South African companies have been accessing markets throughout the African continent since the country regained admission into the world trading community.
While there have been some less than stellar ventures into Africa, most companies have developed successful African business models that allow them to expand into these new markets and deliver profits to their shareholders.
That interaction is not one-sided. Other nations on the continent have another market for their commodities and are beginning to develop links to sell value-added goods in South Africa.
Standard Bank is one of the local companies that has seen the potential benefits associated with developing into a pan-African enterprise.
The bank has made a considerable investment in developing its infrastructure in Africa and Craig Bond, CE of Standard Bank Africa, says the bank has had a focus on being a dominant African bank for more than a decade.
‘There is good economic growth in many African markets and the spread of real democracy and fiscal discipline improvements across many of these markets makes them increasingly attractive. Being active on the continent gives us the opportunity to earn our spurs so we can expand beyond Africa to become a global emerging markets bank,” says Bond.
Part of the rationale for operating more aggressively in Africa than in other emerging markets was that many South African corporations were demanding the creation of banking infrastructure in the markets in which they wished to operate.
Bond says South African business interest in Africa started with the mining houses and this was followed fairly quickly by retailers.
‘The most recent phase is the telecommunications industry, which has become very active on the continent. At the same time we are seeing activity across the board, including all sectors and sizes of companies,” says Bond.
The bank is now present on the ground in 18 African countries. This presence ranges from an initial entry through corporate investment banking activities to a full national network of branches and the complete range of investment, corporate, commercial and retail banking activities.
‘We are not briefcase bankers. Standard Bank has made acquisitions, built head offices and established branches in many of our African markets. We are the dominant bank,” says Bond.
The huge global commodity demand has led to many African economies having access to increasing revenue flows and this has resulted in significant demand for banking services, ranging from infrastructure to trade finance.
Bond says banking business flows in both directions and there is a lot of interest in regional business.
‘In many of the markets in which we operate, such as Nigeria, the companies we do banking for are localised and they come to us for advice on the best ways of spreading their wings. There is a view, which is gaining momentum, that there is a huge market down south, namely South Africa, and African businesses are looking to us to act as facilitators,” he says.
There is a lot of interest from African countries in developing their own capital markets and one of the key roles for South African banks is in helping to develop these markets.
For example, Standard Bank is engaged in corporate bond issues in Nigeria. Bond issues take place in local African markets and through overseas options such as Eurobond issues. ‘There are likely to be a number of dual listings by African companies in the future, particularly by West African companies,” says Bond.
Noah Greenhill, senior general manager at the JSE, says the more favourable consideration being given to listing on the exchange is likely to bear fruit in the longer term, but he does not expect an immediate flood of listings from companies with assets on the continent.
‘The first such listing will show other companies the benefits of a South African listing and this will lead to other companies taking the leap,” he says.
The JSE is in favour of multiple listings and African companies that list on London’s Alternative Investment Market should consider a dual listing and opt for a listing on the JSE as well.
Greenhill believes Africans should have the ability to invest in African assets and the opportunity to enjoy the benefits. ‘By having a dual listing, African companies have the best of both worlds. They can access capital from around the world and facilitate local investors acquiring stakes in local companies.”
Marina Bidoli, group communications manager at Sasol, says Africa remains an important part of Sasol’s growth vision.
The company has invested in 11 African countries and is trading with most countries on the continent. ‘We are committed to developing Africa’s liquid fuels and chemicals industries in a sustainable manner,” says Bidoli.
In 2004 Sasol partnered the South African and Mozambican governments in a $1,2billion investment to produce natural gas in Mozambique and transport it, via a 865km pipeline, to customers in Mozambique and South Africa. The gas is also used as feedstock for some of Sasol’s fuel and chemical production in South Africa.
More recently Sasol embarked on additional hydrocarbon exploration offshore in Mozambique.
Further north Sasol is helping build the Escravos gas-to-liquids (GTL) plant in Nigeria.
‘The plant has a planned capacity of 34 000 barrels a day and it will use Sasol’s GTL technology to turn gas that is currently being flared into ultra-clean, environmentally friendly liquid transportation fuels,” says Bidoli.
The company also produces oil in Gabon and has interests in oil exploration in Nigeria and Equatorial Guinea.