Business
South African companies’ investments in other African countries paying off
Investments in other African countries are starting to pay off handsomely for some South African companies, such as banks, which earned R5.1bn from operations on the rest of the continent in 2013, up 27.5% from the previous year, while return on equity beat that from local operations. According to consultancy, EY, earnings from the rest of Africa operations are growing much faster than here.
The big four banks’ Africa expansion strategies are at different stages, and will be beneficial to the groups, according to EY’s lead financial services director, Emilio Pera. He said the banks’ offerings have to be relevant because they compete with strong international and regional players.
Standard Bank, Africa’s largest bank by assets, reported in its recent annual financial results that return on equity from its operations outside South Africa grew from 16.6% to 19.7%. Despite losses increasing in the personal and business banking portfolio, overall headline earnings from the rest of Africa rose 44% during 2013, driven by the bank’s strong corporate and investment banking focus.
Over the past two years the Johannesburg-based lender has increased its exposure to African countries other than South Africa from 17 to 20 while reducing its exposure outside the continent. Absa Group, now known as Barclays Africa, reported that retail and business banking earnings elsewhere in Africa increased by 35% from R1 billion to R1.35 billion.
The group said it expected operations outside South Africa to account for 20% to 25% of total group revenue by 2016. The group, led by Maria Ramos, acquired eight of the 10 operations from its parent company, Barclays plc, last year. The R18.3bn transaction excluded operations in Zimbabwe and Egypt.
Ramos and her team have set clear objectives in creating “Africa’s go-to bank”, which include growing its wealth and investment management businesses, rolling out its corporate banking and turning around its retail and business banking after years of disappointing performance.
