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“Today, [South Africa] is part of a truly global economy. To maintain our standard of living, we must learn to compete in an ever tougher market place. That’s why higher productivity and products quality have become essential. We need to move the economy into highvalue sectors that will generate jobs for the future and the only way we can be competitive a new partnership between government and business” (Krugman, 1994a:109).

It is without a doubt that the interest is increasing day after days on this country situated in the Southern African region, doubled with its participation in the international summits, its law for equality enabling everybody to get married and for its financial market, the 18th in the world in term of stock market capitalisation, surprisingly for a country which was under apartheid regime until February 1990, called South Africa , is wherein located Standard Bank the leading bank in Africa.

Figure 8. Southern African map

Southern African map



3.1.1. Country performance – Overview

About to become the regional hub in Africa, South Africa is populated of around 50 million and the “Rand” (ZAR), its currency. The Rand’s exchange rate on the market the 8/09/2011 showed: 1 ZAR = $ 0.139680 or € 0.09938854 or £ 0.0871120; $1=7.15923 ZAR; or 1 £ = 11.4795 ZAR; 1€ = 10.0618 ZAR.

Figure 9. Rands exchange rate

Rands exchange rate

The integration of the country into a bloc is quite recent. According to IMF (2008), the country is member of Common Monetary Area (CMA) created in 1986, former Rand Monetary Area (RMA) which became in 1992 the Multilateral Monetary Area. The whole region is pledged by the South African Rand, the currency in used and has implemented IFRS norms.

The region integration is well-advanced pushed by South Africa the regional leader and the dominance of its commercial bank, making the country have a status of African leader according the IMF (2010). MMA is part of another bloc which is the oldest customs integration still working at date, named Southern African Customs Union (SACU). It was created in 1910 to provide a common external tariff. The entire tariffs internal and external are collected by South Africa, in charge of the redistribution. B ut the country is integrated in greater bloc as illustrated above.

Figure 10. South Africa bloc integration

South Africa bloc integration

Source: WTO, Modified by Author.

SACU is part of a bigger region which is SADC (Southern African Development Community) was previously SADCC created in 1980 but the actual form is established
in 1992 and based at Gaborone in Botswana, with an average per capita income is just around $3.152. The SADC are not yet conclusive, but South Africa without waiting agreement to be reached, its banks spread throughout the region largely through mergers and acquisition, (UN, 2011).

The country figures are such:

Figure 11. South African main indexes

South African main indexes

Source : http://www.the a fri ca re outhe rn -a fri ca /country-profi l e -s outh-a fri ca .html


Figure 12. South African current account

South African current account

The South African Current Account is still negative but improving. When the same current account is compare to GDP is a bit lower than the equilibrium. Therefore, the balance of trade is almost equivalent to its current account balance, explaining that the negative portion representing the inflow (importations or FDI).

Figure 13. South African trade’s balance

South African trade’s balance

The South African features are: GDP is $ 5.707 billion of GDP, with a growth rate of 2.784 percent in 2010 but at date still negative of about -3.90 percent; a gross capital formation the last known was in 2008 about 22.4 percent, an interest rate applied by the South African Reserves Bank Monetary Policy Committee (MPC) is 5.5 percent, and urbanisation of the population at 84 percent; with a literacy rate of 88 percent of the population above 15 of age, labour and social protection continuing to rise of 23.8 percent, a full implementation of rights even if the social laws still strongly rooted in the culture; the private sector is booming about 47.6 percent in since 2009, but at July 2011 the industry development registered a slowdown of -6 percent, even though the business confidence still high for a nation in development 48 percent, also a level of poverty in 2005 at 23 percent all these achievement done in least than 25 years, however South Africa has a life expectancy from birth of 53 years old, explains sadly by the AIDS/HIV issues storming the country in according the South African department of health (2008). Nevertheless, it is an upper middle-income country with $6.100 in average per capita, while it is $5.884 in its category and $1.165 in the Sub-Saharan region, according to (World Bank, 2011), and is in stage 2 of development driven by efficiency. After all, according Jensen and Vennes (2006) many political issues pending and overlapping in the development of the region because when countries are part of COMESA other bigger bloc in which South Africa is not yet involved and the SADC in the same time, tension arises . However, it can be noted that many other blocs exist in the region but not joined by South Africa. In the application of the three level of analysis of the global competitiveness 2011, in the overall indexes, South Africa ranks at 54 with a score of 4.32.

3.1.2. Financial sector organisation

“We are pleased with the performance of our financial sector. It has proven to be remarkably resilient in the face of the recent financial crisis and the global economic meltdown”- President Jacob Zuma, State of the Nation Address, 10 February 2011.

The financial industry in South Africa is traditionally regarded as one of the most developed in sub-Saharan Africa, therefore in a context of Africa, where MNCs are also social institutions; the Minister of finance Prahvin J. Gordhan has stated that “ financial stability however is not the only objective. The financial sector needs to do more to support the real economy. The sector has a vital role to play in the on-going transformation of our society, and our desire to bring a better life to all of our people”.

In many ways, South Africa is undergoing a debate that is prevalent around the world, in the sense that many nations are asking what role financial industries should play in a modern economy certainly with the crisis facing actually. Nevertheless, South Africa does have a strong financial services industry in the context of the African industry as a whole. Representing 6 percent of African banks, South Africa leads the continent. Its banks weigh 45 percent of the total African banking balance sheet and generate 32 percent of the net revenue. With the banked population’s rate up to 50 percent, and the repartition of the cash machines network is spread nationwide, the internet banking is almost available for all. Moreover, the country is at the 18th place in term of stock market capitalisation, with Standard Bank as a leader and representing 25.5 percent of the financial sector. In a continent where the un-banked make up a significant proportion of the population, South Africa is making significant strides in terms of ensuring that a burgeoning financial industry drives growth in other areas.

The financial sector of South Africa is strong and well regulated and it is organised as such: the financial services board (FSB) is the body’s regulator in charge of the financial services but is excluded banks which are under the South African Reserve Bank (SARB) regulation. The SARB is the central bank of the country, the legislation acted by the body is similar to the U.K., Australia and Canada ones. The bank sector is composed by almost a 55 domestic controlled banks, 5 mutual banks, dozens foreign-controlled banks and 9 branches and representative offices of foreign banks. The sector acts under The National Payment System Act of 1998 to bring clarity in the international level practices on settlement systems and systemic risk management procedures. The Reserve bank via the payment association of South Africa facilitates interbank rules, agreements and payments. However, the Investment and merchant banking remains the most competitive front in the industry, while the country’s merger “big four” banks: Absa, First National Bank (a division of First Rand National Bank), Standard Bank our object of study and Nedbank, continue to consolidate their grip on the retail market. Also, the sector is open for competition, but in South Africa their model developed go further and beyond the normal routes follow by the foreign banks are refrained to undertake bold risks.


Figure 14. Standard Bank’s logo

Standard Bank’s logo


Standard Bank was founded in 1962 as affiliate of the British Overseas Bank(2) Standard Bank; its position is an expert in developing countries but international perspective. The bank was created in 1862 and started its operations in 1863 in London, with as principal activity to finance and participate on the development of the diamond fields in South Africa, but after many changing the overseas bank has become a merger leader in the continent and even in the world.

3.2.1. STANDARD BANK – Overview

The company has offices in more than thirty countries around the world as illustrated bellow.

Figure 15. Standard Bank’s presence

Standard Bank’s presence


Its growth has been fuelled in part by a series of mergers and acquisitions from the beginning to now. And it is represented on the following table.

Table 3-1. Standard Bank evolution

Standard Bank evolution

Source: Author adaptation of Standard Bank History

This table demonstrates that in its strategy development Standard Bank Allies two different models which allow the firm to develop a competitive advantage and maintaining it through diversification by FDI. Relying on its knowledge of its own market and where is becoming an expert therefore the leading position, Standard Bank can also trust its international perspective shown by its first place of installation London one of the leading financial place in the world and in Europe. After which the growth was done at first in the MMA’s RIA, but very quickly developed in the East coast of Africa. Its international development out of Africa started really in 1992 and represents today 45 percent of its global presence in almost all continents.

3.2.2. SWOT Analysis

To analyse the driving forces of Standard Bank, its strategy and the reason of its success in a competitive industry and booming country, a SWOT analysis will be carried out.

Table 3-2. Swot Analysis Standard bank

Swot Analysis Standard bank

Source: Author

Standard Bank is a well-spread bank in Africa and has a well-developed network at the international level. The bank uses its heritage coming from the colonial route, to have an international model of development and uses also its knowledge on futures, developing and emerging markets, which associated with its presence in the developed countries, diversify its range of opportunities and operations, and enable it to grow into the African market. Therefore, sustainable and modern banking solutions for Africa and African are available to its customers. The strong regulations of the home market make the company visible and competitive in the international level.

The transparency of the market and its position attract more and more FDI. Standard Bank, operates in many countries already in Africa and some of them represent a political risk, but their expansion acting as a leader push the organisation and harmonisation of the financial sector, confirming the theory of “follow my leader” of Knickerbocker (1973) which states that in the heavy competition firms will tend to compete for better market power.


Standard Bank coming from a colonial route has created a strong and dynamic business model adequate for African economies. Founded in a country previously under an apartheid regime, to finance the diamonds fields contradicts the theory in some aspects.

However, at the country level, the industry structure and the domestic rivalry is based on factors endowment, which is mainly the local knowledge. But its willingness to develop a banking structure for African in and outside the continent impacts on their strategy of expansion. Also, benefitting from of the technology and the knowledge in the banking system from its parent, plus its presence and integration within the local culture, Standard Bank has become more than a financial institution but a major actor in the development of the financial sector in Africa. In South Africa however, by increasing the tariff of banking fees and charges, the population might want to go elsewhere or can categorise the bank as a foreign bank. Nonetheless, according to Hymer (1960 and 1976) Standard Bank performs than foreign firms because it has a better understanding of its environment in which it operates. The local context might be privileged by the use of revenge mind-set, because foreign banks are suspected to not have long term commitment to developing countries, leaving the door totally open for African firms, (Caprio et al., 2001: 4). This enables Standard Bank to develop a competitive advantage in Africa and in the world scene.

2 British overseas banks were banks headquartered in the United Kingdom which conducted almost all of their operations outside the United Kingdom. Was composed by: African Banking Corporation; Anglo-Egyptian Bank; Anglo-Portuguese Bank; Anglo-South American Bank; Bank of British West Africa; Bank of London and South America; Chartered Bank of India, Australia and China ; Grindlays Bank; Ionian Bank; Mercantile Bank of India, London and China; Oriental Bank Corporation; P&O Bank; Standard Bank

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