Standard Bank eyes East Africa for growth

Standard Bank, Africa’s largest bank, is looking to the eastern part of the continent for growth, with industries such as energy, agriculture and infrastructure firmly in its sights and partnerships and acquisitions not off the table.

The bank says one of the biggest drawcards for it in East Africa is its integration, which makes trade easier.

Tunde Macaulay, head of Africa regions and offshore for business and commercial banking, said another region that the group wanted to make inroads in was West Africa, with the group already holding dominant positions in Southern Africa and Central Africa.

“A year ago, the Standard Bank Group leadership council came together to think about the next growth factor for the group. There are three areas we are focusing on: the first is that East Africa is a growth factor, second was to be a top private banking bank in Africa, and third was being a leader in renewable energy,” Macaulay said.

“Choosing East Africa as a region does not mean other regions are not important. We are prioritising East Africa for several reasons. If you look at regional integration, out of all the regions on the continent, East Africa is the most integrated. And it is not only integrated in terms of policy perspective but in free movement of goods and free movement of people. That integration fosters trade. East Africa is borderless.”

Kenya is largely accepted as the region’s largest economy and is often considered its most prominent member.

According to the African Development Bank, East Africa is expected to continue to lead Africa’s growth pulse, with growth projected to rise to 5.1% in 2024 and 5.7% in 2025. The development bank expects six other economies in the region — Rwanda, Tanzania, Uganda, Ethiopia, Djibouti and Burundi — to grow at more than 5% in 2024.

One of the reasons the region is experiencing explosive growth is high government spending and strategic investments to improve in-country connectivity and deepen intraregional trade, coupled with efforts to modernise agricultural production systems and boost productivity in the services sector.

Standard Bank group CEO Sim Tshabalala earlier in 2024 said the bank was considering making acquisitions in the region.

Macaulay said all options were on the table, but the lender was now pursuing organic growth in the region.

“There are different ways to grow. But our focus right now is organic growth and if we see possible partnerships, we will engage in partnerships. What I mean by partnerships is about the markets, distribution is really important. So rather than build branches, we can consider partnering agents,” Macaulay said.

“In South[ern] and Central Africa, we are in the top three and we will continue growing our market share there. Where we see the biggest opportunities is East and West Africa, where we [have] low market share [in terms of business and commercial banking].

“In Kenya we have 4% market share, in Tanzania we are small. In Nigeria we have 3% market share, Ghana it is between 6% and 7%. These regions have large economies and because we currently have low market share, we see them as areas of focus for us.”

Standard Bank, worth about R350bn on the JSE, is present in 20 African countries, including SA. Its rest of Africa portfolio has become important to the group’s bottom line.

Standard Bank’s latest set of results show that its banking operations in 19 other African countries, excluding its home market, contribute more than 40% of its headline earnings.

In 2012, gross loans from the rest of Africa represented 13% of Standard Bank’s loan book, and today that has grown to about 20%. The Africa Regions’ deposit liabilities in 2012 contributed only 15% to Standard Bank, but that has now grown to about 22%.

Over the years, the group has increased the capital it deploys to Africa Regions. It consumed only 15% of total capital deployed by the group in 2012, but this has grown to more than 25%.

The African Development Bank projects growth to pick up in West Africa to 4% in 2024 and 4.4% in 2025. Except for Nigeria and Ghana, all countries in the region are projected to grow at least 4% in 2024.

Nigeria, the continent’s most populous country and one of its largest economies, is grappling with the first-order effects of domestic economic reforms, which are geared at addressing persistent macroeconomic imbalances and structural distortions.

SA companies like MTN and MultiChoice have a significant presence in Nigeria, with most of MTN’s subscribers coming from the West African country.

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