Speech to the 14th Annual African Renaissance Conference: ‘Connecting Africa’
24 May 2012
Sim Tshabalala, Chief Executive, The Standard Bank of South Africa
Honourable Ministers, Premier, MECs, Mr. Mayor, Programme Director, Ladies and Gentlemen, it is a
great honour to be invited to appear on this platform with you. I am sincerely grateful for this
opportunity to offer some thoughts on Africa’s renaissance; and on what banks can and should be doing
to stimulate and support our continent’s rebirth.
A strong feature of African culture is respect for â€" and learning from â€" our elders and ancestors. We can
indeed learn a great deal from history, and from the achievements of past generations. As the Swahili
saying puts it, ‘If you refuse the elder's advice you will walk the whole day.’
By the way, honouring and learning from our ancestors is something we have been doing a lot of at
Standard Bank this year. We will be 150 years old in October. We are spending some time this year
reflecting on what our century-and-a-half in Africa means. We are deeply proud of our long heritage in
this country and this continent, and of our growth from a single building in Port Elizabeth to become the
largest bank in Africa, with operations in eighteen African countries and assets of R1.5 trillion. We
remain just as deeply committed to at least another 150 years of service to, and partnership with, our
fellow Africans.
But to return to my main theme: what light does the history of the European Renaissance shed on our
African one? First, I would argue, it offers a warning: economic growth, human development and
cultural enrichment in one place can have very high costs elsewhere. The glories of the European
Renaissance depended to a disturbingly large extent on the looting of the mineral wealth of South
America and the enslavement of several million people, mostly from Africa. I trust that Africans, as we
get richer, will not lose our sense of universal human connectedness. We must ensure that our
Renaissance enhances fairness and inclusiveness.
Second, for all its elements of economic exploitation, the European Renaissance also saw the emergence
of the philosophy of Humanism. Drawing on ancient Greek and more recent Islamic sources, European
thinkers began to emphasise the inherent value of each human life, the importance of fostering human
dignity, and, above all, the sovereign power of human agency. Listen, for example, to Leon Battista
Alberti, architect, philosopher, banker, and one of the most prominent of the Italian Renaissance
Humanists. Alberti rejected the power of ‘Fate,’ ‘Fortune,’ ‘Circumstances’ and other impersonal superhuman forces to shape our lives. Instead, he insisted, ‘men usually are the cause of their every good or
every evil... Fortune was never more influential than... just laws and virtuous principles, prudent
counsel, strong and constant actions, love of country, faith [and] diligence....’
Third, looking at the long-run history of world economic development from the European Renaissance
onwards shows us â€" as Alberti would have emphasised - that there is nothing ‘Fated,’ inevitable or
permanent about African underdevelopment or about western dominance of the global economy. As 2
the economic historian Angus Maddison has shown, Africa’s income per head actually exceeded
Europe’s at the height of the Renaissance, five hundred years ago. Even by the time the European
Industrial Revolution was starting to gather pace, in 1820, Europeans were only on average 2.7 times
richer than Africans. This is a significant gap - but it is no larger than the present income difference
between Gauteng and Limpopo. By the year 2000, however, the average westerner was fully 19 times
richer than the average African.
Looking at China through the lens of Maddison’s data is equally fascinating. In 1950, Chinese per capita
income was half of African income, and less than 5% of western income. By 1990, Chinese income had
increased four-fold to reach 12% of western income. And then the Chinese economy really started to
pick up speed, growing at an average of eight percent a year until the present day. Chinese GDP per
head is now 25% of western average income; China is the second-largest economy in the world; and
more than half of the world’s economic output is produced in Asia, largely thanks to the rise of China
and India.
Western economic dominance, in other words, started relatively recently, and is now clearly coming to
an end. The world economy is reverting to a more balanced and normal state. This is not to say that
westerners are going to get poorer â€" but rather that they are quickly being joined in their material
abundance by over a billion Asians. In fact, on current trends, China’s economy will become absolutely
larger than the US economy by around 2020, and the average Chinese will be just as prosperous as the
average American by around the middle of this century.
The fourth set of lessons that we can draw from an examination of Europe’s economic history amounts
to a useful ‘to do’ list for Africans as we seek to ensure that our current strong growth spurt stabilises
into several decades of fast growth, job creation and sustainable human development. In addition to
the violent exploitation I have mentioned, the first stages of Europe’s economic take-off were fuelled by
the relatively early adoption of stable property rights and an adequately reliable system of commercial
justice; by technological innovation, especially in transport; and by financial innovations â€" such as the
Medici and Rothschild banking networks â€" which greatly facilitated trade. The subsequent phases of
western growth have been fuelled by further waves of technological innovation; by regional economic
integration; and by sustained public and private investment in infrastructure, helped by the great
European and American investment banks, starting with the French Credit Mobilier in the middle of the
19th century. Credit Mobilier, by the way, was a truly seminal institution: it aggregated the savings of the
increasingly prosperous French middle class and invested them in railway and other infrastructure
projects throughout Europe.
The more recent economic rise of China adds further important items to the ‘to do’ list. Among these, I
would emphasise following an economic reform path towards a competitive market-based economy
that - while it may not satisfy theoretical purists - makes sense for local conditions; concentrating on
growing exports; and focussing on opening the economy to inward trade and investment. And - to
quote a recent study of Chinese industrialisation by two distinguished international economists - ‘most
important, heavy and sustained investment in both production facilities and the infrastructure that
undergirds industrial development.’3
To summarise my argument so far: The European Renaissance warns us not to lose sight of fairness and
inclusion; reminds us of the central importance of human dignity; and inspires us with the power of
sovereign human agency. Furthermore, a look at the economic history of the world since the European
Renaissance shows that - if we use our free human agency to make the correct policy choices - whole
regions can make the journey from poverty to wealth in a relatively short period.
Ladies and gentlemen, what is really exciting is that our continent has already taken more than a few
steps along this journey. After decades of post-colonial stagnation, Africa’s growth rate stepped up to
above 3% from the mid-1990s. It stepped up again early in the current century to around 5%. According
to the IMF, sub-Saharan Africa will grow at nearly 6% in 2012, and will contain seven out of the world’s
ten fastest growing economies over the next five years.
There is every reason to be optimistic that Africa’s takeoff will continue for decades to come. This is
thanks to our young, growing â€" and increasingly healthy, well-educated and urbanised - population; our
rich endowment of the commodities essential to the world economy, and particularly to the continued
rapid expansion of the BRIC economies; and the extraordinary information and communications
technology revolution that is sweeping Africa, creating previously undreamt-of economic opportunities.
The world has noticed these trends: foreign direct investment in Africa has more than doubled over the
last decade.
The challenge before us now is to ensure that Africa’s Renaissance does indeed continue. We need our
economic growth rate to stay high and, indeed, accelerate even further. And we want this growth to be
fair, inclusive and sustainable. I believe that the African banking industry can and, indeed, must make
important contributions to both of these goals.
First, banks and growth: Our continent could grow even faster - perhaps even reaching the ‘Chinese
rate’ of 8% - if we could follow the Chinese example of ‘heavy and sustained investment’ both in
infrastructure and in productive industrial capacity. We need much more of both forms of investment to
allow us to export our commodities quickly and efficiently and, even more important, to enable us to
transform our commodity endowments into higher-value-added products and services to trade within
Africa and globally.
The latest World Bank global estimate is that, if a country can increase its infrastructure investment by
10%, it will grow one percentage point faster each year. The returns on infrastructure investment in
Africa may be even larger: the World Bank argues that if all sub-Saharan African countries could upgrade
their infrastructure to the level of the best in Africa (Mauritius), the continent as a whole would grow
around 2 percentage points faster each year. It is therefore very encouraging that Africa is now able to
spend around US$72 billion a year on infrastructure. But I believe that we need to invest even more,
even faster, and a lot more efficiently, so that the developmental impact of every dollar is maximised.
And this is where banks have a major role to play. There are now some 700 African and international
banks operating on the continent. Even as some banks in the developed world have run into trouble,
Africa’s banks have grown fast. The financial services sector in Africa grew at an annual growth rate of 4
15% between 2004 and 2008, and now contributes 8% of the continent’s GDP. We have, in other words,
a rapidly increasing capacity to arrange financing for infrastructure and industrial development.
Let me give you a few examples from the bank I know best. Take our Lekki Toll Road transaction in
Nigeria, where we provided a groundbreaking solution â€" 15-year Naira-denominated finance traded
from our London desk. Another major African first was our partnership with Industrial and Commercial
Bank of China to fund the construction of a 600MW power station in Botswana, which is by far the
largest and longest-tenor transaction in this market, and has also enabled us to provide new investment
products to local pension funds. Another practical way in which we have helped to deepen Africa’s
capital markets has been by arranging a series of successful Initial Public Offerings for corporates in
Tanzania and Nigeria.
Here at home, we are particularly proud that we currently have a 45% market share in financing the first
round of South Africa renewable-energy projects, underwriting nearly R19 billion in debt. Our projects
will produce over a gigawatt of new energy for South Africa, will create nearly 6000 construction jobs,
and will generate a saving of nearly a million tons of carbon a year to be traded in the international
carbon credits market. Talking of projects that generate tradeable carbon credits, we are very pleased
that in the year of Standard Bank’s 150th anniversary, our biggest lower-income solar water heater
project is in the Nelson Mandela Metro, where it makes a major positive difference to the lives of
thousands of people in the townships around our first home in Port Elizabeth.
Banks, of course, also specialise in helping trade to flow by providing the financial services required to
minimise risk and maximise the profits of international exchange. These include currency trading and
hedging, insurance, pre-export financing and international invoice discounting. We at Standard are
bullish about the prospects for trade within Africa, and particularly for trade between South Africa and
our partners in SADC â€" South Africa ran a R46 billion trade surplus with our SADC neighbours in 2011.
However, our optimism is tempered by the recognition that â€" at just 10% of Africa’s total trade - intraAfrican trade is still very low by world standards. It is regrettable that African countries still erect
formidable red-tape barriers between each other. We could learn from the European example here.
Before leaving the topic of what banks can do to support investment-led growth, I’d like to suggest that
it would be very useful to hold more conversations between the African public and private sectors about
creating infrastructure-specific government bonds and establishing dedicated infrastructure finance
banks. In my view, the long-term assets that would be created through these forms of financing could
well be an excellent match for the long-term liabilities carried by insurers and pension funds.
Turning now from growth itself to quality of growth: What should Africa’s banks be doing to ensure that
the African Renaissance is inclusive and sustainable? As with industrial and infrastructure investment, I
believe that the answer should be ‘a lot.’
The most obvious way in which we can assist is through our Employee Wellness and Corporate Social
Investment programmes. Again, I hope you will permit me to use Standard Bank examples: Our
employee wellness champions provide HIV/Aids and general wellness education and support to the
bank’s customers and the broader community in all our African operations; and we have seen some very 5
impressive results from our anti-malaria campaigns. In Nigeria, for instance, malaria is down 30% among
our staff thanks to the bed net programme we started last year.
Not to underestimate their value, but these direct interventions are probably our smallest contribution
to inclusive and sustainable development in Africa. For instance, I mentioned our contribution to Africa’s
electricity infrastructure development and its impact on the continent’s growth prospects. The same
investment also directly transforms lives by freeing people from reliance on dangerous, expensive, and
environmentally damaging sources of light and energy such as paraffin lamps and wood-burning stoves.
Freed from these burdens, people can spend more time on directly productive activity and on
education. One recent study found that household income rose by more than a quarter, and school
enrolment by more than 10%, after being connected to a reliable source of electricity such as solar
panels or the grid. These are enormous gains, and are leading directly to more dignified and more
independent lives for current and future generations
Africa’s banks are making an even larger contribution to inclusive and sustainable growth by working
hard to increase the proportion of Africans with access to formal bank accounts. Let me say at once that
we are not doing this for altruistic reasons: we expect to make good profits in this market. But this is
truly a situation in which banks will be able to do a great deal of social good precisely because we are
spurred on by our search for profit. At present, only about 10% of Africans have formal bank accounts.
Many African banks are energetically finding ways to grow this percentage. Standard Bank, for instance,
has a dedicated Inclusive Banking unit that uses cell phone technology, staff drawn from local
communities, and the tills of existing local shops to bring transactional banking services to several
million people in previously unbanked informal settlements and rural communities. We now have over
5 million Inclusive Banking customers in South Africa. Once again, the development impacts are
significant both for the newly banked customers and for the owners of retail stores. For the customers,
having a formal bank account enhances personal safety and dignity and â€" as a recent London University
study has shown â€" actually raises their incomes by helping them to save and to manage their
expenditure cheaply and efficiently. For the small entrepreneurs who are now our partners, becoming a
Standard Bank ‘Access Point’ agency means both more security (because it reduces their cash float) and
more customers - because people are attracted into their shop by the banking services on offer. As a
result, many Access Point agencies have been able to take on more staff. Take, for example, one of our
partners not so far away from here in Section L, Umlazi. As he says, ‘this product involves the
community... and the more people realise this, the better for everyone in the community.’
By way of conclusion, ladies and gentlemen, I’d like to say a few words about how, in my view, we
Africans should respond to the shift in economic power from West and North to East and South. I think
it is important for us to remember that the ‘old rich’ are in relative rather than absolute decline. The
United States, Europe and Japan will remain very important trade and investment partners for Africa;
and the BRICs are becoming their equals rather than their replacements. It follows that Africa is not
replacing one form of dominance or dependence with another.
Instead, as our continent develops, it is rising to its rightful place in a multipolar world, in which Beijing
and Washington, London and New Delhi, will be of equal importance to us as cultural, intellectual and 6
economic partners. If we are wise â€" and I’m sure we will be â€" this emerging economic and social reality
will create many new choices and opportunities for Africans. These are choices that we must get right,
and opportunities that we must explore to the full.