Barclays Africa has a unique perspective on the African continent- it has operations in twelve African nations, and is one of the most important banks in the region. So when Barclays Africa’s Sisa Ntshona says there’s opportunity up north for small businesses, best to take heed. According to Ntshona, many of Africa’s high-growth countries have put a special emphasis on growing the SMME sector with BEE-like programmes mandating local suppliers and so on. All of this adds up to huge opportunity for small businesses, and, of course, for the bank that serves them. Ntshona talks about the factors driving growth in Africa, and how they vary across countries and regions. He also points out that South Africa is by far the least attractive African economy these days, and talks about the reasons for this relative underperformance. – FD
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ALEC HOGG: It is predicted that Africa will have six or seven (we’re not sure. It depends on who you want to follow) of the fastest-growing economies in the world, over the next decade. This economic growth presents a significant opportunity, particularly for small businesses. Sisa Ntshona, Head of Enterprise Development at Barclay’s Africa joins us for more. Before we go into the specifics of small businesses, how is the Barclay’s/Africa get-together settling down? You now have quite a footprint on the continent.
SISA NTSHONA: Absolutely, I mean it’s a huge business. We are present in 12 different countries, and it’s the alignment that we’re actually working on. How do you put all these pieces together, so we have one seamless type of system? Therefore, if you’re a client of ours in Kenya how do you become known in Botswana, South Africa, or Mozambique – where we exist? There’s a lot of work behind the scenes, basically, to get those pieces together.
ALEC HOGG: So if you have a business in Johannesburg and you would like to start a business in Kenya, can you open a business account there with Barclay’s, and just transfer as you would, ordinarily? Are the exchange controls on the continent easier?
SISA NTSHONA: Sure, at the moment I don’t think we’re there yet. It’s where we’d like to go. You would now definitely be within the Barclay’s system, but you’d still have to comply with the local requirements, basically, depending on the jurisdiction that you’re in.
GUGULETHU MFUPHI: Hasn’t that been challenging, though, the regulations in the different countries not necessarily merging quite well?
SISA NTSHONA: Well, I think it goes to the bigger discussion around opportunities in Africa. We tend to think of Africa as one big block of a country, but its 54 different economies, with 54 different jurisdictions, different cultures, and different currencies. Yes, this has definitely been one of those interesting challenges for us. How do you report on the word ‘currency’? The Barclay’s Group is obviously domiciled in South Africa, yet we also belong to a parent in the UK who reports in pounds. You can imagine. There are many calculations behind the scene, just to make sure we speak the same language.
ALEC HOGG: We needed you here yesterday. Two guests from America were telling us about how Africa is a place where there’s only lions and elephants.
GUGULETHU MFUPHI: They think that’s how we see ourselves.
ALEC HOGG: No, that’s how they see us. That’s how the Americans see us. ‘Africa – such a beautiful country’…we know. Mauretania versus Mauritius…
SISA NTSHONA: As soon as they hit the ground they tend to get different feel and view, and to really understand that it’s not just one big homogenous base. There are different levels of advancement – of the economy levels, as well. You have to choose your space very well and it’s all about niche, I suppose.
ALEC HOGG: People talk a lot about the enterprise of the Indians, and the enterprise of the Chinese but the shining eyes of people on this continent tell me that we aren’t far behind and perhaps even right up there.
SISA NTSHONA: Definitely, if you look at the rest of the continent, it’s really probably being driven a lot around necessity, where there isn’t the liberty of big companies and going for corporate jobs so they really had to hustle from day one, I suppose. If you look at Lagos now, ten years ago, it was a different place and the shopping centre was literally the drive from the airport to your hotel. You could buy everything there from bread to groceries, etcetera. Now you’re starting to see shopping centres being set up, so the economies are definitely evolving but it’s been more out of necessity that people have had to set up businesses and hustle their way through.
GUGULETHU MFUPHI: Naturally, there must be some challenges as well. Are there any significant stories that stand out for you regarding entrepreneurs on the continent, and some of the game-changing innovations that they’ve brought about?
SISA NTSHONA: Yes, and I think you have that right. Innovation is definitely a game-changer. What we’ve seen is that we tend to ‘quantum=leap’ the rest of the world in terms of technology. Look at Kenya, because of a not very dense banking infrastructure – very few branches – people have found an innovative way to move money around, and that’s through the mobile telephone. It has never been done anywhere else in the world. In my view, we will ‘quantum-leap’ the world. It’s not just catching up, but because of the specific challenges that we have, we have to do things differently. If you look at cellular phones/prepaid phones: it was really invented out of South Africa – ‘please call me’ etcetera. It’s about observing what is happening around us and entrepreneurs find a way of making what they see a bit easier for the intended audience.
ALEC HOGG: Where do you play? You talk about the SMME’s, but financially, what kind of numbers? We know the big multinationals love Africa and they want to make investments. They aren’t going to look at a couple of million dollars, and that’s an area, I guess, where there is opportunity.
SISA NTSHONA: Yes, if you look percentage-wise, what really drives a continent are its SMME’s – traders and people who are selling goods and services. You’re starting to see a different trend happening in the market where previously big companies just come and set up. If they mined, they built a railway line straight to the harbour and took everything out. You’re starting to see more and more government starting to say ‘well, let’s see you get your roots into the country’. It’s about big companies’ relationships with smaller suppliers. Where do you buy your goods and services? Where do you procure your raw materials? You’re starting to see an integration of it between big corporates and small SMME’s to get stuff up and running. Look at a successful example like Shoprite/Checkers. There’s no way they can transport fruit and vegetables up to Angola, for example. They’ve had to look inwardly, and that starts to stimulate the economies of those various countries.
ALEC HOGG: So do you finance those guys, if they come to you and say ‘I have this contract with Shoprite/Checkers. I’ll be producing X amount of cauliflowers per week. I need help’?
SISA NTSHONA: Yes, 100 percent: that’s a very big focus of ours – are really those corporate linkages that you’re starting to see. It’s not just a South African or an African phenomenon. It’s a global phenomenon where you’re starting to see these big companies saying ‘I want to start doing more business with SMME’s’, particularly women-owned SMME’s. Many of them are starting to say ‘what impact can I have in the environment that I operate in?’ and it also makes sense for them in the long run, because the better the economies do wherever they’re at, the more clients they have to sell their stuff to, so you kind of see that activity happening. In terms of innovation, as well, the best innovators come from SMME’s.
ALEC HOGG: Gugu will tell you that – again – our guests yesterday said that women are better businesspeople. I’m surprised you didn’t pick up on that and jump right in. I saw the smile.
GUGULETHU MFUPHI: I did, and I’m optimistic. Are there any regions that are really flourishing with regard to that East Africa versus the West, and how does Sub-Saharan Africa compare?
SISA NTSHONA: Again, if you look at the different parts of the continent, they have different drivers. We found that the East is very driven around technology. There are more apps used in Kenya than probably the entire continent, for example. They’re really in the technology space. In West Africa, you’re now starting to see many mineral resources: gold, oil, and coal starting to be discovered over there, and there’s that sense that this time will be different. Sub-Saharan Africa is a mixture of economies. You have Angola also over there. You’re starting to see a lot of activity happening around the Mozambique space with gas, and the oil explorations starting to happen. Agriculture is also quite big and South Africa will be one of the big partners over there. Tourism still tends to drive a lot of our growth area within South Africa, and also in the Kenya space so it’s a nice diversified type of portfolio of the economic sectors that are doing very well. You have to start realising something. While the rest of the continent is probably averaging five or six percent growth, we’re not doing that well as a country, in South Africa. The latest revision is something like 1.9 percent – that’s’ trouble. Yes, you can say they’re starting off a low base, etcetera, but if you’re an astute businessman (or lady), and you’re running a business, you’re going to look at where there’s growth. I make the example of Ethiopia 10/15 years ago, ‘We are the world’ used to donate money to them and everyone was hungry and poor, etcetera. Well, now you have 18 million people and that economy is growing at 8 percent. Surely, you want to be part of that activity. That’s the next phase, and I always try to challenge our clients and customer out there. ‘Do you see activity happening in the rest of the continent, and what is your relationship going to be with those economies there?’
ALEC HOGG: That’s awesome. Just to take a South African angle here, we’re very strong on procurement. Are other governments on the continent?
SISA NTSHONA: In South Africa we call it BEE, and one of the elements of the BEE is around the procurement space. However, if you stripped out the word BEE and you looked for the essence, you would see it in all economies. In Ghana, the localisation type of rule of law has been put into place and again, it drives activities. You are welcome to do business here, but you have to source locally. You have to train local people, and hire local staff. The days of flying in ex-pats have kind of gone. Again, it exists all over the show, and it’s not just an Africa phenomenon or a South African phenomenon. It’s global. The United States has a huge element around localisation, and it’s about ‘how do you become part of the local economies to start spur them and create that spark’, so we are very encouraged. We’re now starting to see big companies saying ‘I want to do business with SMME’s. If they don’t meet my standards, for example, I will help them meet my standards’ as opposed to sitting at arm’s length and saying ‘well, I can’t do anything. I have to ship everything else’.
GUGULETHU MFUPHI: So there are some interesting changes taking place on the continent
SISA NTSHONA: It’s very exciting.
GUGULETHU MFUPHI: I’ll be sure to pick up on them one day, as entrepreneur, right Alec.
ALEC HOGG: Yes, one day…
SISA NTSHONA: Let me just give you an example. Maputo is a 45-minute flight away and yet I think, psychologically, as a country (South Africa), we tend to think it’s far. Cape Town is further away than Maputo.
ALEC HOGG: Correct.
SISA NTSHON: Maputo is pumping.
ALEC HOGG: Well, Ferrari is even closer.
