StanChart recently sold retail assets in a number of African countries. How has the group’s strategy changed regarding Africa?
Sunil Kaushal: I would not say that our strategy has changed. It is rather a redeployment of resources within the Africa and Middle East (AME) region. Our decision to exit selected markets within this was one of the hardest decisions we have had to take, and one taken with careful consideration.
It was done in line with our global strategy, aimed at achieving operational efficiencies, reducing complexity, and driving scale. This allows us to redirect resources within the region to areas with significant growth potential, ultimately enabling us to better support our clients.
This includes, for example, opening operations in Egypt and Saudi Arabia.
We are confident that the markets we have exited are well-placed to thrive under new ownership and the bank will continue to be a bridge for international capital flows from and into these markets.
To date, we have arranged export-agency-backed financing of big-ticket deals in these markets for local infrastructure or helping clients to drive their sustainability agenda.
We have also been involved in facilitating access to international capital markets. An example is the announcement this year of $73m of social loan financing for Angola’s Ministry of Finance to expand the University of Namibe to improve its education and fisheries sectors.
In Ghana we signed a €280m social loan financing for the Ministry of Finance to develop a section of the Eastern Corridor to link southern seaports to the hinterland and landlocked neighbours in the north.
In Tanzania, we coordinated the $1.46bn Export Credit Agency- backed long-term financing facility to fund the new Standard Gauge Railway. This is the largest syndicated transaction in sub-Saharan Africa outside the oil and gas sector to date.
More importantly, it has positively changed the accepted norms on how such deals are structured, and how risks are managed effectively.
All these activities are expected to continue even after we wind down our on-ground presence in these markets.
We remain present in 10 markets and are well positioned to support inflows of capital to the continent.
How is StanChart addressing the challenges of climate finance in Africa since COP 27?
Developed markets have the biggest job to do to transition their economies away from carbon by 2050. However, if they fail to simultaneously channel net-zero investment into emerging markets, there will be serious implications for the planet.
Africa faces tough transition-financing and climate challenges. Many of these markets are reliant on carbon-intensive industries, and many developed economies are also reliant on the products that these industries create.
Our studies show that emerging markets need to find an additional $94.8 trillion of transition finance, to successfully transition to net zero by 2060. Funding this themselves would be a huge setback to development.
We understand the critical role that banks, and other financial institutions, have to play in accelerating the transition to a low-carbon economy by financing activities aligned with the Paris Agreement.
Standard Chartered is accelerating the deployment of sustainability-linked finance, with propositions such as our Sustainable Trade Finance and Sustainable Account designed to help companies to implement more sustainable practices across their ecosystems.
There has been a decisive move into digital banking for StanChart over the past few years. What has the response been from the market?
In this post-pandemic economy, as more people turn to digital payment and e-commerce platforms, we are investing in more digital capabilities, alliances and partnerships. This includes providing a standard platform for global core digital services across our footprint.
In the AME region, for instance, we’ve increased our consumer base by half a million through digital-only banks, representing 50% of our legacy base. We have also seen an influx of fintech start-ups, funding and increased support for existing and new ventures in the region.
A strong model for an effective bank-fintech partnership involves identifying complementary skill sets and mutually supporting areas of expertise and capabilities that combine into unique value propositions.
Standard Chartered has been active in infrastructure lending in Africa, leveraging its global expertise to channel funds to Africa. What are the priority sectors and countries that the bank is engaged in and what are the challenges?
Inadequate infrastructure remains a major obstacle to Africa achieving its full economic growth potential. Most of the African continent lags the rest of the world in coverage of key infrastructure classes.
Estimates by the African Development Bank highlight that the continent’s infrastructure needs amount to $130–170 billion a year, with a financing gap currently in the range of $68 to $108bn.
Closing the gap matters and Standard Chartered can make a difference here, given our unique footprint as a bridge connecting pools of capital in our network to infrastructure needs in Africa.
Collaborative effort is necessary to narrow this gap, with public and private sector entities participating to back innovative funding techniques.
An example of our efforts in this space is a transformational project with the Government of Angola for the development of water production, purification, transmission, storage and distribution facilities in the capital city of Luanda. Once completed, this will improve access for over two million residents to potable water service in selected parts of South Luanda. The deal was one of the largest single term loan financings provided by commercial banks for an African sovereign during 2021.
How is Africa regarded as an investment destination for portfolio and direct investment? What are the main risks, for example forex shortages which are quite widespread, governance – or others? And which markets are top of the investor radar?
There is no doubt that investment opportunities in Africa abound. Five structural trends put the continent in a unique position for long-term international investment opportunities. These are the continent’s youthful population, increasing levels of urbanisation and abundance of resources – as well as the depth of financial services and technological infrastructure.
However, debt sustainability, rising cost of living, sovereign downgrades and defaults in several countries are just some of the major headwinds affecting those opportunities. The recent spate of military takeovers has added to the uncertainty.
For Africa to be seriously considered as a continent of opportunity, it has to come together to implement deep and structural reforms to improve areas such as political stability, policy coordination, ease of doing business, attracting foreign direct investment, and ensuring the African Continental Free Trade Area becomes a functioning regional economic bloc.
Barriers such as high tariffs and poor supply chain infrastructure raise trade costs, erode the competitiveness of goods and services, inhibit exports and generally stifle economic growth.
Nevertheless, Africa has substantial economic potential, and we see this particularly in markets such as South Africa, Egypt, Uganda, Kenya and Nigeria.
We are excited to be a part of the continent’s overall growth story.
Source: African Business