8/17/2006

African economies draw increasing fixed-capital investment

Dennis Ndaba, Features Reporter - http://www.engineeringnews.co.za/

There is currently an increasing amount of foreign direct investment into economies in Africa, as well as aid and donor funds going into projects, particularly for infrastructure development, says Standard Bank acquisitions director Kevin Wingfield. He points out that the African continent is going through a period of improved political stability and, hence, improved fiscal and monetary stability in a number of countries, which will be good for growth. Standard Bank is seeing a lot of South African companies entering the African market and wants to follow suit to create a one-stop banking shop for them.

“There is huge potential for us in our ability to generate assets and also an opportunity to support the aid and donor agencies through providing banking services on the continent, which is a huge focus area for us,” elaborates Wingfield. He adds that bureaucracy, as well as trade barriers in a number of economies on the continent, are creating barriers to trade, as there is reluctance to open up markets for exports.

“There is lack of efficiency at ports and airports, including corrupt customs officials and the trade tariffs can be restrictive.” Standard Bank is looking for opportunities in sub-Saharan Africa. “There are opportunities in a number of sectors. Adding value to the primary commodities has not happened.

“The African continent is rich in minerals and energy resources, but not good at adding value to base commodities, whether soft or hard,” notes Wingfield. He acknowledges that, while there are many talented people in Africa, sometimes it is difficult to get competent people, because of skills shortages.

“One of the things that we find as a foreign business is that the markets in Africa are all different. In doing business, one has to take cognisance of local dynamics and the way of doing business and adapting practices to that of the market. “If people come with an arrogant ‘South African’ business attitude, they won’t be successful in those markets,” he warns.

Standard Bank aims to establish a link with local partners to gain insights into the local market and access to the right people. From a banking perspective, the company is concerned about corporate governance in some institutions, as it is still in its infancy. There are businesses that do not even have financial statements, which pose challenges when they approach the bank for credit. In a number of economies, there is limited diversification and a huge concentration of the economies in a specific industry. Further, lack of regulatory and judicial infrastructure makes it difficult to secure asset titles.

“Banks play a key role in intermediating financial systems that new businesses need to grow. Many African states still need to develop capital markets that improve the environment that allows companies access to equity or debt financing,” says Wingfield. “In Africa we see a significant potential for growth, as we continue to look for opportunities to invest in a number of markets. Where we have established our presence, we want to expand and Standard Bank is excited about the opportunities in Africa,” he concludes.