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V. Shankar, CEO for Europe, the Middle East, Africa and the Americas, Standard Chartered: Africa is Good for Business
Interview with V. Shankar, CEO for Europe, the Middle East, Africa and the Americas, Standard Chartered plc
As a bank with a deep-rooted history across the continent, how have you seen Africa evolve as an investment destination?
Africa is a very exciting investment destination. The bank has been making profit in Africa, growing its business, assisting its local communities, and ensuring its clients grow with it, for 146 years. We very much believe in the “Africa story”.
Thankfully the reality has – in the vast majority of cases - moved far beyond the international perception of Africa as a “begging bowl” with endemic governance issues. The commodities boom, relative political stability and progressive economic management are setting the foundations for more businesses to make more money in Africa. But the new Africa is about much more than commodities, which already account for less than a quarter of the continent’s GDP. At Standard Chartered, we see enormous potential for growth through financing a new class of consumers, agriculture and infrastructure. The bottom line is that Africa’s investment landscape has fundamentally changed for the better.
What more needs to be done to further accelerate capital flows and economic growth?
The priority is to ensure that the private sector is allowed a full and free role in African economies. Whenever this has been allowed, African economies have prospered. Good progress has indeed been made in Africa in terms of cutting bureaucracy and red tape, and enhancing governance and transparency. However, more does need to be done by African authorities to provide a level playing field for international companies and to address protectionism. As part of an improved investment climate, the legal systems need continued reform so that all businesses can act with greater confidence.
A further force for accelerating growth comes from within Africa itself: micro, small and medium enterprises. These play a major role in generating growth, as well as sustainably reducing poverty, providing access to finance and increasing financial participation. Much more needs to be done by government and the private sector to assist local businesses, facilitate their growth and build economic capacity.
Standard Chartered has identified small and medium enterprises as a priority business area – can you say more about why?
This is not a decision taken on the basis of old-fashioned “corporate social responsibility”. Standard Chartered rightly sees its support of the SME sector as a commercial opportunity – offering the opportunity to generate profits for financiers by supporting those businesses that create jobs and growth. Profit equates to sustainability, and sustainability equates to long-term profits.
Our strategy plays to our strengths as an international bank with international investors, clients and international capabilities. And we are using our international network, products and services to provide microfinance institutions – those organisations that hand out the small loans to some of the poorest people – with debt finance and innovative solutions to their business problems, including local currency funding and foreign currency hedging.
The same is true with our SME business. Again, the sector represents an exciting commercial opportunity. SMEs already account for between 30 to 60 percent of African GDP and we forecast that the sector will be the main driver of sustainable economic growth in Africa over the next 10 years. The bank’s competitive advantage in this sector is driven by its international expertise and capabilities and deep local knowledge. Supporting SMEs is no longer a local issue. Customers increasingly request more sophisticated products and services to match their ambitions. The introduction of international products and services is again where the bank can add the greatest value to its customers in Africa. It is about recognising the opportunity, realising what you can offer, and responding to the market.
What is your view on the rise of Asian, and particularly Chinese, investment in Africa?
We need to recognise the benefits of Chinese engagement in Africa, and also that of other Asian investors like India and Korea. The most beneficial impact that Asian investment has had in Africa is in terms of international perceptions: Africa is no longer seen as a relative underperformer on the world stage. Investors believe in China and India’s growth; they believe in what this means for demand in commodities, and China’s and increasingly India’s need for what Africa produces. This has helped correct the chronic undervaluation of African assets. And this story is about much more than commodities: last year Standard Chartered supported the $10 billion landmark acquisition by India’s largest telecoms company, Bharti Airtel, of Zain’s African business – servicing 42 million customers in 15 countries across Africa.
Supporting Asian investment, alongside supporting the growth of the private sector – from larger investors to micro, small and medium enterprises – will result in even more exciting opportunities for all on the continent in the future.
This article was written for New Africa: Emerging Opportunities for Business and Africa a publication by Business Action for Africa in partnership with Ernst & Young and CDC
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