banking association feature
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SA Mag - Issue 21 - BANKING ASSOCIATION FEATURETRANSCRIPT
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Cas Coovadia, managing director of the Banking Association of South Africa, talks to South Africa Magazine about the
industry’s progress, the eurozone crisis, opportunity in Africa and the future of banking.
Banking
T he financial problems facing Europe are causing
worldwide panic and we are in a dangerous new phase of the debt crisis.
If Europe’s troubles spread to the banking sector, the contagion effect would be inevitable and South Africa could be further affected.
However, domestic financial institutions’ exposure to European debt is still relatively low.
Those are the views of Cas Coovadia, managing director of the Banking Association of South Africa.
“South Africa has a developed and well-regulated banking system, comparable to that of any industrialised country,” he says. “Our banks navigated successfully through the worst banking crisis in living memory. This was not luck, but rather a result of
excellent business acumen and sound regulation. As a result of those measures, our financial institutions’ exposure to European debt is relatively low; importantly our banks are well capitalised.
“They are not going through the sorts of challenges here that they are in Europe and America. But, having said that, they are working within a fairly constrained environment. The broader economy, or real economy, has been impacted on by what is happening in Europe, which is still our largest trading partner and, as a result, there has been a downturn in South Africa – the demand for credit thus has reduced.
“Overall, South African banks have largely escaped the crisis experienced by global financial institutions; the sector’s balance sheet is solid,” Coovadia adds. “South African banks also have a sizeable buffer to absorb liquidity pressure.
“I think European leaders, though, probably need to do a lot more to prevent the crisis from spreading and worsening, and to address the concerns of developing countries, which are innocent bystanders, should the contagion affect their economies.
“Emerging market economies have been hard hit by Europe’s debt crisis and South Africa’s rand has been rendered extremely volatile by the uncertainty. South Africa is particularly vulnerable to toxic effects of the eurozone debt crisis because, like I said before, it is our major trading partner and also our current account deficit is primarily financed by international capital flows.
“Yet, the fact is we are in a very good position, on the whole.”
Banking Association of South Africa FEATURE
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By Ian Armitage
You might forgive some scepticism. Earlier this month, Moody’s downgraded South Africa’s debt outlook from stable to negative, in the face of low growth prospects, strained public finances and rising poverty and unemployment.
So why is Coovadia so confident, and what’s next for our banks?
“Everyone’s looking at Africa,” he says. “There has been a steady rise in investment on the continent, which certainly has captured the financial world’s attention.”
Africa has been seen as something more than a curio in global investment terms since 2007, he adds, when the Industrial and Commercial Bank of China bought up a 20 percent share in Standard Bank, South Africa’s biggest lender, for $5.5 billion.
“Africa is flavour of the day,” Coovadia says. “If you look at Standard Bank, they have cut down on other global activity and are saying that they want to focus on Africa. Barclays is a significant
player in Africa. Citigroup and Standard Charter are two international banks that are significant players in Africa. Nedbank has a partnership with Togo-based Ecobank, which has operations in 31 countries across the continent. I could go on; the banks are obviously viewing Africa as a critical market.”
Africa is becoming more and more competitive, and there are broadly two sorts of banks operating in the region. First, the biggish locals, such as Standard Bank, which is active in 16 countries, and Togo-based Ecobank, which operates mainly in west and central Africa. Then you have the Western world giants like Barclays, Citigroup and Société Générale.
“Once seen as unpromising and overly risky, sub-Saharan Africa, and the continent generally, is now one of the world’s fastest growing emerging banking markets and an increasingly sought-after investment destination,” Coovadia continues. “Economies are expanding rapidly, while steadily increasing consumer affluence is creating fresh demand for banking services.
“There are challenges, but also undoubted opportunity. As an association, we are doing a lot of work with regulators to try and ensure reform and ‘proper’ coordination across the region. South African businesses are obviously investing heavily in Africa - the likes of Pick ‘n’ Pay or Spar, to give examples - and they need banking services for that. So, banks are following in their footstep to provide the services they
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Banking Association of South Africa FEATURE
Nedbank is committed to supporting green causes and providing green solutions.Over the past two decades Nedbank and its Green Affinity clients have donated almost R115 million to the WWF Nedbank Green Trust to
fund water conservation, community gardens, food security, climate change mitigation and adaptation together with other environmental projects. The recently launched Nedbank Water Stewardship Programme helps to improve access to and security of water for South Africans. Nedbank is also the first bank in Africa to achieve carbon-neutral status, the first to open a partially wind-powered branch and is the expert in providing green funding solutions – from carbon solutions and renewable-energy projects to green investment products such as the new
Nedbank Green Index. So, join the green bank with green answers for a greener future.For more visit www.nedbankgreen.co.za or contact us on 011 294 4444.
A greener future needs a green bank with green answers.
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RK BBDO
8012786
COP17/CMP7UNITED NATIONS
CLIMATE CHANGE CONFERENCE 2011
DURBAN, SOUTH AFRICA
Nedbank Lim
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o 4320116074, 135 Rivonia Road, Sandown, Sandton, 2196, South A
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frica and, for unresolved disputes, support resolution through the O
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an for Banking Services. We are an authorised financial services provider. W
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According to Brigitte Burnett, Head of Sustainability for Nedbank Group, this
understanding of the integrated nature of sustainability has long driven the bank’s approach to environmental and social sustainability. Both of these are facilitated through a simultaneous focus on its own profi tability and economic sustainability, for this is what ensures it can continue to have a positive impact. Burnett cites a number of initiatives that serve to illustrate this approach, and the value it unlocks for individuals, communities and the environment.
The group’s ‘social carbon approach’ to gaining the carbon credits needed for its carbon neutrality is a prime example of Nedbank’s integrated sustainability philosophy. The credits were obtained via voluntary investment in the Rukinga Project in Kenya and the Umdoni Gel Fuel Low-income Housing project in KwaZulu-Natal.
‘As the world’s fi rst Reducing Emissions from Deforestation and Forest Degradation (REDD) project to issue carbon credits,
While it enjoys a reputation as South Africa’s green bank, Nedbank Group’s sustainability efforts are focused on more than just environmental considerations. In fact, the group’s vision to become a leader in sustainability hinges on its recognition that true sustainability encompasses a number of interlinked and, in many respects, interdependent priorities.
Synergy is essential to sustainability at Nedbank
For enquiries, please contact the Head of Sustainability, Nedbank Group: Brigitte Burnett on:Tel: +27 11 294 3692Fax: +27 11 295 3692E-mail: [email protected]
the Rukinga Project is preventing the deforestation of Kenya’s Kasigau Wildlife Corridor, delivering signifi cant economic, social and cultural benefi ts to local communities, particularly through education, healthcare and job creation,’ explains Burnett.
The Umdoni Gel Fuel project has a similar dual sustainability focus. The project aims to reduce carbon emissions by providing 4 000 households in the region with energy-effi cient bioethanol gel-burning stoves and gel fuel every month. But just as important as the green value of this project, is the potential it has to ensure the safety of communities by preventing devastating fi res and the contribution it makes to the economic upliftment of the people of Umdoni.
‘It’s essential that businesses and individuals begin to recognise the potential inherent in the successful creation of a green economy, because it really is the only viable means by which we can create a sustainable future for our country and our planet,’ Burnett emphasises, ‘but it requires a fundamental shift in perception from seeing society, the environment and the economy as separate issues to recognising that they are inextricably linked and interdependent.’Nedbank is committed to supporting green causes and providing green solutions.
Over the past two decades Nedbank and its Green Affinity clients have donated almost R115 million to the WWF Nedbank Green Trust to fund water conservation, community gardens, food security, climate change mitigation and adaptation together with other environmental
projects. The recently launched Nedbank Water Stewardship Programme helps to improve access to and security of water for South Africans. Nedbank is also the first bank in Africa to achieve carbon-neutral status, the first to open a partially wind-powered branch and is the expert in providing green funding solutions – from carbon solutions and renewable-energy projects to green investment products such as the new
Nedbank Green Index. So, join the green bank with green answers for a greener future.For more visit www.nedbankgreen.co.za or contact us on 011 294 4444.
A greener future needs a green bank with green answers.
NET#
WO
RK BBDO
8012786
COP17/CMP7UNITED NATIONS
CLIMATE CHANGE CONFERENCE 2011
DURBAN, SOUTH AFRICA
Nedbank Lim
ited Reg No 1951/
000009/06, VAT Reg N
o 4320116074, 135 Rivonia Road, Sandown, Sandton, 2196, South A
frica. We subscribe to the C
ode of Banking Practice of The Banking Association South A
frica and, for unresolved disputes, support resolution through the O
mbudsm
an for Banking Services. We are an authorised financial services provider. W
e are a registered credit provider in terms of the N
ational Credit A
ct (NC
R Reg No N
CRC
P16).
For more information on Nedbank’s sustainability initiatives, please visit www.nedbankgreen.co.za and www.nedbankgroup.co.za/sustainabilityOverview.asp
need. The opportunities in Africa are certainly very good.”
Coovadia says the banking sector plays a central role in supporting South Africa’s real economy and went on to explain that more probably needs to do more to support it.
“We are very concerned that the sector is being overregulated at the moment; we need some sort of coordination and appropriate regulation to enable the banks to continue to grow, to enable them to remain at the cutting-edge of international best practice,” he says. “The sector also has a vital role to play in the ongoing transformation of our society, and our desire to bring a better life to all of our people. That is a big priority. But of course, we have to view it now from within the constrained environment, which makes it more difficult. We are working hard on all fronts.”
South Africa’s banks rank 2nd in the world for soundness, according to the Global Competitiveness Report 2011/12. It also ranked 2nd out of 183 countries for good practice in protecting both borrowers and lenders when obtaining credit for business (World Bank Doing Business Report 2011).
The future is bright.“It is, but we need to ensure that
we maintain the right balance to ensure we maintain, if not improve, our position; we don’t want to fall behind others in the global marketplace,” Coovadia says.
“Broadening financial services
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Banking Association of South Africa FEATURE
have an association that can facilitate anything that needs to be facilitated in a regulatory and infrastructure environment.
“I also think that there are African market conduct and consumer issues that will have to be addressed in the next few years and, again, we need to see sound market conduct – it is an essential component in managing risk. We would encourage that. At the same time, there is a fine balance between market conduct and consumer protection and prudential issues; we would like to see that balance maintained well.
to the unbanked is one of the critical challenges going forward and there is going to have to be a balance between an appropriately regulated sector, which is not drowned in regulation, and as a result becomes extremely costly, and broadening financial services to the unbanked, which will have to be properly managed.
“Over the next 10 years, I think there will be significant activity in Africa and we will want to work with African governments, regulators and others to see how, on the back of our banks’ expansion into the region, we can
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“Banks are the oil that grease the machine that is the economy. A healthy banking sector is critical for a healthy economy. If the banking sector is not healthy, if there is any uncertainty, then it immediately raises questions about the broader economy because the banking sector is the critical funder of the broader economy. Whether you like it or not, the banking sector is vital. As a result we need to ensure it is properly regulated, appropriately regulated and we don’t actually, in anyway, create or force conditions where banks have to actually do unsustainable business.
“Banks are important to the economy and it is absolutely essential to ensure that the sector is sound,” Coovadia concludes.
Website: www.banking.org.za. END
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