Riding the waves of African hope
Mbongeni Mguni | Friday September 29, 2017 10:39
To some extent, Standard Chartered’s 120-year history in Botswana and 150 years in Africa, mirror the country and continent’s own economic tribulations over the decades.
Standard Chartered, like Botswana and Africa, has learnt the bitter lessons of placing an imprudent number of eggs in one basket, but like both the country and continent, it has withstood the impact of that folly and emerged stronger for it.
In the 1860s, shortly after its formation, the global bank was first attracted to the shiny stones at Kimberley, South Africa, where diamonds had the world’s adventurers dreaming of obscene wealth. Then called Standard Bank, it expanded north to the new town of Johannesburg when gold was discovered there in 1888, continuing funding exploration and taking up equity.
In May 1897, again drawn by the irresistible allure of minerals, Stanchart arrived in Botswana with an office in Francistown at the tail-end of the gold rush of the period. The office closed soon after due to what the bank’s historians call “harsh conditions”.
Africa being a land of valuable minerals, Standard Chartered naturally viewed the continent favourably over the decades, partnering firstly in the growth of the extractives industry and, in countries such as Botswana, the downstream sectors built from mineral revenues.
Just as Botswana and several other African economies have suffered the perils of an over-reliance on minerals, Stanchart too has had its fingers burnt over the years due to over-exposure to the typically volatile industry.
Earlier this month, the global bank was estimated to have lost a $400 million gamble on lending to diamond miners and retailers and the bank has since closed the unit it specially created for the purpose. In Botswana, Standard Chartered posted a P66.5 million loss for the half year ended June 30, 2017, one of the largest by any bank in recent memory, due to impairments arising from over-exposure to a diamond and jewellery client. In 2015 and 2016, Stanchart Botswana’s performance was affected by the closures of Motiganz Botswana, a diamond polishing firm, and BCL Mine. The bank in Botswana says it plans to exit diamond financing by the end of this year.
Current Stanchart Botswana chairperson, Bojosi Otlhogile sees parallels in the bank’s history in Botswana and that of the country and its financial sector.
“It’s not possible to talk about the journey of Botswana’s economy without talking about Standard Chartered or the history of the country as a whole,” he says.
“We opened for business 12 years after the country became a protectorate. Very few companies have been around for 120 years, but this is just the beginning for us.”
As Botswana celebrates the first year after its Golden Jubilee this weekend by considering a future of declining mineral revenues, Standard Chartered is also mulling its future on a continent where the industry played an anchor role to its presence.
That future, according to bank’s group CEO, Bill Winters, is bright.
Winters’ optimism flies in the face of the growing cynicism around the Africa Rising narrative by many global players. A few years ago, the continent was touted as the next big thing, but a vicious commodity cycle, political and economic distress and even the outbreak of diseases such as Ebola, have dampened global enthusiasm for Africa and laid waste to the Africa Rising story.
For Winters, who led the bank’s exit from diamond financing, there has never been a better time to stay put in Africa.
“Africa is at the heart of our strategy and it’s core in our strategy,” he says.
“I took over in June 2015 and I said ‘let’s step back and look at the things that really make a difference to our clients,’ and we made clear statements that November where we said at the top of that list is our belief in Africa.
“The growth opportunities are phenomenal and our role is to promote that growth.
“For Botswana our job is to support the existing economy and support the new avenue of diversification, whether that is through funding infrastructure or even through financial literacy. These are the sorts of things at our core.”
According to Winters, the bank’s 150 years in Africa has provided a “ringside seat” and a “privileged position” from which to study the potential of individual markets in Africa. From that angle, the bank is seeing strong economic growth “for many years to come” which Winters says will require capital, expertise and more integration into global networks, “which is what is at the heart of Standard Chartered”.
The bank in Africa is anchored on two areas, says Stanchart’s regional CEO for Africa and Middle East, Sunil Kaushal. “One is the infrastructure space which is broad-based looking at energy, ports, roads, water, hospitals and we are already participating in a big way in that,” he says.
“Another is the rising consumer (African middle class). “Depending on which headline you follow you say it’s rising or declining, but we have been here for 150 years and we don’t go by narratives, we are proving ourselves by our actions. We’ve been for 150 years and we will be here for the next 150.”
Although no executive will publicly admit it, Standard Chartered’s future in Africa has also been helped by the exit of a long-time rival in terms of global banking on the continent, Barclays. Barclays, also a British bank, arrived in Africa shortly after Standard Chartered and the two carved up and competed for space as the continent’s economies grew. Barclays, however, will leave the continent and other Asian markets in the next two years, in line with a strategic realignment of interests at group level. In Botswana as in other countries across the continent, the decision is viewed by some as a form of betrayal after years of support and the disaffection at retail banking level will no doubt be a blessing to other banking sector players, including Stanchart.
Renowned local businessman and entrepreneur, Sam Mpuchane puts it succinctly.
“There’s a trend where institutions come here, stay and move to other shores. You don’t stay 120 years in a certain place then pack and go,” he says.
A retail sector backlash is possible to some extent, particularly among clients who been loyal to the exiting brand for decades. In like manner, however, Barclays’ departure could fortify the loyalty of veteran Stanchart clients who would take pride in the heritage they are a part of, over above the global products, services and platforms provided.
One such client is Minister for Presidential Affairs, Governance and Public Administration, Eric Molale, who remembers decades ago being paid via a small aircraft that would fly to the Stanchart outpost near the government offices to deliver cash payments.
“Whenever we saw the aircraft coming, we knew it was pay day,” he remembers.
Barclays’ departure not only plays snugly into Stanchart’s tagline “Here for Good”, but it also leaves Standard Chartered as the sole truly global bank in Africa with both experience on the ground and the global networks to leverage business.
“When we talk to our large complex multinationals wherever they are based globally, they say they want a bank that meets global standards that they can deal with around the world and that also deeply understands the market in Botswana, Nigeria and others,” says Winters.
“We are uniquely positioned for that and we would be extremely loathe to give up that key differentiator.
“For us, sub-Saharan Africa is a valuable franchise, a profitable one and also a very important differentiator for our international clients who want to deal with a global bank that’s also a local bank in markets that are not particularly served by global financial services companies.
“For us, these markets are our home markets and are at our core.”
As Botswana celebrates the dawn of the next 50 years over the weekend, Standard Chartered also looks at the next 120 years in Botswana and deeper into the continent.