Thursday, October 1, 2009

Finance: Africa's banking leaders go global

Written by Nicholas Norbrook - Monday, 21 September 2009

The Africa Report's exclusive analysis of the Top 200 Banks in Africa 2009 is on sale now in our October-November edition, with regional analysis of banks across the continent. Plus a look at how Africa's leading banks are starting to spread their wings beyond the continent.

African banks go global

The small, neat office in a huge office block in central Beijing is dwarfed by those of the Chinese corporate titans surrounding it on every floor. It belongs to Standard Bank, the first African bank to own a banking licence in China. A small bar is screened from a meeting room by sliding doors. For Craig Bond, the architect of Standard Bank’s expansion in Africa, and now in charge of the company’s China operation, this room is critical. “The Chinese don’t do deals like Western businessmen. Connecting with people is important – sitting down, having meals together, building relationships. It’s more of an African way of doing things.”

Standard Bank Group dominates Africa. Sitting on top of our list of Africa’s Top 200 Banks (see page 99), it has slowly pushed its reach into the rest of the continent and is present in 17 African countries. Big deals have followed – lead arranger, underwriter and largest lender for the 30-year Lekki toll road concession in Nigeria, the Mozambican gas pipeline to South Africa and the Rabai power plant in Kenya. Other South African banks have followed clients like MTN, Anglo American, Sasol and Shoprite into the rest of the continent. In every sector, South African companies have taken the plunge and have brought their bankers with them.

But the 2008 sale of 20% of Standard Bank to the Industrial and Commercial Bank of China (ICBC), 70% owned by the Chinese government, was the next step in a race that has seen African banks try to hoist themselves out of the narrow confines of a continent that does not do business with itself and into the warm expanding tides of South-South trade. “The South African economy was running out of steam,” says Bond. “That’s why we wanted a BRIC focus” – in reference to the rapidly growing economies of Brazil, Russia, India and China tapped up by Goldman Sachs. Following the trend, Standard now has operations in Brazil, Argentina and Turkey, amongst other countries.

The business logic is irresistible, driven by a sense that the Africa-Asia relationship is changing. The big deals for resources, including oil, between African and Asian governments will eventually be followed by more multi-faceted relationships at the corporate level. An agro-processor in India will look to Mozambique to provide fresh fruit, a cassava producer in Nigeria will sell in bulk to an animal feed manufacturer in China, Korean plastics companies will look to import petroleum products from South Africa and a Ugandan company will hire a Chinese one to manage their telecoms network. Such relationships will grow fast over the next decade – and they will require financing.

India, where corporate life is more developed than in state-dominated China, is also a natural destination for African banks looking outside the continent. In May, South Africa’s FirstRand was the first African bank to open an office in India. Indian companies like Essar and ONGC-Videsh are interested in oil, while Reliance and Bharti Airtel are circling Africa’s telecoms operators. It is not just one-way traffic; in July, energy giant Sasol tendered with Indian company Tata Group for an $8bn coal-to-liquids plant in Orissa State, India; not only did they win the contract, they were asked to build another one.