Banking on Africa’s strengths

Economic development in Africa is a subject often received with scepticism, and understandably so. But if you’ve attended one of banker Euvin Naidoo’s guest master classes at Wits Business School, and heard his views about the continent’s opportunities to compete globally, you’ll probably be impressed by the rational and succinctly argued case he puts forward.

More so, because 41-year-old Naidoo is considered in the hallowed halls of global business as one of the most powerful and influential role models and voices in Africa. His credentials tell the story. A graduate of the Harvard Business School, he made the Forbes list of the 10 Youngest “Power Men” in Africa in 2011.

Johannesburg-based Naidoo manages a credit portfolio across a 17-country pan-African banking footprint for Standard Bank, one of Africa’s largest financial services groups – but he stressed that the opinions in this article are his own and not that of his employer. He is also co-president of the SA Chamber of Commerce in America, a non-profit trade organisation facilitating the expansion of business, trade and investment opportunities between South Africa and the Americas.

Forbes describes Naidoo as a “leading advocate for Western investment into Africa” and, as a banker, he has worked in both New York and Johannesburg. His knowledge of operations, banking and financial services in Africa means he’s been invited to speak at institutions from the Wharton School of the University of Pennsylvania and the World Bank, to Columbia University and the Massachusetts Institute of Technology.

He’s a heavy hitter at the World Economic Forum (WEF) to boot, having been selected as a WEF Young Global Leader in 2009, and was last year elected onto its Global Agenda Council USA. At the WEF on Africa last year, Naidoo was selected as one of five “Rising Stars of Africa”, drawn from across the continent, and helped close the event alongside finance minister Pravin Gordhan.

Naidoo is also an alumnus of McKinsey & Co., where he started his career in the early 90s, having graduated with a BA in law and politics (summa cum laude) from the University of KwaZulu-Natal in Durban, from whence he hails. Here he worked on growth strategies, turnarounds and engagements in Africa within the financial services, telecommunications, metals and mining, and airlines–transport industries.

For the past four years, Naidoo has visited WBS for two weeks at a time as part of a personal commitment to engage and support MBA student leaders. His work, focused on management excellence and doing business in Africa, highlights the opportunities and talent that exist across the continent.

The pillars of Naidoo’s Afro-optimistic thinking are, in essence, based on the belief that, despite the naysayers, Africa does have the leadership talent in both the public and private sectors to create a regional economic bloc that can compete globally. Effective leadership is critical to success, he says, and he is heartened by the fact that he has met and engaged with many of the new, African-born leaders educated in the US, who are “as comfortable in boardrooms in Africa as they are in New York”. “We need to build this layer of leadership, and it’s essential to involve the youth. It’s a matter of unlocking potential, particularly among prospective young entrepreneurs. Mentorship is also essential,” he says.

In the finance sector, effective leaders are those who are “experienced in multiple aspects of business, including driving tight operational controls”. Naidoo’s experience in banking environments throughout the continent has shown him that while financial services are in their infancy in many countries, and frontier economies like Angola and the Democratic Republic of the Congo remain “challenging and expensive to do business in”, these and other nations have systems and services that are fast evolving to service the private sector better.

“Aside from South Africa, which has a solid and well-developed banking structure, Nigeria, Kenya, Ghana and Egypt stand out. Their banking services are increasingly better regulated, and there has been a huge growth in financial offerings, delivering more accessible, affordable and transparent products to communities,” he says. These countries have large, economically active populations for their banking institutions to support, so for the smaller countries on the continent, intra-Africa trade becomes critical to operate on an effective scale. “So again, thinking ‘regional’ is important in becoming more competitive,” says Naidoo.

Naidoo notes, too, that Africa has the advantage of being able to learn from the 2007/8 global recession, precipitated in part by the bursting bubble of real estate prices in the US. Naidoo, who was in New York from 2006 to 2010, working as a banker and later to fulfil his role as CEO of the SA Chamber of Commerce in America, witnessed the crash first-hand. “Credit and business decisions were at the heart of that crisis. Values were compromised in the pursuit of value; in other words, values were often suspended for value, as incentives drove behaviour that resulted in perverse outcomes that rippled out to affect the global economy,” he says.

With this in mind, Naidoo says that for financiers operating in emerging markets, “discipline in keeping teams focused on core guidelines is key”, and again he points to effective leadership for this job. “The operational codes for financial institutions must be responsible and clear. The credit division of every bank is the engine that works alongside business to grow them, but risk analyses and credit offerings have to be solidly structured, and done in a responsible, sustainable way that ensures growth for all the stakeholders, including the shareholders, customers, staff and their communities,” says Naidoo.

This extends to the control of investor behaviour, says Naidoo, referring to China’s increasing economic footprint in Africa, which he views in a positive light. “It’s up to these African countries to ensure that their relationships with any investor are beneficial to all the stakeholders, and that the values of local communities are respected,” he says. He adds that he sees a great opportunity for Africa to fill the gap in the race against other regions competing to secure global manufacturing jobs, which China is shedding at the entry level of the spectrum as its economy evolves. “Remember, unlike Europe, which has an ageing workforce posing a significant challenge to future growth plans in this region, Africa has a demographic dividend in that we have much higher populations of young people able to work,” he says. “This is our strength, and the key is to create jobs to enable this strength.”

From an investor’s perspective, “contextual intelligence” is critical to operating successfully in Africa, says Naidoo. He identifies Shoprite-Checkers as a business that has got this right, having carefully looked at everything from store locations, costs and supply chains, to opportunities to benefit local communities. “Management is not just about a solid understanding of theory and strategy. It is critically about effective execution and implementation, and includes the ability to manage complexity, but also the discipline to remain focused and build effective teams.”

No economy can survive without foreign direct investment, Naidoo adds, but investors need to be cognisant of the regulatory climate in these countries. He refutes suggestions that South Africa is over-regulated, making the labour market difficult to engage. “The fact is we have a solid constitution, and strong institutions where due processes are followed and clear decisions are made. Solutions must be found that give the private sector fluidity, while at the same time giving people jobs that are sustainable and uphold their rights and dignity,” he says.

Success is about not taking shortcuts, says Naidoo. “It’s not about iconic individuals or quick wins. It’s about developing a clear plan, and building systemic strength and discipline in institutions and business entities. More so now than ever, leaders in both the developed and developing world need to epitomise not only good judgement, but a values-driven approach.”

In 2011, Euvin Naidoo was named by Wits Business School as Lecturer of the Year (part time) for his contribution towards advancing the learning of a new generation of African business students.

Useful resources:
Wits Business School Journal
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