China’s commodities needs ‘will stay strong’

CHINA’s economy might be slowing but its demand for Africa’s commodities will continue, offering opportunities to banks on the continent.

The best prospects are in providing financial services to facilitate development in oil and gas, mining, and power and infrastructure, according to Standard Bank corporate and investment banking CEO David Munro.

Some economists have warned a slowdown in China’s economy and the subsequent reduction in its demand for commodities could hit resource-rich Africa hard, but Mr Munro disagrees.

“You are talking about the secondbiggest economy in the world going from a 10% growth rate to a 7% growth rate. It is still growing at an unbelievable rate,” he said yesterday.

China was Africa’s seventh-largest single trade partner in 2001 but is now the largest.

Since the financial crisis in 2008, Standard Bank has changed its strategy of looking to emerging markets for growth to focusing on Africa. The corporate and investment banking unit now earns about a third of its revenue from its operations in the rest of Africa. This strategy should cushion the bank if the US government defaults on its debt and sends the global economy into free fall, Mr Munro said.

African frontier and pre-frontier markets responded slower to global financial shocks than emerging markets, he said. “We have placed our whole strategy where we think we can be competitive in a future world, in a part of the world that is growing and probably more capable of dealing with worldwide financial shocks.”

Mr Munro said financial services can play a role in unlocking the con- tinent’s potential, particularly through facilitating the flow of capital through trade, local and foreign direct investment, and portfolio capital.

Foreign direct investment flows into Africa grew 5% to $50bn last year while globally, foreign direct investment fell 18%. Portfolio inflows have also increased into Africa, particularly Nigeria, as local debt and capital markets have matured. Mr Munro said African eurobond issuances were an important source of capital inflows into Africa, having grown from less than $1bn in 2005 to more than $20bn.