In October 2007, the world’s largest bank, the Industrial and Commercial Bank of China (ICBC) bought a 20% stake in Africa’s largest bank, Standard Bank, for R36.7bn ($5.24bn). It was the largest ever investment by a Chinese company and the biggest foreign direct investment ever made into Africa.
The deal reflected a wider trend across Africa that has seen foreign direct investment flows soar over the past decade. The emerging economic powerhouses of Russia, India and, in particular, China are pouring billions into a continent rich with resources and with vast potential.
For Clive Tasker, chief executive of Standard Bank Africa, the journey is just beginning. Apart from the obvious and welcome injection of capital into Standard Bank, Mr Tasker believes that the relationship with ICBC will be mutually beneficial.
He says that the banks are working together on a number of cross-organisational work streams both in Johannesburg and Beijing “to identify and drive business opportunities”.
Strategic vision
Mr Tasker believes that in terms of strategic vision, Standard Bank and ICBC are very closely aligned but admits that there are challenges ahead from a cultural perspective.
“Certainly there are difficulties – not least in terms of the language and communication difficulties – and I think we will have to spend a bit of time working on that, but we are looking forward to those challenges and they are not insurmountable.”
Shifting trends
Mr Tasker believes that this latest wave of investment into Africa is different to previous attempts by foreign governments to harness the continent’s vast potential.
He says that the old style ‘hit-and-run’ attitude towards Africa, whereby countries came in took what they needed and left, without necessarily benefiting ordinary Africans, has disappeared. “I am not sure if [that attitude] is going to be sustainable into the future,” he says. “The way in which investors construct their interest and investments and activities in Africa is going to be a competitive issue.”
These days, when dealing with an African government or commercial bank, foreign investors will need to demonstrate the degree to which they are going to leave some residual benefit, according to Mr Tasker. He says: “Investors have to take into account that they are not the only player in town these days, and ask themselves: how do we amend our value proposition to become more palatable to the owners of the resource?”
Vast potential
Standard Bank’s pan-African vision was demonstrated last year when it purchased CFC Bank in Kenya and IBTC Chartered Bank in Nigeria. Those decisions were driven by a desire to tap into Africa’s expanding middle class.
“Both were associated with an expansion of retail or personal and business banking activity,” says Mr Tasker. “We have seen and continue to see very pleasing growth [in these activities] across the continent.
“As you see the population migrate up the consumer value chain, the potential for growth... is huge. The number of un-banked individuals in Africa is disproportionately large so there is big potential to bank those individuals.”
Looking ahead, Mr Tasker says that myriad obstacles could stand in the way of the African growth story, “not the least of which sometimes too much reliance on donor funding as opposed to straight commercially driven investment decisions”. But on the whole, he is positive. “We need to move away from the mindset that says that Africa is a ‘basket case’ because for a number of fundamental reasons it isn’t and it shouldn’t be seen as such... there is a harder commercial reality that will be globally competitive,” he says.
The appetite for African risk will continue to increase, according to Mr Tasker, who points out that average gross domestic product growth across Africa is forecast to be more than 6% in 2008 for the fifth year in a row. “There are really exciting high-volume, high-growth opportunities in some countries,” he says. “A lot of it will be dependent on high resource prices and high oil and gas prices, but in the medium term I don’t see that abating.”
