Over 50 members of the Isle of Man’s financial community turned out for the Standard Bank seminar on Africa, held on Thursday 13th June. The seminar identified why companies and investors should be looking towards Africa, and the various opportunities and challenges they face in doing so. Standard Bank flew over two of its staff from its South African office to give presentations: Allen Leuta, Head of Legal for Africa and Graham Baillie, Head of Standard Bank Private Clients’ Investment Services. Mark Hucker, Head of Corporate & Business Banking Offshore also gave a presentation.
Guests heard how the World Bank says Africa is on the verge of an economic take-off similar to China’s 30 years ago, with the region’s economy predicted to grow by over 5% in 2013. Host, Mark Hucker, said the recent flurry of high level research and media stories highlighting African opportunities is attracting interest: ‘The Isle of Man is in an excellent position to take advantage of the possibilities Africa has to offer. The strong legal and regulatory background, the close links to the UK, and the reputation as a well established and trusted jurisdiction make the island attractive to Africa, but going forward there is going to be a lot of competition. We have to show a genuine and long-term commitment to the Continent and an understanding of clients’ circumstances, needs and concerns.’
Allen Leuta told guests that the rate of return for foreign investment in Africa as a whole is greater than any other region: ‘The important thing is not to make investment choices on an incomplete picture. Africa is not a single story. To understand Africa you must embrace its complexities and its diversity.’
Graham Baillie said Africa is a frontier market but that the international community has seen what has happened in South African capital markets, and this is going to be mirrored across the African continent. ‘In the old days Africa was sometimes perceived as one big quarry with a bit of tourism round the edges. Now there is rising consumer income, rapid urbanisation which is bringing more people into the jobs market, abundant natural resources and a deepening and increasingly sophisticated financial sector.’ He also talked about the challenges those looking to invest will face: ‘Africa is not a short term option, the stock markets are relatively illiquid and concentrated, but Africa is also one of the few places to get uncorrelated returns - dollar returns on African markets are currently up around 27% this year.’
Following a break, the seminar guests also heard from Mark Hucker, who delivered a practical presentation on the approach to the perceived regulatory and compliance risks attached to African business. They heard how the risks are often over-estimated by those who don’t understand the continent but it is critical to have a local partner: ‘Unless you have somebody on the ground you cannot know and understand local customs. There are very real challenges for example: in conducting due diligence on somebody who has bought property by a handshake from the local chief; and in the still common African practice of facilitation payments which is in conflict with international anti-bribery and corruption laws. These things are beginning to change but you need somebody who knows the “real” price and whether a transaction is likely to be legitimate. Banks that serve local and international clients such as Standard Bank are now outpacing the growth of investment banks. You cannot be a suitcase banker - you have to get personally involved.’
During questions the issue of political stability arose. Allen Leuta, said that there are instruments to hedge political risk such as those from the World Bank or Political risk Insurance cover, but the outlook is generally improving: ‘Africans are taking their own initiative in creating stability and the positives far outweigh the negatives. They simply don’t want to go back to where they were before. Salvation lies in strong and growing institutions that help to ensure people cannot get away with poor practice. In short, use commercial instruments and local understanding to mitigate against political risk – and go beyond the newspaper headlines.’
Ian Hamilton, Head of CBB, IOM was very pleased with the attendance at the seminar and the response from guests: ‘I was delighted by the turnout today, it is evidence of the increasing interest in Africa and the continent’s potential for the island. Standard Bank is Africa’s largest bank and as such we are perfectly positioned to partner local businesses as they look to take advantage of this growing success story, this is just the beginning.’
Photo - from l to r: Allen Leuta, Mark Hucker, Graham Baillie, Ian Hamilton.
