Africa’s biggest lender, Standard Bank, which recorded a near 30% jump in annual profits, has mobilised R105bn since the beginning of 2022 to support the continent’s energy transition, and says it was confident it could exceed its 2026 target of providing more than R250bn in sustainable finance.
With many parts of Africa lacking energy infrastructure, and a global move towards more environmentally friendly energy solutions, Standard Bank has seen an opportunity in the green energy space.
“The energy transition is among the most important social and economic themes of our lifetime. It is here where the greatest risks arise for Africa, and also where a great deal of money can be made and the largest possible impact achieved,” Standard Bank Group’s CEO Sim Tshabalala told investors during the company’s annual results presentation this week.
The bank is on its way to reaching its 2026 target, and could even exceed this. “We have set ourselves what we thought was an aggressive target of R250bn by 2026 ... we’re quite confident that we will exceed the target,” Tshabalala told Business Times.
Tshabalala did not estimate the amount by which the company could exceed the target, but said this would depend on market dynamics. “At the moment, if things carry on as they are, we’re doing very, very well, but there could be market dislocation factors.”
Such factors could include a deterioration in geopolitics, which might change the way in which people are allocating assets and cause a slowdown in projects. “The pipelines are very robust and they’re very solid. If things were to carry on and we were to drill down on all those pipelines, we would do very well. I’m sure we’d exceed the target.”
In 2023, Standard Bank mobilised more than R50bn in sustainable finance, of which more than R35bn came from its biggest subsidiary, South Africa. Coupled with South Africa’s commitments to reduce its greenhouse gas emissions levels, the incentive to take up clean energy projects could help mitigate the effects of load-shedding, which last year hit record levels, leaving businesses and households without power for many hours daily.
The economy is estimated to be losing about R1bn a day during load-shedding. The trend has continued, with rolling blackouts implemented almost every day this year so far. But Standard Bank said the electricity shortfall was expected to ease relative to the level experienced last year, “driven by an increase in Eskom supply and the ongoing expansion of private sector generation capacity”.
The energy transition is among the most important social and economic themes of our lifetime
— Sim Tshabalala, CEO of Standard Bank Group
The bank financed eight government-procured projects last year and provided funding for two private renewable energy projects in the same period. The bank’s renewable energy funding for last year was more than five times greater than its financing of non-renewable energy, exceeding the average for banks signed up to the Net-Zero Banking Alliance, where renewable energy funding is 92% of non-renewable funding, Standard Bank said.
“Our commitment to being the leader of the just transition for Africa is unshakeable,” Tshabalala told investors. But the bank has not written off funding brown energy sources. Standard Bank said it was willing to support non-renewable energy investments where the social and environmental benefits outweighed their costs, and where they were part of credible transition plans.
This week, the bank posted headline earnings of more than R42.9bn for the year to December 31, a jump of 27% from the R33.9bn posted a year earlier. The bank’s active customers base was up 6% to 18.8-million last year.
Standard Bank’s performance was helped by its Africa Regions franchise, which contributed 42% to group headline earnings.
Africa Regions delivered an outstanding performance, CFO Arno Daehnke told investors during the company’s results presentation.
“A larger balance sheet, higher interest rates, higher transaction volumes, recovering international trade and a strong growth in trend revenue all contributed to an overall outcome of R18.2bn in earnings, up 49% year on year,” Daehnke said.
The bank’s east, west and south and central African regions all delivered improved performances in headline earnings and return on equity.
“Despite macro issues which have emerged over the last 18 months regarding sovereign vulnerabilities and weakening exchange rates, we remain certain that the value of our Africa Regions portfolio is in its diversity and in its growth profile,” Daehnke said.
The bank remains confident about economic growth prospects in the portfolios of the 19 countries in its Africa franchise.
Sub-Saharan Africa is expected to grow about 4% in 2024, up from about 3.3% last year, the bank said, with growth in most African economies either approaching or exceeding pre-pandemic levels.
Growth in some East and West African countries could even outpace the rest of the continent and the world, Yinka Sanni, CEO of the bank’s Africa Regions, told the media.
The rest of Africa is set to outpace South Africa’s growth for 2024, which under the current policy trajectory is 1.2%, according to Standard Bank’s projections, but Tshabalala was confident the country could catch up.
Tshabalala said South Africa was undergoing a number of structural reforms — including a focus on electricity and logistics — which could bolster its economy in the medium term if they were implemented quickly enough.
“The faster they get done, the bigger the chance of us growing at 3% in the period from roughly from 2027 to 2030 ... in fact, after 2025,” he told Business Times.
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