Investec South Africa says it is pushing to expand its corporate and investment banking market share across the rest of the continent, citing economic and population growth prospects after its biggest portfolio restructuring.
CEO Cumesh Moodliar says Africa is a growth story, with GDP in some countries expanding by 4%–7% a year and international corporations warming to investing in the continent.
“You’re seeing international corporates and sovereigns taking a view that they want to invest, and you are also seeing, in certain areas, better levels of governance. So I think as those things come together, we believe it’s the right opportunity,” he says.
Moodliar points to the success of South African telcos operating on the continent and says Investec will take a risk-adjusted approach in its investments.
“People don’t often talk about it, but the telcos have done very well on the continent. Yes, they’ve had problems. They’ve paid school fees. But we will do it differently. We’ll take the risk-adjusted approach, but we see a big population dividend opportunity. We’ve seen the opportunity to service large pools of clients differently.”
MTN and Vodacom have a significant presence across the rest of Africa, where they lead in infrastructure and network services.
We’ve got to clamp down on corruption. I mean, we cannot, every morning, look at corruption — whether at national or local government level.
— Cumesh Moodliar, Investec South Africa CEO
Moodliar says private capital was available in the domestic market, benefitting from a strong monetary policy, fiscal prudence and the structural reform programme gaining momentum at Transnet and Eskom. However, corruption remained an unresolved challenge.
“We’ve got to clamp down on corruption. I mean, we cannot, every morning, look at corruption — whether at national or local government level.”
Formed in 1974, Investec South Africa is a niche bank focused on corporate, institutional and private client banking activities as well as wealth and investment management services.
South Africa’s big banks dominate the corporate and investment banking segment, including Standard Bank, Absa and Nedbank, which are tapping into the continent’s rapid infrastructure and energy reform at a time when its mineral endowment makes it a leading critical minerals producer.
The head of Investec corporate and investment banking, Dhiren Mansingh, says Investec South Africa wants a “more concerted effort” in Africa. He says the South African corporate and investment banking segment generated about R90bn of revenue across five local South African banks, which had been growing at 8.5% a year for the last three years.
However, corporate and investment banking in African markets generated about R60bn a year, with growth to be exploited. “It has grown by about 20% over the past three years, so that’s new income of R12bn per annum that is available on the continent,” he says.
Investec has operated in African regions for more than a decade, where it has led with its specialist expertisein aviation, energy and infrastructure lending, he says.
“There’s a big drive for infrastructure, not just the energy, across roads and ports in South Africa and on the continent.”
While the group has a single brick-and-mortar bank in Mauritius, its footprint extends into Namibia, Botswana, Mozambique, Zambia, Tanzania, Kenya, Nigeria, Côte d’Ivoire and Ghana.
Investec’s corporate and investment banking segment was established after the merger of the investment bank and corporate and institutional bank. Its key focus areas for the segment were investment banking, global markets, structured finance solutions and transactional banking components.
The segment had a solid presence and was recently the adviser behind the R9.6bn Mr Price acquisition of Germany-based retailer NKD and Natco Pharma’s acquisition of a minority equity stake in Adcock Ingram.
Mansingh said the deals underscored the rise in offshore capital seeking opportunities in South Africa and across the continent.
He says Investec accounted for 8% of local corporate and investment banking, and a “reasonable” target should be for Investec to reach about a 12% to 15% market share.
The group’s corporate mid-market segment aims to bring private banking services to commercial and business banking clients and will be focused on the “underserviced” segment from R30m to R1.5bn, but mostly from R100m to R1.5bn.
It wants to win more than 10,000 clients in this segment to contribute to the overall increase of at least 200bps in the group’s return on equity by 2030.
Business Times
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