South Africa: what was hot and what was not in 2010
It was the year of the World Cup, when South Africa showed the world it could organise a successful global event, manage security, avoid the horror scenarios and confound the doom mongers. The deafening sound of the ubiquitous vuvuzelas did not drown out the sound of airplanes landing, carrying not just football fans but also CEOs and bankers looking for opportunities. Looking back on a momentous year, some sectors and some people stood out:
- Renaissance Capital:
The Russian investment bank made its mark this year, pushing relentlessly to achieve its goal of having the most extensive footprint of any bank in Africa. After buying well-regarded BJM Securities in Johannesburg RenCap beefed up the team, poaching analysts and investment bankers from both local and international rivals. The bank has also expanded across Africa, offering competitive packages to lure top talent. "RenCap have been very active and aggressive, and are now getting involved in different kinds of deals," says Mike Atter, associate director of recruitment consultancy Robert Walters SA. "The impression is they have only just started."
- First Rand:
First Rand showed that having a clear strategy and acting early in a crisis pays off. At home FNB has been expanding its EasyPlan branches, targeting the 14m South Africans with no access to basic banking services. Abroad it is quietly growing its presence in new African markets. Analysts' forecasts of "superior earnings momentum" proved correct. While rivals retrenched, First Rand hired. While rivals had to revise their earnings estimates downwards, FirstRand said its second half results are expected to increase by 20%.
- M&A
This was the year that South Africa registered on the big global M&A map. US giant Wal-Mart made a formal $2.3bn bid for Massmart and Japan's NTT bought Dimension Data for $3.2bn HSBC's bid for Nedbank, although withdrawn, stirred up interest in the market. "There have been big deals in South Africa and there is no reason why this shouldn't continue in 2011," says Veronique Parkin, partner at Heidrick & Struggles in Johannesburg. The rest of Africa did well on the M&A front as well, as global investors sought new sources of growth and diversification in emerging markets. India's Bharti Airtel acquired Zain Africa, a provider of wireless telecommunication services, for a whopping $10.7bn. The value of M&A activity in Africa has risen to $54bn, an increase of 52% compared to 2008.
For every winner there is a loser, as in a football match. Just as Bafana Bafana failed to crown the achievement of hosting the World Cup with a victory on the pitch, others failed to live up to expectations in 2010.
- Standard Bank:
Africa's largest bank by assets started the year on a high and ended it on a low. At the beginning of 2010 it was forecasting 20% earnings increase and planning a full-steam-ahead expansion in Africa. In October it made the shock announcement it was shedding over 2,000 jobs, some in London but mainly in Johannesburg. To cap it all, in a voluntary trading update in December it warned that earnings for the year could fall by as much as 12% as "the pressures on banking revenues evident in the first six months of 2010 have intensified in the second half of 2010. In addition the group will be incurring substantial retrenchment costs."
- HSBC/Nedbank:
It seemed a done deal: HSBC would buy Nedbank, the smallest of South Africa's "big four" banks, for 4.5bn. Then suddenly in October HSBC changed its mind, without giving a reason. The British bank had spent two months poring over the books, but the decision seems to have more to do with the abrupt change of CEO at HSBC than with any hidden problems at Nedbank. So the South African bank was left like a jilted bride at the altar, while HSBC, like a fleeing groom, has not covered itself in glory. More importantly, questions remain as to how the emerging markets specialist now plans to achieve its stated goal of increasing its presence in Africa.
- Fund management:
With South Africa crawling out of recession and many organisations licking their wounds after taking a battering, activity was muted at best. "For the fund management industry it has been a year of consolidation and counting the money, with no attempts to expand the business or to hire people," says Atter. "The lack of activity means they are struggling to attract people at the top even when they are looking to fill a position." It can only get better in 2011.
