In conversation with Standard Bank Group CEO Sim Tshabalala
On the economy:
Our economists believe that the cutting cycle will start after the elections, and that we will have at least three cuts during the course of this year. They believe this is predicated on declining inflation. Declining inflation and declining interest rates will improve the ability of customers to service loans.
On Africa operations:
Over time when one part of the business is struggling, another part is doing really well. And that's exactly what you see in Standard Bank's results. The South African operations made a massive 16 point 8 billion rand they were up 3%. Whereas the operations outside South Africa in the 19 countries in Africa, made 18 point 2 billion rand they were 49% and they now make up 42% of our group. The net result of that is that not only are the African operations larger than the South African operations but that Standard Bank's profits are now Bigger outside South Africa than they are in South Africa. Now, what is really exciting is if South Africa grows faster than 1.2% in 2024. That means that off a massive base all of a sudden you will have a fast growing home base and a fast growing operation outside South Africa. The two together will produce exceptionally good results in the portfolio.
On the Election:
There are three factors that go into business confidence. The interest rate scenario, demand and the political outlook. The negative in business confidence at the moment is driven in large measure by people's views about the country's politics.
At Standard Bank, we take a data driven view, our political economists have analysed the data and they come to the conclusion that there are three scenarios and they attribute probabilities to them. The one scenario is that the current ruling party wins 50% and more and they attribute 25% probability to that outcome. The second is that the ruling party gets less than 45% and they've attributed a 15% probability to that. In the third scenario, the African National Congress gets between 45 and 50% and has to go into a coalition with one of the other parties, our political economists attribute a 60% probability to this scenario.
In all three of those scenarios one needs to analyse the policy direction. We've come to the conclusion after looking at all scenarios that the general policy direction of the country will continue, as it has over the last three years and hopefully accelerate - but that's going to be dependent on the makeup of the coalition or if the ANC goes on its own.