Goldman Sachs is committed to SA and is investing for the long run, says the US-based bank, which recently marked five years since it gained a full branch banking licence in SA.
The bank, which last week hosted an investor conference in Johannesburg addressed by President Cyril Ramaphosa, returned to SA in the early days of democracy but sought a branch licence only in 2018, gaining this in November 2019.
Its client base has since grown, gaining 70 active institutional clients and becoming the premier primary dealer in SA government bonds, co-CEO of Goldman Sachs International Kunal Shah said on Friday.
It also jointly led the government’s successful $3.5bn international bond issue in November, with Citigroup.
“For us as a global player there’s no-one better positioned to bring those international pools of capital to emerging markets, and in particular into SA,” Shah said.
He was speaking after the conference, the bank’s first in SA in five years, which drew corporates, wealthy individuals, institutional investors and banks.
“We’re connecting with all the global institutional accounts on all the flows into SA, which also then allows us to dominate the flows with the local institutions because we see the global- to-local and local-to-global flows,” he said.
International investor appetite for SA’s bonds was strong last year due to the formation of the government of national unity and some progress being made on infrastructure, particularly in electricity, but investors have been more cautious this year, Shah said.
“That’s a combination of the Fed not cutting rates any more, plus the tariff risks, plus the geopolitical uncertainty.”
But he said SA’s issues were mainly domestic. “If we can bring back jobs, increase growth to 3% and hopefully accelerate from there, I think the prospects are very good. Sentiment remains positive.”
We just have to be careful we don’t create a self-inflicted political crisis here, whether or not there are global geopolitical crisis issues.
— Kunal Shah, co-CEO of Goldman Sachs International
On SA’s delayed national budget, Shah said the international community was assuming the government was discussing, debating and working towards an agreement that would deliver a budget on March 12. It would be a great positive signal if the parties found common ground — but a “sell” signal for investors if not.
“We just have to be careful we don’t create a self-inflicted political crisis here, whether or not there are global geopolitical crisis issues,” he said.
The bank’s SA CEO, Simon Denny, said multinationals were looking at Africa and SA and wanting to understand the dynamics on the ground.
But Denny cautioned that multinationals needed to see certainty about what SA’s competition regulators required and about how long it would take to get a deal through the regulators if they were to commit huge investments.
“The regulatory environment remains a major challenge. The national interest requirements are not foreign concepts from a global perspective. But that you don’t have certainty around what those requirements are going to be, and most importantly, what the timing is going to be to get approvals, creates uncertainty,” he said.
Goldman Sachs also has a market-leading investment banking business, as well as licensed private wealth and asset management businesses in SA, all of which are growing quickly. Its expansion in SA has come while other big global banks have been cutting their presence. BNP Paribas recently handed back its licence while HSBC is handing back its licence, transferring its corporate and investment banking business and client base to Rand Merchant Bank and its securities business to Absa.
The withdrawals leave the SA market with just three branches of US banks — Citi, JPMorgan and Goldman Sachs. Deutsche Bank still has a branch licence as do a few large Chinese banks. Most other big international banks operate in SA through representative offices.
Shah said the local banks were also all sophisticated and competitive, but Goldman does not compete with them on rand-based financing.
“We have partnerships with local banks and we collaborate with them. And ultimately when other international banks are giving back licences and pulling out, it adds to our confidence around our commitment here,” he said.
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