Standard Bank

Commentary

South Africa sums up a lot of what is good in Africa – and what is not so good. The country has a lot of problems, with a lot of violence and people living in poverty. At the same time, it possesses enormous mineral wealth, and has a tradition of being a business friendly environment - it is ahead of many African countries in this respect. Also, the years of isolation during the Apartheid sanctions mean that many local subsidiaries operate with a greater degree of independence than is usual.

What does this mean for multinational companies doing business there?

Basically, South Africa works. There is a lot of bureaucracy, and there are laws to promote the advancement of certain ethnic groups. Our peers’ activities there vary in size, but they are generally profitable. There are exchange controls, but the currency is convertible, and can be hedged onshore: offshore hedging is available in both deliverable and non deliverable forms, and does not drive a significant premium.

The main points:

• Banking can be a challenge. A lot of international banks have scaled down their presence, or are exiting the market – HSBC is the latest example. There is a concern that a lot of effort may go into moving to an international bank, only for them to withdraw from the country – this happened to one peer with HSBC.
• For the banks who remain, peers expressed the view that....

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