Much to like about SA economy’s sophistication, says Citi

by Hilary Joffe

It is critical for SA to lift its low growth rate, but it remains attractive because of the scale and sophistication of its economy, says a senior executive of Citigroup, whose SA business was doing “very well” last year.

Citi’s David Livingstone, part of the US-based bank’s global executive team, said all three of its big institutional businesses are represented here, servicing the domestic and international needs of an SA-headquartered client base as well as the needs in SA and regionally of hundreds of multinational corporations operating in SA.

“SA stands out — certainly within Sub-Saharan Africa — as a very strong consumer of all our activities here, because of the sophistication and depth of the economy and the financial system.”

Livingstone was in Johannesburg last week visiting clients and stakeholders of the bank, which first established a presence in SA in 1920 and returned after democracy, gaining a full branch licence in 1995.

With several international banks having exited or reduced their presence in SA and Africa in recent years, mainly because of tighter global regulatory requirements, Citi is now one of just three US-based banks with a full branch banking licence here, with JP Morgan and Goldman Sachs. It is a player in corporate banking in 34 countries in Sub-Saharan Africa.

Livingstone said that SA sat in the upper tier of countries for Citi, not just for its strong revenue or profitability but its importance to group clients.

The capital that’s present here, the capital that could be raised by SA companies both domestically and offshore, is a feature of a developed economy not an emerging market economy.

The economy needed to grow, and the set of policy issues the government of national unity needed to tackle were clear, Livingstone said.

“I’m optimistic there, because I think the dynamic of a coalition government means that you will have a set of views around the table and the ability to land, hopefully, on policy settings that are robust and executable. And the good thing is that the role of the private sector in the economy is absolutely understood,” he said.

With average growth of just 1% more than the past decade SA has lagged far behind its emerging market peers, but Livingstone said this was not necessarily a deterrent to investment.

Many places in the world would look jealously at SA’s pension system. “The capital that’s present here, the capital that could be raised by SA companies both domestically and offshore, is a feature of a developed economy, not an emerging market economy,” Livingstone said.

If SA were growing faster it would attract more capital investment by strategic and portfolio investors. “But we’re not sitting here just with a league table of GDP growth ... because we follow our clients and our business and SA has been growing nicely on the back of that.”

He pointed to sectors of growth, such as non-bank financial institutions, commercialisation of public sector entities and consumer-facing activities in fast-moving consumer goods and technology, in which clients saw structural opportunities, not just those linked to growth.

You need to make sure, particularly around core infrastructure … that capital is coming in in a sophisticated 21st century way and not in a 20th century project finance way.

Livingstone was also bullish on the continent, while recognising the pitfalls of generalisation, saying Africa was “absolutely on a structural upward trend”. People had been saying that for a long time, but different now was the digitisation of economic activity, which enabled such activity in the most important part of the economy, small and medium-sized business, he said.

“Also, Africa needs capital. Good news is the world has plenty of capital,” he said. “But you need to make sure, particularly around core infrastructure ... that capital is coming in in a sophisticated 21st-century way and not in a 20th-century project finance way. Which means you’ve got development finance institutions lined up, you’ve got private sector bank and particularly non-bank capital.”

Though US President Donald Trump’s sweeping tariff announcements have raised concerns about a global trade war and created huge market uncertainty, Livingstone was careful to avoid calling it a trade war. The “resetting” of trade relationships worldwide was a signature policy of the new administration that would have implications but one needed to wait to see what the outcome would be after early July, when the 90-day “interregnum” on the tariffs ends. “One hopes there will be bilateral arrangements and announcements between the US and other jurisdictions. That’s what needs to be executed and we’ll see at the end of that period.”

Citi recently hired former US trade representative Robert Lighthizer, who played a key role in the imposition of tariffs in Trump’s first term, as a senior adviser on global trade.

The group increased global profits 37% last year but still lags its Wall Street peers on profitability and operational performance. It reorganised management last year in an effort to tackle it, but this did not affect its SA business. It rather raised its profile in the new structure where the international business is under a single head.