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Standard Bank Group Ltd, Africa’s largest lender by assets, plans to expand some of its operations on the continent and further digitize its systems to fend off fintech companies encroaching on its customer base.
Companies like Ant Group’s Alipay unit are looking to tap into emerging markets like Africa and its 1.2 billion people through financial services offerings. This is complicating the strategies of South African banks that have turned to the rest of the continent in search of growth, while their domestic market faces a recession, corruption and high unemployment.
“What really worries me is that Alipay partners with some of our clients speaking from the mainland,” Standard Bank CEO Sim Tshabalala said in an interview. “It is going to continue to be a significant expense.”
Lenders from Kenya to Ghana are grappling with a burgeoning mobile banking industry that allows anyone with the simplest phone to transfer cash. Mobile network operators, including MTN Group Ltd, Vodacom Group Ltd and Orange SA, also offer digital banking services.
Standard Bank’s expansion drive will focus on building larger businesses in French-speaking African countries and East African nations, the CEO said.
“We want to be at scale to take advantage of trends in East Africa, especially Ethiopia,” said Tshabalala. “There are no specific acquisitions on the table, but it is quite obvious that there will be a consolidation as a result of the crisis.”
Ethiopian Prime Minister Abiy Ahmed is privatizing state assets, while opening large sectors of the economy to foreign investors. Kenya, Tanzania and Uganda are poised to expand above the average for sub-Saharan Africa next year, according to estimates from the International Monetary Fund.
Virus application
Standard Bank’s digital investments allowed it to adapt its systems to allow the majority of its staff outside of branches to work from home after the outbreak of Covid-19, Tshabalala said. IT spending accounted for nearly 30% of Standard Bank’s operating expenses in the six months through June.
He started an app to keep track of staff working from home and to help with daily symptom checks, arranged transportation for essential staff, and paid bonuses to customer-facing employees.
In South Africa, where Standard Bank makes most of its profits, credit growth has slowed due to lack of demand in the wake of the pandemic. The number of people in employment in the country fell to the lowest level in nearly a decade in the second quarter, while gross domestic product contracted 51% quarter-on-quarter, the deepest drop since at least 1990.
“We will probably only return to the real GDP levels of 2019 by 2023, and employment will only recover to pre-Covid levels by 2024,” Tshabalala said.
There have been some encouraging signs, ”said Tshabalala. These include “announced advances with the agrarian reform, gradually eliminating obstacles to increasing the private sector’s electricity generation capacity, corruption lawsuits and advances in published infrastructure projects.”
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