Africa, a basket case? Don't believe it for a moment. If you're prepared to confront the unique challenges posed by doing business on the dark continent, Africa's nascent banking industry offers huge opportunities with excellent returns.
In fact, says Stanbic Africa managing director, Sim Tshabalala, the banking industry will play a pivotal role in realising the vision of an African renaissance. As the centre of the payment system in many Africa countries with capital markets still in their baby shoes. Banks play a far more important role in development and carrying out fiscal policies than in developed countries - but globalisation is demanding an innovative approach from a sector better known for its pinstripe suits and conservative approach.
Understanding the different market segments is the key. On one hand, there is a rapidly emerging middle class, with aspirations of owning cars and houses and getting a better education for their children. On the other, there is
a mass of people who either don't trust financial institutions or find them inconvenient.
It is these masses who represent the proverbial pot of gold for retail banks on the continent. A large portion of Africa's money stock is still sitting outside the banking system, so there are genuine opportunities for those institutions that are able to draw that money into the fold.
The answer to Africa's banking conundrum may well lie in simply meeting the basic banking needs of the people in a competitive way. Contributing to the debates on good governance. Striking a balance between reducing poverty and growth.
This may mean a move away from the traditional role of recycling retail deposits to a more balanced retail banking business that offers vehicle finance, personal loans and mortgages.
Africa is proving to be a market with which South African banks are seemingly comfortable. The expansion of corporate customer bases north of the border is a key driver
of local banks' business, with South African corporates currently providing the largest source of foreign direct investment (FDI) in Africa.
This FDI requires both equity and debt finance. Customers then require liquidity, which needs money transmission and staff banking services - and so a bank's footprint is born.
"African economies tend to be bank-driven, not financial market-driven. So there's potential to develop capital markets," says Tshabalala, who believes that being a South African company is generally an advantage when trying to penetrate the African market.
"Many Africans think we're latter-day colonialists, but generally we are regarded as being part of the fabric of Africa, brothers to the extent that we are supplying services that uplift the African people."
Stanbic lists the expansion of its presence in Africa as one of its priorities for 2004. "Our plan is to be regarded as the quintessential African bank," says Tshabalala. He
builds his bank's growth strategy on five pillars: an increased corporate presence, product proliferation, higher market penetration in markets where it's already established, rolling out payment channels, and geographic expansion outside its existing network.
Tshabalala, who is widely tipped as the first black MD of Stanbic's parent company Standard Bank, says the group will grow through acquisition in both its existing and new markets. Further expansion could be through joint ventures and alliances, such as an in-store banking offering with Nairobi Stock Exchange-listed retailer Uchumi. Acquisitions are essential, he believes.
"For example, in Uganda, where we had a small wholesale operation, we bought Uganda Commercial Bank, which we integrated into our existing Stanbic operations," says Tshabalala. "It makes sense to grow organically. We also need to work on distribution."
Stanbic Africa has probably the biggest stake of any banking group on the continent,
targeting 15 - 20 percent headline earnings from Africa in the medium to long term, compared with 8 percent in the 2003 financial year. In the past 15 years, the group has led the pack in expanding its presence on the continent; in 2003, the group's African operations contributed R489 million towards its bottom line. It has the biggest retail footprint of South African banks, but corporate and investment banking remain its major money-spinners.
The bank operates in 22 African countries. It has the biggest branch network of all the SA players, with 214 full service branches/service centres, plus some 220 ATMs. Stanbic wholly owns nine of its African subsidiaries.
Unlike some competitors, Stanbic is no Johnny-come-lately to the hurly-burly of the African banking market. Its relationship with the continent goes back more than a hundred years. Standard Bank's first foray into the rest of Africa occurred in 1894.
In 1987, Standard Chartered pulled out of South
Africa, leaving Standard Bank to re-enter Africa through the Stanbic brand. Although confusing from a brand perspective, Standard Bank has to use "Stanbic" as its retail brand in Africa because it is morally and legally obliged to Standard Chartered not to use the "Standard" name north of South Africa's borders.
Stanbic or not, international service standards are coming to Africa and markets are modernising rapidly. Branches are being upgraded and in most respects Stanbic's product offerings and sales promotions will be similar to those in South Africa.
"Not much is non-replicable in banking. At present all infrastructure, from product development to data processing, is replicated in each country. Our aim is to centralise all operations, leaving only the customer interface localised," says Tshabalala.
One of the perennial stumbling blocks to doing business in Africa is its notoriously poor telecommunication infrastructure. Thankfully, Africa is unhindered by
the bulky legacy systems which weigh down the technology operations of many of its First World cousins. The result is so-called "leap-frogging", in which local banking operations can install the latest technology without having to fret about issues of integration.
This has seen operations like Nile Bank in Uganda and Zimbabwe's Kingdom Bank install IT infrastructures which are the envy of the First World in terms of functionality, service levels and the ability to take products to market faster.
Many believe that mobile solutions provide the ideal answer. Satellite communication is also aiding Africa's leap into the digital age and is enabling several banks to centralise their data processing functions.
"Africa missed the industrial revolution and much of the first wave of the technology revolution. But it is not missing the digital revolution," says Tshabalala.
Once the telecoms problem is solved, African banking offers huge potential for growth.
"Countries that were once at war are flying," says Tshabalala. "Africa's GDP grew by 4.2 percent in 2003 and a country such as Uganda is growing at 6 percent per year. Those are the kind of figures which will drag the continent out of poverty and into the world's economic mainstream."
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