Firmly on the radar
With global growth prospects limited, risk appetite favours Africa
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