JOHANNESBURG — President Cyril Ramaphosa is set to have a state visit to India on 25-26 January. The visit will present another opportunity for Ramaphosa to drum up further investment for South Africa, following a major summit that he held late last year. India is increasingly becoming a key nation in global politics and business with the country set to become the fifth largest economy this year. Ramaphosa’s visit to the country, therefore, will be among his most important to date. One major South African company that already has strong ties to India is interestingly that of Rand Merchant Bank (RMB). And in this interview, CEO James Formby explains why SA businesses have to start taking a closer look at the Indian market. – Gareth van Zyl
This special podcast is brought to you by Rand Merchant Bank.
It’s a pleasure to welcome James Formby, the CEO of Rand Merchant Bank (RMB), on the line with me from Johannesburg. James, thank you so much for joining me on the podcast.
Thanks, it’s a pleasure. Thanks for having me.
You recently wrote a very interesting article on the India–Africa corridor and the need for SA businesses to factor India into their strategies. Now, India is said to become the fifth largest economy this year, with GDP growth of over 7%. Are SA businesses focusing enough on India do you think and, if not, why not?
I think there has been a number of SA businesses that have looked at India. I think often in the desire to diversify into different markets, India is perhaps seen as a very competitive market. But, it is also still a fairly tightly regulated market. So, perhaps South African investors who wish to invest offshore have been a little cautious. The exception has probably been mostly in the financial services industry, particularly in the insurance space. And, obviously, with ourselves being in the banking space, we’ve had a business there now for about 10 years. There have been investors from SA into that market, but it is certainly an attractive market that’s going to keep growing.
President Cyril Ramaphosa will be visiting India on an official state visit scheduled for 25 and 26 January. What are you hoping that SA will get out of that visit?
I think President Ramaphosa’s key mission (and I think it’s quite auspicious that he’s been invited at that particular time over there, during their Republic Day celebrations) will be looking to portray SA as a very attractive investment destination. I think there are many Indian businesses that have invested in SA over a period of time. There are also many growing and strong corporates over there. He would be looking to remind them that SA has a market that’s open for business, that’s open for their investment and that they would be invited to come to SA to invest.
James, how has trade between India and Africa grown over the years and how is it going to grow over the coming years, especially when you compare it to the bilateral trade of between China and Africa?
India isn’t quite as big as China but across the continent, as a whole, it’s been moving around a little bit in the last three years. It is linked to resources prices. It peaked at US$70-bn, but at the moment it’s about US$53-bn in the last year of trade between India and Africa.
We believe that that’s going to grow stronger over the coming years. I think it could reach US$150-bn by 2023, which is not that far away. I think it’s a combination of mineral exports from Africa and also oil and gas exports from Africa to India that will fuel its growing economy. It’s going to continue growing at 8% for the foreseeable future. But similarly, it’s also going to be about some of the large Indian corporates seeing the consumer market in SA and across the continent, as being attractive and building out their presence across Africa. Also, Indian companies seeing Africa as an attractive export market say, for example, for the likes of pharmaceutical products.
There’s clearly been a strong desire from China over the last decade to play in Africa, and that presence, as a result, has become very visible. But is there the same desire from India do you think?
I think that the desire is different on India’s part. The interest of China in Africa is very much politically led – the ‘One Belt One Road’ or the ‘Belt and Road’ strategy, which talks about Chinese investment into infrastructure projects etc. This is to create a sphere of influence, which includes Africa, but also includes Southeast Asia and Latin America.
I think that the Indian expansion is much more about business and trade, and India has always been an excellent trading nation. So, theirs is very much company led by privately owned companies. They’ve got an enormous depth of large corporates, but also emerging or smaller/medium corporates that, as they grow, are starting to see Africa as being attractive. Just the employment in their small and medium enterprise sector of the economy is about 450 million people – there’s an enormous depth there. The links between India and Africa then are actually many smaller and larger corporates, building links (trading links), across the continent and many of which have been established over a fairly long period of time.
Talking about those linkages, you as RMB, actually have an office and a license to operate in India. Can you tell us more about that?
We have a fully licensed bank in India. We trade in India under the name of FirstRand India and our interest really is in establishing this bank. It turns 10 this year and it’s been a presence that we’ve been building over a number of years by servicing the trade flows between the Indian sub-continent and Africa.
An example of a significant trade flow is India being an enormous importer of gold, in fact, the largest gold market in the world. This is clearly something that requires banks to facilitate. Our presence in India is therefore to service the trading relationships, but we are also able to provide other cross-border banking services between India and Africa. These include, for example, currency transactions, lending transactions, and advisory transactions. On the advisory side we are advising SA corporates or African corporates wanting to invest in India and similarly Indian corporates who want to establish a presence, say in Nigeria, Kenya or SA for example.
Just as the last question. What brief advice would you give SA businesses if they’re interested in exploring the Indian market?
I think it is a very attractive market, but it is also a complex market, which is still fairly tightly regulated, particularly in some segments. I think the key is to find attractive partners that are right for those particular markets to work with. It is also important to do one’s homework properly with the right input and advice so that when the time comes to writing a cheque, there’s a really good understanding of the opportunity and then of course, to make money out of that opportunity.
James Formby, thank you so much for telling us about the India–Africa corridor today.
Great, thank you very much and thanks for your time.
