Public office bearers could learn lessons from bankers

Standard Bank’s CEO Sim Tshabalala has been in the news recently after the release of his company’s glowing results for 2023 showing a 27% rise in annual profits.

His salary — R83m last year — gets many on the Left upset as they see it as a gross display of inequality.

Critics ignore the value he creates for shareholders and the employees who are able to hold on to quality jobs.

The banks’ results have an underlying story about South Africa’s economy and politics.

Standard Bank and Old Mutual, for instance, reported glowing returns despite a challenging trading environment at home, having reaped the benefits of growth markets and sectors outside of the economy. Standard Bank has been rewarded for its more than 30-year involvement across Africa, said Radebe Sipamla, senior investment analyst at Mergence Investment Managers.

“They have been growing through acquisition, but also organically. It has taken a long time to get where they are, resulting in these numbers.”

Patrice Rassou, chief investment officer at Ashburton Investments, said: “What’s interesting is that for Standard Bank and Absa, corporate investment banking grew massively, mainly from the rest of Africa. South African revenue was slightly down.”

Standard Bank is Africa’s biggest lender by assets and reported 27% earnings growth of R43bn in December 2023.

Absa was bought by British bank Barclays’ retail business in Africa, and Nedbank has a partnership with Ecobank, allowing the companies to spread from retail banking services to corporate and investment banking.

Absa is driving to brand itself as a pan-African bank, looking to pick up the market left by Barclays when it cut its exposure to Africa in 2017.

“[South African financial institutions] are growing in the rest of Africa at a substantially higher rate than in South Africa,” said Rassou. “It shows you South Africa is going backwards.”

However, Daan Steenkamp, CEO of Codera Analytics, said South African banks were generally profitable and on solid operational footing, allowing them to explore opportunities further afield. “South African banks have a higher return on equity compared with other economies,” he said.

South African banks easily achieve return on equity of 14% on average.

The country’s second-biggest insurer, Old Mutual — at group level — reported a headline earnings per share jump of 28% for the year ended December 31. It saw profits rise by 74% in Africa from 12 countries besides South Africa, according to Rassou. Old Mutual has a strong presence in Southern Africa and relies on local management, whose expertise helps it navigate environments that would otherwise be complex for “suitcase bankers”, said Rassou. He said Sanlam, the largest non-banking financial services group in Africa, also reported a 25% rise in profit, boosted by its partnership with Egypt’s Allianz in 27 markets on the continent.

However, South African corporates have often struggled in the pan-African market due to harsh trading conditions, while political and currency level uncertainty often hurt cross-border incomes. Banks were better at managing their continent-wide strategy compared with companies from other sectors. Some South African companies such as Shoprite, a food retailer, have struggled in their foray into the rest of the continent, he said.

“You do need to have operations on the ground and a footprint that allows you to grow.”

Bank CEOs like Tshabalala tend to be bullish about South Africa’s economic prospects. I hope they are not disheartened by the fact that their growth is increasingly coming from outside.

However, the smarts and resilience of the banking sector could provide a lesson or two for those in public office.

Speaking of bankers, Julius Malema thinks Floyd Shivambu is fit to be South Africa’s finance minister. Well, Shivambu is accused of once making a run on a bank, VBS, which he denies.

Malema knows a coalition between his EFF and the ANC is a theoretical possibility, although I think it’s unlikely. Shivambu is not likely to be our finance minister, and the ANC would be foolish to negotiate itself out of controlling the finance ministry.