Seeking the opportunity, managing the risk

Diana Layfield - Africa CEO, Standard Chartered
Diana Layfield - Africa CEO, Standard Chartered

Standard Chartered has a unique profile in Africa. Our business is balanced across 37 markets in East, West and Southern Africa – including 15 countries in which we have a full presence as a substantial local bank, and 22 in which we operate on a transaction basis. This provides a varied investment portfolio for our clients and covers 92% of Sub Saharan GDP. Africa has been central to Standard Chartered for over 150 years, but the opportunity and the global focus now feels palpably different.

When I visit our clients in other parts of the world — particularly Asia — the first thing they want to talk about is Africa.

The growth opportunities in Africa are increasingly evident: by 2035, the continent will have the world’s largest workforce, with over half of the population currently under the age of 20; the past 10 years have seen vast improvements in macroeconomic stability, and a burgeoning and fast-growing South-South trade and investment flow (with over US$170 billion of trade with China alone). Africa presents a significant opportunity across multiple sectors – with US$2.6 trillion of revenue expected by 2020 across resources, agriculture, consumer and infrastructure, of which US$1.4 trillion will be in consumer industries alone. The rapid emergence of a middle class, already equal in size to India, makes consumption a major driver of economic growth across the region, and is one of the most interesting yet less explored opportunities across Africa.

We are often asked about the risks of operating in Africa. While the existence of corruption, poverty and limited infrastructure mean that the continent can still be a challenging place to do business, we are seeing steady progress across most markets. Over the last 10 years, governance and political stability have improved significantly. Although the levels of education, employment and skills vary substantially across the continent, there are increasingly deep talent pools in a number of key markets. Importantly, while many of these challenges facing businesses in key African markets are no more significant than elsewhere in the world, the rewards on offer are substantial. Critically, it is this risk-reward equation that makes African investment so compelling – the returns remain among the highest in the world, while risks are diminishing and can be effectively managed.

Standard Chartered has found a number of factors helpful in harnessing this opportunity and managing the risks. The first is commitment: Africa rewards those who invest with a long-term agenda, both in respect of time and in conscious contribution to the economy and society. Second is local understanding: these are markets where critical information is not published or uniformly accessible and taking the time to build local relationships and teams is key (98% of our staff in Africa are African and many of our client relationships are multi-generational; both key to giving us a differentiated risk understanding). Third is people: ensuring that you hire, and more critically train, the best in the market can be transformational. Fourth is portfolio: although the growth trend for Africa is unequivocally positive, there will be more bumps in the road than in the case of Asian growth, and having the ability to balance risk across a number of markets can be extremely helpful.

Investors who take the time to understand the nuances, risks and opportunities in Africa will be rewarded.

Standard Chartered is a leading international banking group. It has operated for over 150 years in some of the world’s most dynamic markets and earns more than 90% of its income and profits in Asia, Africa and the Middle East.

This article is an extract from Ernst & Young’s Attractiveness Survey Africa 2013: Getting down to Business. Click here to download the full report

Countries: Africa, Central Africa, East Africa, North Africa, Southern Africa, and West Africa
Topics: Getting Started and Insurance & Risk
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