As many as 95% of foreign investors are looking to increase their exposure to SA, with 30% of these planning to do so within the next three months, Standard Bank’s economists found when they asked a range of offshore bond and equity market investors how their perceptions of SA had changed since the election.
Standard Bank CEO Sim Tshabalala cited the findings in an upbeat outlook for SA’s and Africa’s economies as he presented the group’s results, which showed a 17% increase in earnings in constant currency terms for the six months to June, which translated into just 4% in rand terms because of large currency devaluations in some of its African markets.
Standard’s survey of investors found that 81% of foreign investors had a “positive” or “very positive” perception of SA after the elections.
However, while 95% suggested they were either planning to or considering increasing their investment in SA, 40% said they would need to see further policy steps taken by the government of national unity (GNU) to improve trend growth and/or were waiting for an improvement in economic activity levels before they would increase their SA investments.
Standard economists Simon Freemantle and Elna Moolman cautioned in the report: “While on the one hand investors are clearly positive towards SA, far more so than they were before elections, they remain cautious of SA’s muted growth trajectory.
Their survey covered a range of offshore fixed income and equity investors, who would be driving portfolio flows into SA. It is not yet clear how foreign direct investment flows might respond to the GNU.
Standard is the most exposed of all SA’s big banks to the rest of Africa, which posted strong earnings growth of 27% in constant currency terms and accounted for 41% of the group’s earnings in the six months. Standard had warned at year-end that the currency factor would cause a dip in earnings growth and the devaluations in the naira and Angolan kwanza hit hard this time.
But Tshabalala expects the currency effect to dissipate in the second half of the year.
He paid homage on Thursday to the group’s SA business, which grew earnings by 12% to R9.4bn in a tough environment — up from the 3% earnings growth the SA business posted for the 2023 full year. He said retail banking had seen the worst of the bad debt cycle. “The consumer is in a better place.”
The group’s results showed that its actively managed portfolio of businesses across Africa was working well: “The franchise is like a juggernaut.”
The long-term trends for the group’s portfolio were all in the right direction.
SA offered “fantastic opportunity” if it continued on the course of structural reform, with GDP of $400bn that could grow 2%-3% if scenarios by the Bureau for Economic Research and Standard’s own economists proved correct.
Africa was on track to become the world’s fastest-growing region with growth of 4% and a need for $3.4-trillion of infrastructure investment, much of it in countries where Standard was well positioned to take advantage.
Standard, which ventured into the rest of Africa in the early 1990s with its acquisition of UK-based ANZ Grindlays, now has operations in 20 African countries and is the largest financial services group on the continent. It is targeting East Africa, which is the fastest-growing and most integrated region in Africa, as a priority area for growth.
Tshabalala estimated Standard was the third largest bank across the three major East Africa markets (Uganda, Tanzania and Kenya) but it lacked scale, particularly in Kenya.
It would continue to grow organically in the region, but would also look at acquisitions.
“We are not averse to acquisitions, and will look at opportunities, if and only if they meet our hurdles and capital allocation criteria,” he said.
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