Two large foreign banks have chosen to leave South Africa as President Cyril Ramaphosa and Deputy President Paul Mashatile continue to push SA as an attractive investment destination during their tour of the UK.
BNP Paribas and HSBC have decided to vacate their South African operations and announced that they would be leaving this year, subject to regulatory approval.
HSBC, a UK-based bank said that it concluded its last deal with Absa and FirstRand at the end of September.
This comes just as Mashatile continues his tour of the UK in order to help bolster trade and investment between the United Kingdom and South Africa.
Earlier this week the deputy president said that government was committed to building an inclusive economy in South Africa and emphasised that the Government of National Unity (GNU) is working around the clock to make SA’s economy more inclusive.
“My delegation and I are here in the United Kingdom to build on the outcomes of the State Visit by President Cyril Ramaphosa in 2022, with a specific focus on how we can work together to ensure inclusive economic growth, address and respond to climate change challenges and the Just Transition, and ensure a balance and increase of trade between our two countries,” Mashatile said at Bloomberg roundtable discussion.
Mashatile noted that a priority for the GNU was addressing poverty and the high cost of living in SA and strengthening bilateral partnerships in several sectors with the UK.
Such sectors include trade, investment, skills development, science, innovation, tourism, and the Just Energy Transition.
“All of these major sectors aim to advance the GNU’s strategic priorities of achieving sustainable economic growth, alleviating poverty and the high cost of living, and developing an ethical, capable developmental State,” the deputy president said.
“Our people voted for us to collaborate to create better employment opportunities and equal economic growth in all facets of society. The GNU is the best tactical option for us to move the country ahead, putting our differences aside for the benefit of our great nation,” he added.
Mashatile also wanted to make it very clear and reassure those who have business interests in SA that the GNU is working together to create a conducive environment for businesses to strive.
“As the new government, we will continue to hold the United Kingdom in a special place in our hearts, not only due to our historical ties but also because of the immense potential for collaboration and growth that exists between our two countries.”
Is South Africa bleeding foreign investment?
Despite Mashatile’s resounding optimism to bring in foreign investment, seven international companies have left South Africa this year.
These companies include, Shell, AngloGold Ashanti, Rolex, BP and TotalEnergies.
A blow to Africa
The loss of BNP Paribas and HSBC will have a significant blow to SA’s economy as the international banks provided investor confidence and served as a conduit for foreign capital inflow into SA.
Kokkie Kooyman, executive director & portfolio manager at Denker Capital said that the loss of these two banks will have a major impact on South Africa’s ability to get new foreign capital.
He made this comments on the Money Show with Bruce Whitfield earlier this year.
“It is sad, it is really sad because Africa and South Africa need capital to grow. We do not have enough capital ourselves,” Kooyman said.
“To create jobs and economic growth, we need offshore capital to come into the country via our stock market or by international banks lending to companies in South Africa. It is a net negative when international banks,” he explained.
Kooyman also said that the departure of these banks will mean that more strain is placed on SA banks.
He noted that local banks can try to fill the gap left by HSBC and BNP Paribas but they can only do it for a while.
There will be a need for for more foreign cash flow and these banks will not be able to supply it and this could lead to a higher risk of financial instability, Kooyman said.
IOL BUSINESS