Bank bats for Africa SMME boom
Standard Bank is on a mission to prop up small, medium and micro enterprises across Africa through its business and commercial banking division as a key component of driving the continent’s integrated economic development.
Africa’s biggest lender by assets launched a charm offensive during its inaugural Africa Unlocked Business and Commercial Banking Conference in Cape Town this week as it seeks to generate half of its total revenue from the rest of Africa. The event included clients of Standard Bank's business and commercial banking division including small business and large firms.
Group chief economist and head of research Goolam Ballim told Business Times the group would provide high-level products and advice to African small businesses that have been neglected by much of the banking sector.
“Many of these firms lack capital and require financial services more sophisticated than they typically receive. Financial institutions tend to offer a more sophisticated set of products for firms and there is often a neglect of product and advisory for SMMEs.
“We want to do two things. We want to ensure our business is not caught between knowing if it is fish or fowl. But we also want to give this part of the business a fuller definition and in turn, give a more wholesome service,” Ballim said.
Standard Bank recognised the potential of African SMMEs, as they comprised the largest share of output in several markets. GDP growth rates in East Africa were hovering between 5% and 7%, making it the single fastest-growing region in the world, Ballim added.
“South Africa has a very deep financial services system generally and a deep financial services market.”
Standard Bank South Africa CEO Lungisa Fuzile told the conference that supporting SMMEs yielded potential for development
through the African Continental Free Trade Area, using the continent’s human capital and natural resources necessary for the global low-carbon energy transition.
“These deposits can generate revenues, create jobs and raise living standards ... They need partnerships among us to realise this. Our continent has a huge infrastructure deficit. Many countries can barely meet their energy needs, if at all. For us, this is a major opportunity,” Fuzile said.
Citing a study by the World Economic Forum, he said Africa could achieve 76% renewable energy by 2040 through its endowments in hydro, solar, and wind power.
“As Africa’s largest bank by assets we stand ready to unleash every capability we have as we partner with you in unlocking the growth potential of our continent ... Not only do we have the largest balance sheet, we also have a footprint in 20 countries on the continent.”
He said Africa needed to be deliberate about integrating SMMEs into the supply chain of various strategic sectors, including
agriculture.
“I implore you to be deliberate about integrating small and medium-sized businesses into your supply chain and foster an enabling environment for entrepreneurship,” he told delegates.
Standard Bank CEO for business and commercial clients Bill Blackie told Business Times the pandemic had affected economies in Africa through high interest rates, slower growth rates in some countries, and elevated inflationary pressures globally.
“Small businesses have smaller capital bases than big global and regional multinationals, so these challenges start to eat into that capital base and create pressure ... our primary focus is to support customers through these tough periods.”
Asked about the potential for intra-Africa trade in local currency rather than the dollar, Ballim said he expected the dominance of the dollar as the reserve currency of the global financial system to shift “slowly then
suddenly”.
“With respect to the dollar, I think I would label it as a case of slowly and suddenly. Many are talking about the end of the dollar. We believe the underlying hegemony is being chipped away but there are still many years of dollar reliance in the global system. It will be a significant element of trade for years to come.”
He said there was great demand for trade in China’s renminbi among African markets because many those countries traded more with China than with their peers.
While the concept of intra-Africa currencies could come to fruition as intra-Africa trade grows, the continent should focus more on removing trade barriers between African markets, Ballim said.
Financial institutions have also been debating the role of currencies in the global financial system. Speaking to delegates at the 2024 Afreximbank annual meeting in the Bahamas recently, former vice-chair of the US Federal Reserve, Roger Ferguson, said the dollar would be the globally preferred reserve currency for a long time despite China’s campaign to supplant it.
“I think the dollar is going to still be the reserve currency of the globe for a number of reasons. One is the vast majority of trade is still denominated in dollars. Two, the US financial market is still the engine of financial behaviours globally.
“And frankly, number three is there is really not an alternative at this stage. The Chinese would like for the renminbi to be more of an international currency, but if that’s going to be the case they will have to make it fully convertible and do a number of other things which they haven’t done, and I think will take quite a while to do.”
His remarks poured cold water on the anticipation of a realignment of the global economic system in favour of China and its allies as US dominance recedes.
Also addressing the Afreximbank meeting, Donald Kaberuka, the chair of SouthBridge Group and former president of the African Development Bank, said he hoped the Pan African Payment and Settlement System (Papss) could allow African economies to trade in their currencies, but that did not necessarily mean doing away with the dollar.
“To think that the dollar will disappear is like saying the English language will disappear. It doesn’t happen like that. But ... other currencies will emerge. The currencies that are not the dollar but as close to the dollar as possible. But I expect the dollar to remain dominant in the future. I say this because something like Papss doesn’t remove the use of the dollar but reduces the demand for the dollar immediately.”
Papss was launched in 2022 after a successful pilot in six West African countries.
As Africa’s largest bank by assets we stand ready to unleash every capability we have as we partner with you in unlocking the growth potential of our continent
Lungisa Fuzile Standard Bank South Africa CEO