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China and India offer good role models as well as opportunities for Africa, says Steve Booysen, Absa Group Chief Executive.
 Do you see the resurgence of China and India as threat or an opportunity for Africa?
China and India are in many respects role models for Africa, but both these countries are also potential business partners and markets. India and China are growth and development role models, because they have achieved excellent, consistent economic growth, they are putting an enormous effort into developing their human resources and technology so that these become productive assets and they are both investing enormously in infrastructure. We face many of the same challenges and can therefore learn from them.
India and China also present an enormous market opportunity. Both of these countries need our resources, they are big investors in gold and other precious minerals and they have over 2 billion consumers between them. African businesses should make an effort to become preferred suppliers to these markets, so that we do not only supply raw material, but value added products as well. Imagine, for instance, the impact on the South African viniculture industry if Cape wine and brandy products can become the leading wine and brandy brands in India and China.
The concept of IBSA (The India, Brazil, South Africa partnership for development) will be a good proving ground for developing partnering opportunities between Africa and the BRIC (Brazil, Russia, India, China) countries. There are many opportunities for these countries to pool their expertise, thereby becoming more competitive in our globalized world.
Concretely, what did the "Year of Africa" deliver?
The enormous investment of over £3 billion by Barclays to become the controlling international shareholder of Absa, is one significant example of the shift in perceptions about Africa. When a global financial institution like Barclays invests in the potential of Africa, the message is clear - Africa is at last becoming an investment target, not only a recipient of aid from the developed world. Barclays is also largely entrusting the management of their investment to Africans. This too, is a concrete vote of confidence.
| We should not underestimate the importance of this development. When the world starts seeing investment opportunities in Africa, it enables us to extend the development curve beyond aid. The next challenge is to encourage African consumers to become owners, so that financial institutions could mobilise their capital for African development and investment. In this way, we in Africa could fund our own growth and become independent of development aid over time. We should work towards a world where every African family owns a home, has savings in the bank for a rainy day and a reliable income in their old age. If this sounds utopian in the short term, it should not deter us from such an ambition for the future. |  |
"When the world starts seeing investment opportunities in Africa, it enables us to extend the development curve beyond aid. The next challenge is to encourage African consumers to become owners, so that financial institutions could mobilise their capital for African development and investment."
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Where lies the biggest opportunity for growth for the financial services industry in Africa?
The two biggest growth opportunities relate to infrastructure investment in the short term and retail growth in the longer term. There is also a real need for Africa’s consumer culture to become a savings culture, as economic growth broadens disposable income to more levels of society.
Africa needs substantial investment in infrastructure to develop its human and natural resources into productive assets for the future. This investment, rooted in government initiatives, international developmental initiatives and economic growth, is starting to take place and is expected to grow substantially in the next decade. Financial services institutions can play a significant role in effectively facilitating the flow of funds and in wise, innovative financing partnerships with governments, multinational institutions and the private sector.
Consistently higher economic growth will in time create a substantial retail opportunity. As more Africans have disposable income, they will become financial services customers for vehicle and home purchases, savings and investments, as well as other financial transactions. This is why Absa is continually working to find ways in which to drive down costs, to develop new products that will appeal to new niches in the market and to invest in consumer education that will enhance the ability of current and potential clients to become more knowledgeable about their choices.
Does ABSA Group have an AIDS in the Workplace programme for its employees?
Yes, Absa has a wide-ranging Aids in the workplace programme. Absa’s Employee Wellness strategy reflects the company’s own unique culture. In Absa we value the contribution of our employees to our success. The wellness of our employees therefore complements and embraces our human capital change themes, i.e. leverage human capital as an investment as well as enhancing employees’ ability to transform and change.
The overall wellness goal in Absa is to encourage our employees to stay healthy, longer, by taking a multi-dimensional approach supported by projects and programmes that intervene at the individual, divisional and system levels through promoting wellness, preventing illness and addressing the factors that influence wellness.
The primary goal therefore is to optimise the wellness status of our human capital through promoting wellness as a personal lifestyle of balanced wellness dimensions.Within the HIV/AIDS programme, Physical Wellness looks at promoting the adoption of appropriate life skills/styles. Absa People Management oversees the overall project management of the entire programme and monitors the health service providers.
The “I Know” project offers employees onsite health screening with Voluntary Counselling and Testing (VCT) and Health Risk Assessments (HRA). Employees are encouraged to use these services advantageously as an opportunity to find out their health status, improve on life styles and choosing health.
Through the “I Know” project, employees are able to optimise their health by knowing their health status. When they are aware of their health status, they can then adopt healthier lifestyles, achieve early diagnosis of chronic illness (specifically HIV/AIDS) and obtain the necessary treatment to maintain health and extend their productive lives.
Employees are referred into the Bankmed (medical aid) chronic illness and HV/AIDS programmes for early and optimal treatment.
Investors often perceive doing business in Africa as risky. What can the financial services sector do to lower or spread real and perceived investment risk?
We should not over-emphasise Africa’s perception problem, or use it as an excuse – Barclays is heavily invested in Africa, so why would other big businesses shy away?
The rest of the financial services sector would be serving Africa best by investing in Africa and thereby pointing the way for their clients. We at Absa and Barclays are credibly able to talk to our clients about investment opportunities and risks in specific industries or countries in Africa, because we ourselves are seriously invested in Africa.
The biggest challenge in Africa is to defeat poverty. There are actual examples in the world and in Africa of poverty being defeated, such as Japan and Botswana, to name two examples. The role of business and government in defeating poverty revolves around economic growth through mobilising capital, encouraging small business development and the development of intellectual and physical infrastructure, so that Africa’s resources become productive assets. These are more important than fighting risk perceptions across the globe.
Africa’s perception problem may be of a longer duration, but it is not unique in its perception challenges. The real question is how we as Africans consistently work together on specific growth goals and challenges to defeat poverty and shape our own future.
Public-private partnerships are often cited as key to implementing infrastructure projects in Africa. How could the finance community engage business in implementing such projects?
Wise infrastructure investment, based on sound business practice helps to make development sustainable. Take the example of housing infrastructure, which is close to my heart, because we at Absa are actively promoting home ownership, as part of our effort to encourage a savings and ownership culture.
At Absa, we are for example putting money into housing projects in central Johannesburg where we confidently expect a return on our capital, because our primary role is to invest our shareholders’ money wisely. For instance, as we work towards the realization of President Mbeki’s vision of Johannesburg becoming a premium world-class city, Absa has funded 35% of the R100 million Brickfields residential project. We provided a loan of R25.5 million over 120 months at an interest rate of prime less 1% and a further R10 million in equity. This is a business decision, based on sound business practice.
Brickfields is a prime example of a public-private partnership that works and benefits individual families. With 536 housing units completed, the project is being extended so that ultimately 727 families will live there. The Brickfields project provides a return on investment for Absa’s shareholders, while at the same time improving the quality of life for people in South Africa’s great world city. And it is sustainable.
Another example is the Olievenhoutbosch Ministerial Project, located southwest of Centurion, which will cost approximately R400 million to develop. The project combines the efforts of four leading role players - Absa, the National Department of Housing, the Gauteng Department of Housing and the City of Tshwane.
The development will consist of a total of 5,480 units, made up of 1,168 bonded, 3,049 subsidised and 1,263 rental units on 180 hectares. The project will be completed by March 2008. It will also accommodate 3 schools, 2 clinics, a public open space, religious facilities and industrial and commercial development.
Dr Lindiwe Sisulu, the Minister of Housing, said at the Olievenhoutbosch launch: "We welcome this partnership with Absa in the spirit of our Social Contract for Rapid Housing Delivery. This project will provide decent homes for many low - income people and the poor. We will build on this partnership until all informal settlements are eradicated by 2014.” Defeating poverty is possible.
Absa is not unique in this effort. I would like to credit my competitors for their involvement too. According to the Memorandum of Understanding between the Minister of Housing, the Banking Association of South Africa and the Chief Executives of Absa, FNB, Nedcor and Standard Bank, the banks will strive to deliver a minimum of R42 billion for new affordable housing in the R1,500 to R7,500 per month income households by 31 December 2008. Olievenhoutbosch is the first in a series of projects through which Absa will be involved with Government and other important role-players to help to address the housing demands of the country. We aim to provide 100,000 new stands for low income and subsidised housing with a goal of a minimum of one project per province by 2008.
At Olievenhoutbosch, it is planned that the rental stock will eventually be sold on deed-of-sale or instalment sale where the units are transferred to the purchasers after four years. Absa will consider taking up 50% of the mortgage units.
The litmus test for understanding whether our development focus is correct is when sound business practice results in wise investment that gives individual Africans a better life and a meaningful stake in their country. Both Brickfields and Olievenhoutbosch pass that test. |
