Article first published in South Africa's Business Report
By Martin Roche
In 2007 just before the world suffered its worst financial crisis in living memory, the head of one of Europe’s most respected financial regulation authorities asked for a report into the reputations, regulatory structures and market potential of a dozen “new wave” economies around the world. The report grew in importance as the financial crisis worsened. It provided some of the answers to the big questions being asked by the finance houses, and the big legal and accountancy practices; “If the United States and Europe are in crisis, where should we be seeking new opportunities?”
Greatest potential
Of all the countries in the study, South Africa had the greatest potential. It has a regulatory structure rated among the very best in the world and a sophisticated and long-established commercial legal system with skilled practitioners and dependable courts. Its accountants are admired worldwide for the quality of their training, their probity and industry. The country has sound banks (untainted by the failures and scandals of the global crash) and solid businesses in areas like insurance and fund management.
How could this potential be unleashed? How could the biggest financial services economy in Africa position itself to become the financial hub for a booming “New Africa” - and compete on the global stage as a finance centre to rival other successful hubs like Singapore or Beijing?
It’s a very big idea. At the core is a strategy designed to bring wide-spread benefits to South Africa. One that will widen and deepen the economy, bring new business and employment opportunities and do so in a way that protects and enhances South Africa’s reputation for honesty and fair dealing in finance. It’s an idea that will enable the country to win the confidence of the world’s financial policemen, media and governments.
Its key objectives would be to bring new business to indigenous finance concerns, attract international finance and allied firms, provide an ever-growing number of high quality jobs for local people, stimulate the business hospitality, convention and tourism sectors and steadily grow revenue for city, provincial and national exchequers.
To capitalise on this extraordinary opportunity, South Africa has to develop a strategy with a universal set of credible brand benefits and express them in a way that informs and persuades mobile capital and gives local voters and international observers real confidence that the benefits of building the finance sector will be deep and lasting.
The way any country presents itself as a centre for finance has to be very different from five years ago. Then, with booming economies across the world and a seemingly non-stop growth in personal wealth everywhere, the finance industry was seen as the saviour of the universe.
Finance reputations in tatters
The reputations of many of the world’s largest finance concerns are now in tatters and hundreds of millions of people have had at least a third wiped off their personal wealth. Scandal follows scandal, heads roll; jail doors open, share prices collapse and people in banking and finance now enjoy lower public confidence in Britain, Europe and the United States than estate agents, journalists and politicians.
Trust has evaporated and with it went belief in the credibility of the marketing propositions and brand promises made by finance houses and finance jurisdictions. Thus the strategy for South Africa and the guarding of the country’s reputation have to be seen to be driven by a partnership of democratically-elected politicians, regulators, the central bank and the industry. Every word, every detail and every nuance matters.
Most important to the attraction of foreign investment is that very few people in the world know of or understand South Africa’s credentials in finance. So it will require a sophisticated strategy and a highly-professional campaign to alert, inform, stimulate and motivate the world of international finance to the potential of South Africa as a country with a view of finance and its supervision that the world is hungry for - because it needs the rebirth of trust.
It calls for the skills and experience of people who work in this world and have a track record of helping countries make breakthroughs in this field.
In 2009, Etoile took this thinking to the government of the Western Cape, where it received a warm, professional and enthusiastic reception. A finance industry body is now considering the idea.
We hope that what will emerge is a partnership between public and private sectors with the right strategies and plans to deliver a breakthrough and give the world new reasons to admire, support and applaud South Africa.
There is a great deal at stake and no time to lose. The Economist Intelligence Unit, the highly respected in-depth research arm of The Economist magazine, recently forecast that while South Africa’s finance industry will grow in the next decade, its predominant position as Africa’s top finance centre will be eroded by competition from other African countries.
The most recent entry into the business of hosting international financial operations is Botswana, which offers a stable Government and sound governance, regulation and infrastructure. Its initiative is already proving successful, much to the benefit of the country and its people.
Windows of opportunity rarely stay open for long. South Africa needs to grasp this opportunity now while it still can and to look to the best people in the field to help it achieve the breakthrough that is possible. It would be a great pity if the opportunity were to be squandered by treating it merely as a short-term marketing opportunity for the local finance industry.
Martin Roche, a partner of geopolitical consultancy, Etoile Partners, has worked on place marketing and foreign direct investment assignments across the world.
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