While many challenges remain, on any balanced assessment, the strides Africa has made in the last decade have been remarkable, writes Chris Newson, head of Standard Bank Africa.
AS THE AFRICAN UNION (AU) CELEBRATES ITS 10TH anniversary, it is perhaps a good time to reflect on Africa’s continued renaissance and the continent’s future development prospects. After false starts in previous decades, there is now a clear consensus that Africa’s time to take its rightful place in the world has finally come. What is really exciting is that our continent has already taken more than a few steps along this journey. While many challenges remain, for example, in tackling poverty, youth unemployment, the unequal distribution of the new wealth that is being created, low agricultural productivity and climate change, on any balanced assessment, the strides the continent has made have been remarkable.
After decades of post-colonial stagnation, Africa’s growth rate stepped up to above 3% from the mid-1990s. It stepped up again early in the current century to around 5%. According to the IMF, sub-Saharan Africa will grow at nearly 6% in 2012, and will contain seven out of the world’s 10 fastest-growing economies over the next five years.
There is every reason to be optimistic that Africa’s take-off will continue for decades to come. This is thanks to our young, growing – and increasingly healthy, well-educated and urbanised – population; our rich endowment of the commodities essential to the world economy, and particularly to the continued rapid expansion of the BRIC economies; and the extraordinary ICT revolution that is sweeping Africa, creating previously undreamt-of economic opportunities.
Add to this the continuing trend towards political, economic and market reforms. All these factors make the future look attractive for a continent hoping to realise its development aspirations as well as for investors who wish to be part of that growth story.
The rest of the world has noticed these trends: foreign direct investment in Africa has more than doubled over the last decade. Africa has emerged as one of the favoured global investment destinations, especially by investors seeking portfolio diversification or to tap into the continent’s high economic growth that is expected in coming decades.
The challenge before us now is to ensure that Africa’s renaissance does indeed continue. We need our economic growth rate to stay high and, indeed, accelerate even further. And we want this growth to be fair, inclusive and sustainable. Standard Bank and the rest of the African banking industry can and, indeed, must make important contributions to both of these goals.
The Standard Bank Group, Africa’s largest bank by assets, remains committed to doing business in Africa, the platform over the years of its growth into a banking franchise recognised as an emerging markets champion. With operations in 18 countries on the continent, the group’s Tier 1 capital stands at $12.06bn, almost twice as much as the second-ranked bank in Africa. Standard Bank recently renewed its commitment to the continent when it refined its strategic focus. Africa is at the core of our strategy. We will continue to build first-class, on-the-ground banking franchises in chosen markets in Africa, investing in people, branch networks and systems.
Standard Bank is confident that revenue flows will justify our investments in our operations and infrastructure. As we create stronger annuity revenue streams and customer relationships in our domestic operations, these will provide greater opportunity to leverage our cross-border investment banking and global markets capabilities. The specialist knowledge and experience that Standard Bank has gained over many years of key African economies and the natural resources that drive their growth has positioned it advantageously.
Standard Bank and the over 700 other African and international banks are rapidly increasing capacity to arrange financing for infrastructure and industrial development. Take for example, Standard Bank’s Lekki Toll Road transaction in Nigeria, where we provided a ground-breaking solution – a 15-year Naira-denominated finance traded from our London desk.
Another major African first was our partnership with Industrial and Commercial Bank of China to fund the construction of a 600MW power station in Botswana, which is by far the largest and longest-tenor transaction in this market, and has also enabled us to provide new investment products to local pension funds. Another practical way in which we have helped to deepen Africa’s capital markets has been by arranging a series of successful Initial Public Offerings for corporates in Tanzania and Nigeria.
In South Africa, we are particularly proud that we currently have a 45% market share in financing the first round of renewable-energy projects, underwriting nearly R19bn of funding. Our projects will produce over a gigawatt of new energy for South Africa. It will also create nearly 6000 construction jobs, and generate a saving of nearly a million tons of carbon a year to be traded in the international carbon credits market.
Africa has certainly come a long way. Not many people appreciate how profound the changes have been. In support of the AU’s vision, Standard Bank has played a major part in laying the foundations for long-term growth and development and will continue to build on that.
There are still many challenges, however, and Africans cannot afford to be complacent. But there is no doubt that Africa’s economic take-off is well under way. And there are compelling reasons to believe that it is likely to continue for decades to come.
As our continent develops, it is rising to its rightful place in a multipolar world, in which the emerging giants of Asia – China and India – as well as the traditional world leaders such as the US and Western Europe will be of equal importance to us as cultural, intellectual and economic partners.
If we are wise, this emerging economic and social reality will create many new choices and opportunities for Africans. These are choices that Africans must get right, and opportunities that we must explore to the fullest.