Although it is the most talked about, China is not the only Asian economy looking to Africa – and bankers are moving to facilitate the flow of capital.
A case in point: South Africa’s Standard Bank announced a partnership on 23 April with the largest bank in South Korea to provide services for its clients doing business in Africa.
The agreement with Woori Bank, which has been in the process of privatising from state ownership since 2010, aims to support the South Korean lender’s clients even though the bank has no presence in the region.
By ADRIENNE KLASA @ This is Africa
“[A] partnership with a strong African bank like Standard Bank will enable Woori Bank to extend its banking relationship with key Korean clients to its non-presence countries,” says Robert Cleasby, Standard Bank’s global head of financial institutions.
South Korean investment and trade with Africa has increased exponentially over the past decade, paralleling trends in African nations’ relationships with other countries in Asia including Japan, Indonesia, Malaysia and Singapore. Foreign direct investment rose from $24.3m to $287m between 2000 and 2010, while bilateral trade rose from $6bn to $25bn between 2000 and 2011.
But even as the business relationship has grown, financial institutions out of Asia have been slower to adapt. Comparatively few Asian commercial banks have a long established presence in Africa. Risk aversion and perception issues may play a significant role.
“I think the Asian banks generally are not attuned to the African context, and it is very hard for them to assess the risk there,” Raoul Ghosh, director for Middle East and Africa at International Enterprise Singapore, told This Is Africa during a June 2014 interview.
Some have sought to build partnerships with players with a longer track record on the ground, in similar models to the Standard Bank-Woori deal. Barclays and the China Development Bank, for instance, expanded their partnership agreement to include deal-making in Africa in March 2014, building on CDB’s aquiry of a 3.1 percent stake in the British bank earlier in the year.
Meanwhile, a much trumpeted 20 percent buyout of Standard Bank by the Industrial and Commercial Bank of China (ICBC) in 2006 has so far failed to produce the high profile deals it was expected to.
Meanwhile, more established banks are adapting their services to cater to the growing numbers of Asian clients in Africa. Citigroup, which opened its first branch in the region in South Africa in 1958, now has tailored services to facilitate banking for Chinese clients at many of their outposts in Africa.
“We have set up Chinese desks in a number of countries, so for example we have Mandarin speakers in Kenya, Nigeria and South Africa, which makes it easier to connect with our clients in China,” Jim Cowles, Citigroup’s CEO for Europe, Middle East and Africa, tells This Is Africa.
These examples might suggest that Asian banks will soon be crowding out traditional players may be premature. If anything, banking services seem to be crowding in – with plenty of demand to go around.