Big banks shun South Africa for growth

South Africa’s biggest banks – Standard Bank, Nedbank, Investec, and FirstRand – are looking outside their home market for growth as the country’s economy stagnates. 

The CEOs of these major banks have been clear that they will allocate capital to the parts of their business showing the strongest growth, and those are no longer in South Africa. 

South Africa’s economy has stagnated in the past decade, while its government debt has skyrocketed and its population has boomed. This has resulted in a decline in living standards for South Africans. 

“We are allocating our capital at Standard Bank to the fastest-growing parts of our business. The fastest growing parts are outside of South Africa,” Standard Bank Group CEO Sim Tshabalala said on the sidelines at Davos.

Tshabalala said parts of Africa are on a much more positive trajectory as they have implemented reforms and have made it easier to do business. 

He said this does not mean the bank will not invest in South Africa. “We believe in the African continent and South Africa. We are investing and will continue to invest because of the vast opportunities.”

Nedbank is looking to expand in East Africa, a focus area for incoming CEO Jason Quinn, who takes over from current CEO Mike Brown on 31 May.

“We are not sure whether we should do that through acquisitions, or now that we have built our tech stack, whether we can make a digital entry into those markets,” Brown said to Bloomberg. 

He cautioned that expanding in Africa is not without its risks, as many of the countries on the continent have unsustainable debt burdens. 

“Most of the larger banks in Africa have had very good real-life experience navigating those risks over many years,” Brown said.

Nedbank already operates in Eswatini, Lesotho, Mozambique, Namibia, and Zimbabwe and maintains representative offices in Ghana and Kenya.

It holds a 21% stake in the pan-African lender Ecobank Transnational, giving it exposure to more markets in East and West Africa.

FirstRand is looking to purchase other African banks in countries where it operates as the continent’s biggest lender by market value and seeks to expand. 

Potential targets for acquisitions may also include financial services outside of traditional banking, Mary Vilakazi, FirstRand’s incoming CEO, said in an interview with Bloomberg. 

“Maybe there are other ways in which we can participate in financial services without necessarily setting up branches and having a banking license,” Vilakazi said.

While FirstRand already has units in the west and southern Africa, it is also looking at establishing itself in the east, including Kenya.

Investec is not known to be a major player in financial services on the African continent outside of South Africa, but its presence is starting to grow. 

“We are more active than people realise,” Investec South Africa CEO Richard Wainwright said to CNBC Africa at Davos. 

“Unlike some of our competitors in South Africa who have banks on the ground, we have chosen not to do that and rather partner with domestic banks across Africa,” he said. 

This has worked well for Investec so far, according to Wainwright, as the bank is not looking to buy out banks on the continent or start a bank from scratch in other markets.