Business Daily (Nairobi)
Peter Munaita and Isabella Mukumu
22 June 2008
interview
Following the acquisition of a 20 per cent stake in Standard Bank (Africa's biggest by asset) by Industrial and Commercial Bank of China, Craig Bond has been posted to China as the chief executive of Standard Bank ICBC Ventures. He will be replaced in Johannesburg by Clive Tasker.
The two executives were in Nairobi recently and fielded questions from Business Daily's PETER MUNAITA and ISABELLA MUKUMU on doing business in Africa, what informs the bank's strategy and the CFC Stanbic merger. Here are excerpts of the interview
BD: What does it take to be one of the continent's key players in financial services?
Mr Bond: Simple: history. We are a bank with deep African roots. We have been in DRC for over 100 years. We have expanded to many countries in Africa but we are not big in all the markets. We see ourselves as a bank that can make a difference in the communities we operate in and so we have an optimistic motive that sits behind our business. Because of this base, we are a threat to international players who have their primary interests in markets such as Europe, America and Asia. The fact that we have banks in other places in the world is because we want to have a base in emerging markets but our real focus is on Africa.
Mr Tasker: Credit should go to our predecessors who went after opportunities in Africa by acquiring banks many of which had been owned by governments, enabling us to transform them. Standard Bank realised Africa before many other companies saw it as a market with potential to grow.
Mr Bond: I also think many of the big multinational banks saw Africa as just a little bit too difficult for business with the tough economic environment. That is beginning to change with good regulatory regimes being put in place. There is a lot of resistance to change but the continent gives better returns, better opportunities than the established international markets.
How do you navigate different regulatory hurdles in the various markets?
Mr Tasker: It is important to regard each country and markets as a sovereign entity and one that deserves and requires the relative time, respect and attention. It's impossible to take a paint brush and paint the continent in one colour from Kenya to Cape Town. Legally, we have strong governing structures, each of our banks have got strong boards which have at least a majority of non executive independent directors. These individuals are, in their own rights, strong members of their own communities, in business, academic and professional spheres. Each board has a major role in ensuring we comply with regulatory frameworks. For us, the minimum we want is more in terms of raising the bar and act as a responsible local entity in those markets that we operate in. So we are strong in the local flavour of the executive management team, strong on the reliance of our boards and our independent non-executive enterprise directors. We also ensure there's an ongoing relationship between management, the stakeholders in each country, regulators, and governments.
Mr Bond: We also see ourselves as Africans with a responsibility to bring positive change so we spend quite a lot of money bringing regulators to speed up on global perspectives. We sponsor regulators to come to group conferences to help understand what these measures can mean to them. This takes time but increasingly there's a optimistic sense developing bringing a positive force in the countries. We want to help in improving governance and the regulatory regimes. We have resolved to have zero tolerance to poor governance, corruption, and instead be positive contributors to the economy of these countries. So we navigate each market differently but try to have as much local relevance through the composition of all these.
What is in store in terms of growth strategy in the markets you are in?
Mr Tasker: We have specific and unique strategies for each one of these markets. What we are concerned about is making sure we have a full service universal offering as a bank in the market sector that we operate in. Whereas in the past we might have operated a primarily corporate investment banking operation, we have now expanded into the retail, personal and businesses banking market. We believe there is tremendous potential as various economies in Africa grow in a lot of these spheres especially personal and business banking. We certainly have a pan-African strategy aimed at accelerating growth through increased presence and acquisitions.
Mr Bond: We have three groupings that help summarise our strategy. There are a group of countries where the GDP growth is low and where population is not large. Those we call our simpler better faster: we must make services, simpler, better and faster. Then we have exciting new opportunities like the DRC and other countries which we call our investing growth; where there are no banks to buy or no attractive acquisitions. We mainly focus on investing there. Then there are the big growth opportunities and for us those are Nigeria, Ghana and Kenya at this point in time which we call our acquiring group. This is where there are M&A opportunity because incremental growth would be too slow in terms of market penetration costs. In essence, those are the three drivers that underpin our class growth strategy.
Has the design to enter personal banking in Kenya started showing in your numbers?
Mr Bond: We have a standard operating model, we generally come into a country where there's no opportunity for acquisition and build a strong investment bank. This helps us to understand the markets players the capital markets, how to fund the retail market and generate good profits. The second phase is generally an on-tray to the business and personal banking markets, which is the process that we have been through in the last two years in Kenya.
We are understanding the market, understanding the credit risks and how we will factor these if we see incremental growth. The next stage now is the joining with CFC which will extend to a fully universal banking institution offering retail banking, life insurance and short term insurance on investment products. This allows us to literally go from the mass market right through to our affluent with a credible offer. That's the phase we are at the moment. The phase after that will be to be committed to make growth, and generally that requires quite an aggressive roll out.
That merger has had some hiccups.
Mr Bond: We are positively disposed, we've been working on this deal for over a year, and all the regulators both in Kenya and in South Africa have approved this deal. Clearly we are in a good process at the moment, we are confident that the Kenyan legal system is one of the best in Africa. We have to trust the legal system to do what is right but we hope this will not fail. As we stand, as shareholders of Stanbic and CFC are positive and we think it will be good for both of us and Kenya because lots of international businesses have been contacting us.
Are there other African markets you are considering going into?
Mr Bond: Right now, we might turn our focus to West and North Africa because there are many linkages across the continent and our main aim is to be Africa's largest Sub-Saharan bank. So there is a team in place that is looking at the markets opportunities and the economies of those in West and North Africa.
Mr Tasker: There are certainly opportunities due to political stability re-emergence especially in the French West Africa and as North Africa comes into the main stream economy of the world. I think it is going to be an opportunity for us to grow there.
You have gone public in Kenya and Uganda, is this the game plan for the other markets?
Mr Tasker: Our desire to go public will be driven by local requirements and traditions and also specifically on the efficiency and liquidity of the particular security structure to avoid low liquidity, low free float or trade, and little ability to raise capital. That said, there is no reason we would have to own 100 per cent of all the banks in the areas we operate in and especially when the localisation of a bank makes sense.
We've seen the possible effects of the Ugandan listing and the listing in Nigeria was positive. We are rational in listing; one is to send a strong signal that we are happy to localise and second is to want to participate positively in the local capital markets. We may not list in all the 18 countries due to sophistication.
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