is still very much on the mar­ket for a for­eign buyer to use as a con­ti­nen­tal spring­board.

In the in­surance sec­tor Lib­erty still hopes to cap­i­talise on the Stan­dard Bank foot­print; while the merger of Mo­men­tum and Metropoli­tan will see the ex­pan­sion of the lat­ter group’s ex­ist­ing busi­nesses in other African coun­tries.

The most sig­nif­i­cant

trans­ac­tion

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