Withstanding economic headwinds

Africa’s prospects for sustainable, long-term and inclusive economic growth

Despite the economic headwinds that we experienced during 2015, our financial results demonstrate our franchise’s resilience and ability to continue delivering sustainable shareholder value.

Ted Woods, group remuneration committee chairman

Africa is our home and we are committed to the expansion and deepening of our business across the continent. We work with clients and regulators to support economic growth and diversification, thereby counter-balancing the slow-down in emerging markets and the related decline in commodity prices.

Why this is important

The global economy continues to demonstrate relatively weak economic growth. This has resulted in a slowing of trade, a prolonged decline in commodity prices, and investment outflows from emerging markets. Sub-Saharan Africa economic growth is estimated to have declined to 3.5% in 2015, from 5% in 2014.

This decline has led to speculation that Africa may no longer be as attractive an investment destination, however, Standard Bank is confident in Africa’s long-term economic prospects. Despite a slowing down in some economies, notably Nigeria, South Africa and Angola, many countries, particularly in East Africa, continue to demonstrate impressive growth.

Africa’s rapidly urbanising population and growing middle class, the diversification of African economies into manufacturing and services, large-scale investment in infrastructure and growing inter-regional trade, are driving internal African growth, making the continent less reliant on external markets than it has been in the past. Energy demand is rapidly increasing, and Africa is beginning to establish itself as a renewable-energy hub. The continent is on track to become the second fastest growing region in the world by 2025, with GDP of USD4,5 trillion.

Growing numbers of consumers, small enterprises and large corporations are looking for appropriately tailored financial solutions to meet their needs. SBG’s history and track record on the continent and our on-the-ground presence in 20 countries place us in an excellent position to serve this growing market. We remain deeply committed to operations across the continent, and we expect to continue to see strong growth in our African operations.

How we manage this area

Our on-the-ground presence and deep understanding of the local environment, together with clear lines of accountability at country and group level, enable us to responsibly balance risk considerations with growth opportunities. Our extensive risk-modelling processes include assessment of the likely impacts of national and regional macroeconomic trends and forecasts on business activities, and on clients and customers. This informs our risk appetite, and enables us to identify any required mitigating actions to ensure we stay within our risk parameters.

Our management teams are supported by well-defined governance, compliance and risk management frameworks. This ensures that in all our countries of operation, we stay true to our principle of ‘doing the right business, the right way’.

IT systems are impacted by, and facilitate compliance with regulatory changes. With the increasing pace of regulatory changes impacting financial services, a significant amount of IT expenditure is allocated to ensuring compliance with regulatory requirements while also driving business value. An enhanced anti‑money laundering capability was deployed in South Africa in February 2016; the programme was built on the modernised core banking platform. Good progress has been made with our risk and data aggregation and risk reporting programme to meet the Basel Committee of Banking Supervision requirements and with SAP capabilities to deliver against the requirements of IFRS 9 (International Financial Reporting Standard).

As an integral part of the business within the group, IT adheres to the relevant group governance frameworks, standards and policies.

Standard Bank is confident in Africa’s long-term economic prospects.

Standard Bank’s strategic partnership with ICBC gives us a competitive edge in connecting Chinese investors to African opportunities. In December 2015, SBG and ICBC jointly sponsored the Focus on China-Africa Co-operation (FOCAC) summit. SBG hosted briefings for Chinese public and private corporations, highlighting investment opportunities in Africa. As part of the event, SBG and ICBC signed a Memorandum of Understanding (MoU), witnessed by President Zuma and China’s President Xi Jinping, which includes a commitment to jointly support up to 100 new infrastructure and industrial projects across 30 African countries, at an investment of USD80 billion. The event raised SBG’s profile with African governments and Chinese businesses operating in Africa, and further strengthened the SBG-ICBC brand in Africa.

Equator Principles

SBG was recently appointed the new chair of the Equator Principles Association from June 2015. This makes us the first African bank to be elected to this position.

The Equator Principles are a set of voluntary guidelines that assist financial institutions to determine, assess and manage the environmental and social impacts of the projects they finance. They apply to activities in respect of project finance and related advisory services, project-related corporate loans, and bridge loans. Members require their potential project to demonstrate that they have in place systems to manage social, environmental and human rights-related impacts, and to consult with affected communities in relation to potential impacts. While the Equator Principles are voluntary, they are legally enforceable against loan recipients when incorporated into loan agreements.

Standard Bank has been an active and engaged member of the Equator Principles Association since its adoption in 2009. The Association is managed by an elected steering committee of 12 global banks, with Standard Bank the only African representative. Debt underwritten through the application of Equator Principles forms a significant component of our investment in Africa. Standard Bank closed nine ✓ Equator Principle projects in 2015, eight of which were projects financed, while the other project was an advisory deal initiated in 2015. The graph below illustrates the number of projects financed by SBG and the relevant category indicating the potential social and environmental risk potential. Additional details about our environmental and social process, as well as a further breakdown of the projects.


Opportunities and challenges


  • Standard Bank has a diversified portfolio of clients across our African countries of operation and extensive experience in the mining and oil and gas sectors, which we continue to prioritise. However, we recognise that economic diversification is crucial to driving sustainable economic growth across Africa. Accordingly, we are actively expanding our client base and service offering in other economic sectors, including key growth areas such as telecommunications.
  • Similarly, we are working to maximise the opportunities presented by growth in East Africa, including for example the opening of a representative office in Ethiopia.
  • While we continue to serve a diverse range of multi-national clients, we are also focused on developing tailored offerings for African businesses with the potential and appetite to grow into African markets.
  • We share our clients’ long-term vision and ambition for their businesses. We are actively partnering with the entrepreneurs and medium-sized companies that will grow into tomorrow’s African multi-nationals.
  • We continue to invest in IT in the form of more tailored and personalised service offerings, more stable, efficient and cost-effective customer channels, and enhanced customer security. We are confident that the considerable cost of this investment, which has impacted on return on equity in recent years, is fully justified by the benefits it will enable us to deliver to our customers and clients.
  • With its growing middle class and low levels of insurance, sub-Saharan Africa represents an enormous potential market for SBG’s Wealth business. We are working to expand our presence in this area. Additional information


  • Many African economies remain dependent on commodity exports. The prolonged commodity price decline has severely dented national growth in a number of SBG’s key markets, notably Nigeria and Angola (oil), Botswana (diamonds), Zambia (copper) and South Africa (gold, iron ore and platinum). This has impacted on all of Standard Bank’s business. While most of these economies are expected to experience a gradual pick-up, national growth rates will be slower than in previous years. SBG is working closely with clients in the impacted sectors, and at country level, to ensure that risk associated with slowing growth is appropriately managed and mitigated.
  • Continued infrastructural weaknesses, including electricity supply constraints, in a number of our countries of operation risk diminishing the attractiveness of the region as an investment destination. Public private partnerships of the type required to deliver infrastructure development need to offer commercially attractive terms. This is challenging in certain countries owing to currency fluctuations and the rising cost of dollar-denominated debt.
  • We are committed to working with African governments to structure and deliver appropriate infrastructure funding instruments. However, in the Basel III context, commercial banks cannot readily make long-term loans to be used, in effect, as equity – as this impacts on our capital and liquidity requirements. SBG continues to work with governments and DFIs to secure the necessary partnerships to deliver major infrastructure investment on the continent.
  • Africa has the potential to be a major food provider to the rest of the world. However, water scarcity, lack of irrigation, and underdeveloped water management infrastructure make Africa’s farmers vulnerable to climate change. Many sub-Saharan African farming businesses are struggling under the impact of a prolonged regional drought. SBG is working with these clients to assist them to manage risk, and to improve their resilience to climate change in the future.
  • While Africa’s middle class is growing, many countries continue to experience low consumer confidence and high levels of poverty and unemployment. SBG is working with our partners in the public and private sectors across Africa to promote inclusive economic growth and job creation, thereby supporting the ongoing development of a prosperous consumer class with money to save, spend and invest.

Performance overview

Key performance indicators


The process of realigning SBG’s resource allocation to support our vision to be the leading financial services organisation in, for and across Africa, is largely complete. Despite significant challenges in all markets, SBG performed well and achieved 27% growth in headline earnings to R22 billion (2014: R17 billion).

SBSA grew headline earnings 11% to R13,4 billion, accounting for 60% of group headline earnings. Our operations in ROA achieved 12% growth in headline earnings, to R5,5 billion, contributing 25% of the group’s total headline earnings. The impact of the rapid decline in oil and other commodity prices was mitigated by our CIB businesses’ diversification across a range of other sectors and regions which continue to show growth opportunities. Our PBB franchise in countries outside South Africa remains robust, growing from R104 million to R192 million.

Our capital position remains strong with a total capital adequacy ratio of 15.7%. A total dividend of 674 cents per share was declared, an increase of 13% on the prior year. Our ROE is our most relevant measure of performance over time as it combines all critical drivers. This year we were pleased to enter into our medium-term target of achieving between 15% and 18% ROE, with a 15.3% ROE in 2015. A detailed discussion of our financial performance can be found in our 2015 annual integrated report.

A return on equity of 15.3% was achieved this year, aligned with our medium-term target.

Progress in 2015

Helping to re-shape the Namibian economy

The Development Bank of Namibia (DBN) is a limited company incorporated in Namibia and was established as a public company through an Act of Parliament. The Ministry of Finance is the sole shareholder and seed capital was provided by the Namibian government. DBN’s purpose is to provide finance to private and public sector companies, SMEs and emerging micro enterprises working in infrastructure development. This includes physical infrastructure such as roads, power and water, and social infrastructure such as medical facilities. The objective is to enable businesses to develop and expand, in the process creating new jobs, and supporting the prosperity of communities and individuals.

Standard Bank of Namibia acted as sole lender, providing a loan to the DBN to the value of NAD670 million over a period of 12 months. The funding is lent onward by DBN, to support strategic economic projects in Namibia. The facility is a game changer in terms of the size of the local market.

Partnering for development

SBG has developed significant strategic business alliances to partner for development and meet our objective of growing our footprint across the African continent. Initiatives undertaken include:

  • A partnership with South Africa’s Eskom to sell USD1,25 billion 10-year fixed-rate bonds into the international capital markets. The funds raised will enable the state-run utility, which produces more than 95% of South Africa’s and 40% of Africa’s power, to fund its generation expansion programme.
  • A USD250 million loan agreement with the Japan Bank for International Cooperation (JBIC). The credit line is co-financed by Mizuho Bank Ltd, with JBIC providing a partial guarantee for the co-financed portion. The funding will be used by SGB to on-lend to green energy projects in sub-Saharan Africa.
  • A business cooperation agreement with Woori Bank, one of the largest commercial banks in South Korea, aimed at capturing more banking business from Korean companies who are increasingly operating or investing in Africa.
  • A partnership with Resilient Property Income Fund Limited, Capital Property Fund Limited and Fortress Income Fund Limited, who are key participants in the success of the Siyakha Education Trust. The Siyakha Education Trust recently received R1 billion in its third debt facility from SBG, highlighting how innovative financing can be used to help develop black empowerment initiatives in the property sector that benefit broader communities.
  • An MoU with ICBC and Export-Import Bank of Korea whereby the three banks will seek opportunities to participate in projects in support of their clients investing in Africa. Together we will look to build a ‘solid partnership’ in providing sufficient and timely financing for these projects, especially when Korean or Chinese companies are involved.

Forward focus

  • Maintain focus on Africa and further entrench our footprint by identifying new regions of opportunity.
  • Work with African governments to support inclusive growth, thereby supporting the long-term viability of the markets in which we operate.
  • Support African companies in their expansion on the continent, particularly into countries such as Angola and Mozambique.
  • Connect international companies with market and investment opportunities in Africa.
  • Develop low-cost investment and risk products tailored for the African market.
  • Test new models for credit solutions in the small-scale farming sector in Malawi and Zimbabwe.


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