Speaking as someone who has been deeply influenced by the Jesuit Order, Foluso’s comment strikes a deep chord with me. The Jesuits define love like this: ‘treating your colleagues as your friends; respecting everyone; not caring about superficial differences of race and culture; recognising human potential; and helping everyone to be free to do the best they can.’ I’m sure you’ll agree that the Jesuit understanding of love defines exactly what South Africa-Nigeria relations – indeed, all human relations – should aspire to.
I’ve been asked to talk a little about the Standard Bank Group’s strategy – which is also a pretty easy job. This is because our strategy is very simple and very clear. Our purpose is expressed in eight words: ‘Africa is our home, we drive her growth.’ Our vision is only a little bit longer: ‘To be the leading financial services organisation in, for and across Africa, delivering exceptional client experiences and superior value.’
In other words, we’re firmly committed to doing all we can to support and promote inclusive economic growth in Africa. We believe that the long-term profitability and sustainability of our business is inextricably linked to the development, stability and prosperity of the African continent.
We work to ensure that the services and products we provide make life better for our fellow Africans. We put our clients and customers at the heart of everything that we do, because we care about what matters to them. We recognise them as real people – parents, students, entrepreneurs, future Dangotes and Otudekos, owners of profitable businesses wanting to expand into new geographies and employ more people, and governments looking to leverage private sector funding for the development of public infrastructure.
We have businesses in 20 African countries and we’re also represented in the major global capital markets, including London, New York and Beijing. We use this large and deep geographical footprint across the continent and beyond – together with our strategic partnership with the world’s largest bank – the Industrial and Commercial Bank of China – to connect African markets to each other and to the wider world.
Sub-Saharan Africa’s strong and steady economic performance has amply justified our focus on the continent. At the most recent half year, for instance, the Group earned 25 percent of its profits in Africa beyond South Africa.
We’re confident that Africa will continue to grow sustainably for decades to come, despite the slow-down in growth rates over the past year in some of the continent’s biggest economies. We’re conscious of the challenges, of course. Declining commodity prices, moderation in the growth rate of global trade, reduced capital flows to emerging markets, pressure on local currencies, concerns about rising current account deficits, and rising debt costs owing to a strengthening dollar. It’s a daunting list of short- and medium-term challenges.
But we firmly believe that there’s still a great deal of momentum in Africa’s longer-term growth trajectory. And we’re certainly not alone in this view. Last month, for example, the World Bank forecast that sub-Saharan Africa would grow at 3.7 percent in 2015, rising to 4.4 percent in 2016, and 4.8 percent in 2017. Yes, these rates are slower than in the recent past, but they still make Africa the world’s second-fastest growing region, just behind developing Asia.
Talking of developing Asia, China’s exporters and services industries, and its income and consumption patterns, remain resilient. The Chinese economy will continue to make the inevitable and healthy transition from export-led industrialisation to consumer-driven growth. But the Chinese economy will continue to grow as it matures, at around 5 percent to 6 percent per year. In other words, the Chinese economy is now settling down to a more measured and sustainable – but unquestionably still impressive – rate of growth. There’s no question that it will continue to rely on its African trading partners for energy, minerals and metals to sustain that growth, and that Chinese companies will continue to invest in our continent as they seek expansion opportunities.
Unfortunately for all of us, our continent’s biggest economies, Nigeria and South Africa, have been in a bit of a slump – largely driven by severe electricity constraints in South Africa, and by the impact of the sharp oil price drop in Nigeria.
But we’re working on these challenges. South Africa is successfully rolling out a large scale renewable energy programme which, together with better management at our electricity utility and the ongoing progress on our new coal-fired power stations at Medupi and Kusile, is helping to ease our electricity supply constraints.
Nigeria is making significant progress in the diversification of its economy – and has seen extremely impressive growth in the services sector in recent years. Both countries have a rapidly growing consumer class.
And both are making the most of growth opportunities into neighbouring countries – our private sectors through expansion of our firms into the rest of Africa, and our governments by pursuing greater regional integration through initiatives such as cross-border payment systems, trade liberalisation and trans-national infrastructure projects.
The media, of course, likes to make a big deal about the allegedly intense rivalry between Nigeria and South Africa. For instance, when Nigeria undertook its re-basing exercise and firmly established itself as the largest economy on the continent, many in the South African media seemed to think that corporate South Africa should be groaning in despair. This was, frankly, as bizarre as it was naïve. A larger Nigerian economy can only be good for Africa and for the South African companies seeking to make a living in Nigeria’s extremely dynamic market.
The complementarity of our economies is clear to see. Nigeria has enormous energy reserves, a rapidly growing middle class with a keen appetite for consumer goods, a considerable infrastructure backlog, and an ambition to deepen its financial sector. South Africa is an energy importer, is home to several world-class construction companies, has developed tremendous expertise in supplying and marketing consumer goods and has – even if I say so myself – banks and insurance companies that are as sound and well-managed as any in the world, and that are very keen to promote the development of the Nigerian financial sector.
And of course Nigeria has Nollywood, a burgeoning, proudly African entertainment industry, generating $600 million a year and employing more than a million people … while South Africa limps along with our scandal-riven public broadcaster – ample proof that in some things, Nigeria is just way ahead of us!
To sum up, Nigeria and South Africa are natural partners and natural friends. But no real partnerships can avoid disagreements. In fact, if everything is always going smoothly, then you can be sure that your relationship is merely superficial.
The South Africa-Nigeria relationship is far from superficial. We must, therefore, expect difficulties from time to time, including those currently happening between the Nigerian authorities and two of the largest South African firms operating in Nigeria.
Here’s our perspective on the current controversy involving Stanbic IBTC. The issue in a nutshell is that in line with the Standard Bank Group’s operating model, a wide range of services – the largest component of which are IT services – are provided by the Standard Bank Group to Stanbic IBTC and our other franchises in Africa. I’d like to emphasise that charges for these services amount to approximately 5 percent of the total cost base of Stanbic IBTC.
The Nigerian National Office for Technology Acquisition and Procurement (NOTAP) has in recent years raised objections to the payment of these fees, resulting in the accumulation over the past two years of an outstanding inter-company balance between Stanbic IBTC and Standard Bank South Africa because these charges cannot be remitted without NOTAP’s regulatory approval.
The Financial Reporting Council of Nigeria has conducted an investigation into Stanbic IBTC’s financial reporting, and has asserted that the absence of approval for the franchise fee, and recent IT licence fees, from NOTAP invalidates the accruals raised for such intra-group items, and that the reflection of these accruals as liabilities on the financial statements is a misstatement. Essentially, in our view, the regulator has sought to reject the validity of an established contractual arrangement between Standard Bank SA and Stanbic IBTC.
We argue that the regulator is not in a position to make this call – and we are not alone in this opinion. To quote KPMG, ‘We wish to state categorically that KPMG does not agree with the decision taken by the FRC as it does not reflect the true position in this matter…. The decision of the FRC is erroneous on its merits and the process that led to it is significantly flawed and not in compliance with the requirement of the FRC Act.’
We believe that the charges for services and IT licences are correctly shown as liabilities under International Financial Reporting Standards, despite the fact that foreign currency payments due to the Group cannot at this stage be remitted in the absence of NOTAP approval. More fundamentally, we believe that these are not matters of financial reporting at all, but matters under the commercial discretion of Stanbic IBTC’s board of directors. We believe that we have been fully compliant with Nigeria’s laws and regulations, and with international financial reporting standards applicable in Nigeria. We are engaging robustly with the relevant regulators to make our case. However, we will not be joining the unseemly shouting match that has developed around this matter – public bickering and name-calling is incompatible with our values. But let no one confuse our commitment to evidence, reason and civility with weakness. We will defend our position with the utmost determination and to the fullest extent of the law.
We stand – we will always stand – firmly behind Stanbic IBTC’s chairman and executive team – all, as you know, individuals of impeccable credibility and the highest integrity. They run a bank that is widely recognised as a paragon of excellent governance – for instance, winning ‘Most Compliant Company of the Year’ from the Corporate Affairs Commission this past June. Our board, after all, is led by Atedo Peterside, the very embodiment of good corporate governance in Nigeria in his capacity as chairman of the National Council on Privatisation’s Technical Committee, and as founder and president of the ANAP Foundation. The people of Stanbic IBTC are, quite simply, the cleanest and best in the business. And to paraphrase the redoubtable General Douglas MacArthur, the ‘magnificence of their courage and fortitude under the present circumstances simply defies description’.
We remain committed to doing business in Nigeria, and to building constructive relationships with the Nigerian authorities based on clear communication and transparency. In the short term, we will continue to engage with the relevant authorities to resolve these issues as quickly as possible. In the longer run – indeed for as long as there is such a thing as the Standard Bank Group – we will continue to uphold the highest standards of corporate governance, of adherence to the law and of ethical conduct. And we will continue to expect the same from regulators and from everyone with whom we do business. This expectation emerges directly from our purpose: in order to grow sustainably, Africa must be committed to the rule of law, to the sanctity of contract, and to public institutions that exist to promote the good of the many rather than to cater to the extractive interests of the few.
Will these events dent our confidence in Nigeria, or make us think twice when advising others about investment opportunities in the country? Absolutely not. We have every confidence that the current dispute will be resolved fairly, appropriately and reasonably. Nigeria is an enormously important market for us, and for a great many other South African firms – including MTN of course. So when disputes such as these arise, it’s in everyone’s interests to play open cards, to commit to transparent and constructive resolution, and to learn from the process. That’s precisely what we intend to do.
So let’s return now to the bigger picture. More trade and investment between Africa’s two largest economies is a very good thing for both Nigeria and South Africa, and for the region as a whole. This being the case, we need to do more to identify areas for collaboration and mutual opportunity. And we need to work together to ensure that we uphold good corporate governance and meet all the relevant regulatory requirements.
Perhaps most important of all, we need to actively pursue deeper regional integration – easing regulatory barriers, improving regional infrastructure, and doing all we can to support the realisation of the planned Tripartite Free Trade Agreement and, eventually, the Continental Free Trade Area.
Initiatives such as the Nigeria-SA Chamber of Commerce, which celebrates its 10th anniversary this year, play a very valuable part in deepening the relationship between our two great countries. Standard Bank is therefore very proud to be associated with the Chamber.
Being excerpts of a dinner speech to the Nigeria-South Africa Chamber of Commerce as part of events marking the 10th anniversary of the South Africa-Nigeria Chamber of Commerce in Rosebank, Johannesburg, November 3, 2015.
Sim Tshabalala
Tshabalala is the chief executive of Standard Bank Group.
