What is Standard Bank’s footprint in Africa and the DRC?

We are the largest banking organization on the continent, with a presence in 20 countries. We are also the largest bank by assets. In the DRC, where we manage more than US$300 million in assets, we have been present since 1992, following our acquisition of ANZ Grindlays. Over the last three years, we have made a considerable capital investment into the country, both in terms of cash capital and infrastructure capital. Indeed, we have completely reengineered our business in the DRC, including new IT systems and technology. We spent US$12 million putting that in place. We became primarily a corporate investment bank, so we do not look at retail banking anymore. We also increased our net equity to over US$45 million.

How important is the mining industry for Standard Bank?

Across the continent mining is very important for the Standard Bank group. In the DRC we are probably the biggest bank in the industry. We provide financing to the big multinational miners as well as the different suppliers to the mining industry. Because of our relationship with the Standard Bank group, we are able to support any kind of transaction in the sector. For example, with one of our mining clients we were able to facilitate a US$500 million financing.

How attractive is the DRC for mining investment?

The DRC has huge mineral deposits across a diversity of minerals: copper, cobalt, gold, diamonds, tin and others. There is an estimated US$24 trillion of mineral reserves in the DRC.

The ore grades are very high and the yields are very good, so, for mining companies there are huge returns to be made in DRC. Literally 60 km from Lubumbashi, in the Zambia copper-belt, grades are much lower. That said, the DRC faces other challenges that need to be addressed. While important players like Barrick, Glencore, Ivanhoe and others are already here, majors such as BHP Billiton, Vale, Rio Tinto and Anglo American need to see a change in the macroeconomic and socio-political situation in the country in order to enter the sector locally.

President Félix Tshisekedi has started making the right impression by addressing corruption and improving the judicial system to encourage foreign direct investment, which is a good start and the government will need to continue to do a considerable amount more to address the socio-political and socio-economic situation in the country.                    

Today, DRC is the largest exporter of copper in Africa and one of the largest in the world. With a population of over 80 million, there is a strong workforce ready and able to develop this mining industry.

One must also remember that at a certain point, DRC was the second most industrialized country in Africa after South Africa and had significant industry, such as motor car manufacturing, large textile businesses, huge agriculture development with exports of good quality coffee, cocoa, cotton and others. It is therefore not unforeseeable that the country can again rise up to take its rightful place as a leading nation on the continent.

How has COVID-19 affected the industry in the DRC, and what pace of recovery do you expect?

Covid-19 has primarily been felt on the slowdown in China, which is the biggest importer of both copper and cobalt from the DRC. We have seen price reductions in both metals, but, as of May 2020, China is starting to reopen its businesses, so trade flows will increase again. I think recovery will take time. I do not think that China can switch on its engine and be flying at the same speed as it was. So, recovery will not be necessarily a ‘hockey stick’ or a ‘V’ curve, it may be flatter.

What does this mean for your banking business?

We have had a very good 2020 so far, leveraging of the re-engineering of our business that we have put in place as part of our overall restructuring in 2018-2019. This gives us the opportunity to ensure that, notwithstanding the challenges, we can still operate profitably.

Through the digitization of a number of our systems and platforms, our clients can safely transact with us from wherever they are and, with the straight through processing that has been implemented, there is greater level of efficiency, quicker turn-around time and better operational results for both the clients and the bank.

Surely, 2020 will not be 2018, which was a very good year for banks in the DRC. In 2019 some banks started feeling the impact of higher capital needs. The Central Bank required banks to have a minimum of US$30 million of capital, and with the low growth of assets in the market, returns on this capital and on assets has been affected. The increase of capital to US$50 million has now been postponed to January 2022 as a result of one of the measures the Central Bank put in place to support the industry during COVID-19 pandemic. We are also likely to see some more consolidation in the industry, like the acquisition of BCDC by the Equity Bank, as banks consider the requirement to increase their capital further and there may be some M&A opportunities arising from this.

What is the opportunity to grow in the DRC, considering the low penetration of banking?

Banking penetration rates in the DRC are very low. Up until very recently, this has been a cash environment. We have started to see a little bit more movement in the major cities and towns towards digital banking systems and also card payments.

Another issue is that the adoption of internet and telephone banking is still very low. The cost associated with internet and smart phone technology is very high making it unaffordable to most people. I know that the telco’s are working on this to improve the rollout of data and phones across the country. In a country like Gabon, which only has 2.5 million people, you have a 130% penetration of mobile phones. Other countries have between 80% and 120%. In the DRC, penetration rate is just 30%. This needs to ramp up and we of course want to provide digital banking services as Standard Bank. In preparation we have set up excellent online banking platforms and have recently introduced straight-through processing in our foreign currency transactions, which makes operations more efficient for clients. We are also moving away from a cash environment to a digitized platform, which makes banking a lot more efficient and productive for clients, while it also decreases risk as we do not have to move large amounts of cash from one center to another.

Would you like to add a final message to our audience?

Standard Bank has been present in the country for 28 years and has a demonstrated commitment to the country. Africa is our home and we drive her growth. The same is true for the DRC.

Our objective is to become the number one corporate investment bank in the country.  We will continue to improve our platforms and services to make sure that, from the clients’ perspective, we cater to their needs.