Big four trek into Africa

2011-07-23 14:02

South African customers are poised to benefit from alliances local banks have forged with other lenders in Africa, where local peer Standard Bank is one of the dominant players.

Nedbank says its alliance with Ecobank, which covers 35 countries, is giving its South African customers a seamless, Pan-African full-banking service that allows them to transact and finance business deals wherever they are on the continent.

Ecobank mainly covers Middle Africa while Nedbank, the smallest of South Africa’s four major banks, operates in the southern part of the continent.

“We have opened accounts for retail clients as they move between countries where Ecobank and Nedbank have a presence, and we have enabled Nedbank ATMs to accept the Ecobank regional card,” says Graham Dempster, Nedbank’s chief operating officer.

“We continue to pursue initiatives that build the alliance and add value to our clients as they grow and do business within Africa.”

He says Ecobank has helped issue guarantees on behalf of Nedbank clients bidding for local contracts across sub-Saharan Africa, in countries such as Mali, Burundi, Rwanda, Sierra Leone and Tanzania.

The alliance has also given Nedbank’s investment banking arm, Nedbank Capital, a competitive edge in the wholesale banking market, where it is helping finance transactions in sectors like mining, energy, resources and infrastructure.

Growth in these sectors is expected to grow the size of Africa’s economy by nearly 40% over the next five years.

According to Standard Bank, Africa’s collective gross domestic product is expected to increase from last year’s $1,6 trillion to $2,6 trillion in 2015, thanks to an estimated 5,5% annual growth during this five-year period.

This growth will be achieved on the back of an increase in the continent’s total trade from $654 billion in 2009 to about $1,6 trillion in 2015, buoyed largely by strong demand for its resources from countries such as China and India.

This wealth’s allure has not only caught the eye of Nedbank but also Absa, which has formed an alliance rather than build an African footprint.

Absa, the country’s largest lender, has forged a partnership with Barclays Africa, which is owned by British lender Barclays Bank.

Barclays is a majority shareholder in Absa.

The alliance between Absa and Barclays Africa has a 15-million customer base served by 1 600 outlets across the continent.

The partnership will contribute more than 15% to Barclays’ revenue. Early this month Absa CE Maria Ramos took over Barclays Africa’s geographical responsibility.

“Africa is an important growth opportunity for Barclays and Absa. This (alliance) will lead to better products and services for our customers, which in turn will lead to improved performance for our shareholders,” says Ramos.

On the other hand, FirstRand Bank, which owns retail lender First National Bank (FNB), investment bank Rand Merchant Bank, and car financier Wesbank, has a partnership with China Construction Bank to fund large commercial transactions on the continent.

FNB is in the process of starting a retail and commercial banking operation in Tanzania and is pursuing opportunities in oil-rich Angola and Nigeria.
The encroachment of local lenders into markets outside of South Africa and of Western African lenders into Southern Africa is putting pressure on Standard Bank, the continent’s largest bank by assets.

Faced by intensifying competition, it has decided to abandon its strategy of building a strong presence in emerging markets outside of Africa.

“Impacted by the global and economic crisis, many of our operations outside South Africa consume more capital than their current levels of return justify, while the ability of our operations outside Africa to compete effectively has been limited by the growth and increasing sophistication and competitiveness of the financial services sectors in key emerging markets,” says Jacko Maree, Standard Bank’s group CE.

Dempster says Africa is perceived as the new growth frontier and many players from within and outside Africa are exploring growth opportunities.

“We are also seeing players from West Africa expanding their footprint to the east and south of the continent,” he says.

“These are welcome developments as increased competition will ultimately benefit the client.”

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