South African banks tap Chinese businesses

When Lisa Xie moved to South Africa in 1993 to work for the Asian business department of Johannesburg-based Nedbank, her employer was the only local bank with a Chinese business unit.

That began to change as Chinese businesses increased their local presence. Banks set up specialized units to serve them, usually starting with retail services.

"Now almost every bank has personnel to provide different kinds of banking services for Chinese businesses, and the loan to a single project can be as high as 100 million rand ($9.6 million), compared with 1 or 2 million rand in the past decade," Xie says.

In 2010, Xie moved to FNB, the second-largest bank by assets in South Africa. She is now senior business development manager-China.

"Loans for Chinese enterprises still account for a small share of the bank's total, but the increase is the fastest among all the business groups. The past five years have seen local banks enhancing their support as well as risk tolerance for Chinese business. Investment banking services increased especially fast," she adds.

Xie says the Chinese business teams she is building comprises both local and Chinese talent to combine language advantages with banking expertise.

Her teams also have to be ready to meet specific needs.

Compared with their Western peers, Chinese enterprises "tend to put forward unscheduled service demands", she says.

"Large companies from China are usually not short of money, and we need to design tailored products for them to seize business opportunities. In addition to basic services such as setting up accounts, we also provide short-term and long-term plans following different demands," Xie says.

Banks also must deal with the volatility of South Africa's rand, which in 2013 had one of its worst years against leading currencies.

Changes in banking are being driven in part by Chinese companies increasingly entering the local market with advanced technology, ambitious goals and large projects in key sectors such as new energy, mining and real estate.

"Chinese enterprises in South Africa showed their strength in the last one or two years with a single deposit of millions of rand. Before, they brought in lots of capital but lacked a mature business model," Xie says.

These enterprises have a specific business orientation and thorough understanding of the local market, as well as feasibility studies.

"Different from a decade ago, Chinese investment in South Africa is becoming very mature," Xie says.

Local banks have developed a mature model to provide all-around services for Chinese businesses, from looking for potential investors, to providing information on setting up overseas branches, to training and the search for legal and accounting teams.

"Talent is in urgent demand and the best way is training Chinese in South Africa about banking knowledge," Xie says. "Many Chinese enterprises are taking South Africa as a platform to tap the market in the whole African continent."

While Chinese banks with operations in South Africa are more familiar with the needs of Chinese enterprises, local banks are more specialized in tailored banking products for local markets and understanding local banking mechanisms.

(China Daily Africa Weekly 05/23/2014 page20)