After South Africa’s President Cyril Ramaphosa secured the top spot in his party in December, attention has now turned to decisions his government is expected to make in 2023, the fourth year of his five-year stint.
The bank is “definitely sub-scale” in the region and has “clear intent” to increase its size there, Helmut Engelbrecht, the bank’s CEO for West Africa, tells The Africa Report.
Africa’s largest bank is targeting the region as other banks have reduced their presence or turned away. French bank BNP Paribas has sold off units in Senegal, Côte d’Ivoire, Tunisia, Burkina Faso, Mali and Guinea as part of a strategic move away from sub-Saharan Africa. Standard Chartered has pulled out of African markets including Cameroon, Gambia and Sierra Leone, preferring to concentrate on Saudi Arabia and Egypt.
Those decisions mean the “competitive environment is more favourable for us,” Engelbrecht says. His aim is to extend the bank’s CIB client base in the region from the existing core of multinationals to local corporates in areas such as trade finance and long-term debt.
Standard Bank is seeking more earnings streams outside South Africa, where banking sector profitability has been declining. According to McKinsey, the average South African return on equity in banking dropped by 2.7 percentage points from 2016 to 2022.
South Africa’s ongoing economic weakness is adding to the urgency of the search for diversification. Fitch expects South Africa’s GDP growth to fall to 1.9% in 2022 and 1.6% in 2023 from 4.9% in 2021. The ratings service says that Standard Bank’s “Viability Rating” of “bb-“ is lower than it should be because of concentrated South African and sovereign-related exposure.
CEO Sim Tshabalala has said that the bank is considering expansion into North African markets such as Morocco and Egypt. He is also willing to look at opportunities outside Africa in Arabic-speaking countries.
Francophone Africa historically has not been a core focus for Standard Bank. The bank has a license which covers the West African Economic and Monetary Union (WAEMU), so it should be “relatively easy” to expand in the region, Engelbrecht says.
Standard Bank reopened for business in Côte d’Ivoire, where it operates as Stanbic Bank, in 2018 after leaving in 2003 due to civil war. The country is a potential bright spot amid Africa’s poor overall economic outlook.
According to Fitch Solutions, the country will see real GDP growth of 6.2% in 2022, well above the overall Sub-Saharan African forecast of 3.4%. Growth will then rise to 6.5% in 2023, driven by infrastructure investment and household spending.
Accelerating inflation means the outlook for Senegal is less upbeat. Annual inflation in November reached 14.1%, and Fitch Solutions raised its forecasts for average inflation in 2022 and 2023 to 9.7% and 7.5% from 9.0% and 6.0% previously.
- Those rates will trigger an increase in social unrest in 2023 and President Macky Sall is likely to lose the 2024 presidential elections if he runs, Fitch forecasts.
Once the CIB has been scaled up, Engelbrecht says, the longer-term aim is to establish retail banking businesses in the two countries.
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