Investec South Africa says it is pushing to expand its corporate and investment banking market share to the rest of the continent, citing economic and population growth prospects following its biggest-ever portfolio restructuring.
ceo kamesh moodaliar Africa is said to be a growth story, with GDP growing by 4%-7% per year in some countries and international corporations are excited to invest in the continent.
“You're seeing international corporates and sovereigns taking the view that they want to invest, and you're also seeing better levels of governance in some areas. So I think as those things come together, we believe it's the right opportunity,” he says.
Moodlier points to the success of South African telecoms companies operating on the continent and says Investec will take a risk-adjusted approach to its investments.
“People don't often talk about it, but telcos have done very well on the continent. Yes, they've had problems. They've paid school fees. But we'll do it differently. We'll take a risk-adjusted approach, but we see an opportunity to deliver dividends to a larger population. We see an opportunity to serve a larger group of customers in a different way.”
MTN and Vodacom have a significant presence in the rest of Africa, where they are leaders in infrastructure and network services.
We have to crack down on corruption. I mean, we can't look at corruption every morning – whether it's at the national level or at the local government level.
— Kamesh Moodaliar, CEO of Investec South Africa
Moodlier says private capital was available in the domestic market, which benefited from a strong monetary policy, fiscal prudence and the increased pace of structural reform programs at Transnet and Eskom. However, corruption remained an unresolved challenge.
“We have to crack down on corruption. I mean, we can't look at corruption every morning – whether it's at the national level or at the local government level.”
Established in 1974, Investec South Africa is a specialized bank that focuses on corporate, institutional and private client banking activities as well as wealth and investment management services.
South Africa's large banks dominate the corporate and investment banking sector, including Standard Bank, Absa and Nedbank, which are helping fund the continent's rapid infrastructure and energy reforms at a time when its mineral endowment makes it a major critical mineral producer.
The head of Investec Dhiren Mansingh, corporate and investment banking, says Investec South Africa wants a “more concerted effort” in Africa. He says the South African corporate and investment banking segment generated approximately R90bn of revenue across five local South African banks, growing at 8.5% per year for the past three years.
However, corporate and investment banking in African markets generates approximately R60bn per year, which should be leveraged. “It has grown by about 20% over the last three years, so that is R12bn of new income per year that is available on the continent,” he says.
He says Investec has been operating in African regions for over a decade, where it has led the way with its specialist expertise in aviation, energy and infrastructure lending.
“There is a huge drive underway across South Africa and the continent for not only energy, but also infrastructure on roads and ports.”
While the group has a single brick-and-mortar bank in Mauritius, it has expansion to Namibia, Botswana, Mozambique, Zambia, Tanzania, Kenya, Nigeria, Côte d'Ivoire and Ghana.
Investec's corporate and investment banking segment was established following the merger of the investment bank and the corporate and institutional bank. Its main focus areas for this segment were investment banking, global markets, structured finance solutions and transactional banking components.
Had a solid presence in this segment and was recently the advisor behind the R9.6bn mr price The acquisition of Germany-based retailer NKD and Natco Pharma's acquisition of a minority equity stake in Adcock Ingram.
Mansingh said these deals underline the increase in offshore capital looking for opportunities in South Africa and across the continent.
He says Investec has an 8% share of local corporate and investment banking, and a “reasonable” target should be for Investec to reach around 12% to 15% market share.
The group's corporate mid-market segment aims to bring private banking services to commercial and business banking customers and will focus on the “underserved” segment ranging from R30m to R1.5bn, but mostly R100m to R1.5bn.
It aims to win over 10,000 customers in this segment to contribute to an overall growth of at least 200bps in the group's return on equity by 2030.
Business Times