Banking » Absa’s corporate bank CFO on addressing Africa’s coronavirus challenge

Absa’s corporate bank CFO on addressing Africa’s coronavirus challenge

Matt Harcourt, who is also the CFO of Absa's African regional operations, reveals in an interview how the South African banking giant is preparing for the virus

Coronavirus has yet to impact Africa in the way it has spread elsewhere, but the inevitable arrival of the virus is creating urgency in finding ways to mitigate its effects across the continent’s economies.

As in countries where financial damage is already resulting from the necessary lockdowns put in place, banks will play a key role in keeping economies on track in Africa.

Matt Harcourt, CFO of the corporate and investment bank and African regional operations at Absa, one of South Africa’s biggest financial institutions, is putting in place plans to address the forthcoming challenge.

He says Absa, which has 12 million customers and employs 40,000 staff across 11 African countries, is working hard to come up with initiatives to support those in need as a result of the virus and lockdown.

“We realise that this is a difficult time for our customers and businesses whose financial means have been negatively affected. We have implemented a comprehensive customer, business and corporate relief program, which includes payment holidays for small and medium enterprises. We’ve done that quite a lot in South Africa and we’re busy doing it across the rest of the continent.

“We’ve also waived some digital fees, so customers can use their phones more easily and not have to go into branches, which is a big thing in Africa. We have donated to various initiatives aimed at dealing with the humanitarian impact of coronavirus and are partnering with South Africa’s Department of Social Development in a public awareness and hygiene education campaign using the bank’s sports broadcast advertising spots and prominent football personalities.

“In addition, we have redirected food intended for the cycle race Absa Cape Epic which was cancelled, towards vulnerable communities that have been the most severely affected by the current lockdown in a number of our markets,” says Harcourt.

He says Absa has put extensive safety measures in place at the bank’s branches to protect customers and staff. “At the same time, a significant number of my 500 Finance team staff are working from home as lock downs are implemented in a number of our markets. This has been quite challenging given that internet speed and reliability is not always where we would like it to be,” he says.

“We’ve also had our challenges where we need to finalise financial statements with auditors and submit hard copies to regulators, while being in a state of lock down. I’ve been delighted with the way the Finance team have stepped up and continued to deliver despite the challenges. I’m also pleased at how positive the team have remained through all of this,” says Harcourt.

 Career path

Harcourt’s career journey started with a degree at University of KwaZulu-Natal, in his native South Africa, before joining accountancy firm PwC and then becoming head of financial reporting of the corporate and investment bank of Nedbank, another big South African financial institution, following a brief stint there after university.

But his ties with Absa can be traced to his time at banking giant Barclays, that Absa was divested from in 2018 although it still owns 15 percent, having been acquired by the UK bank in 2005.

Having launched his career in Barclays in London before moving to the bank’s New York office, he was invited by the head of trading in Johannesburg who he had previously worked with in New York to join the business in South Africa’s commercial capital. “This was in early 2008, it was an exciting time for the business as we were busy building out a full scale corporate and investment bank, aligned to Barclays. It was a period of rapid growth for the business and we were very much seen as the employer of choice in the market,” says Harcourt.

In all, Harcourt has spent 12 years in the bank that reverted back to the Absa brand in 2018 following Barclays’ decision to divest the operation. In the same year Absa opened an office in London to service multinationals and corporates that Barclays would have serviced for its African operations.

Having rejoined the bank as head of financial decisions support in 2008, and later becoming CFO of the corporate and investment bank in 2012, he was made CFO of the African regional operations almost a year ago, as well as taking on responsibility for the group’s treasury function.

He says the African businesses, excluding South Africa, are the fastest growing part of the group’s corporate and investment banking business. “In the rest of Africa, outside of South Africa, we have strong retail and business banks and an established branch network, but the vast majority of growth and profits from our regional operations are from our corporate an investment bank, so it makes sense to cover both,” he says.

Harcourt says his responsibility is to provide support to the CEOs of both businesses in formulating strategy and in the overall financial management of the business. “It also includes overseeing the control environment and contributing to the improvement and automation of the overall business,” he adds.

Harcourt says he has picked up a wide set of soft skills required to engage with a diverse portfolio of stakeholders. “When I took over the African regional operations about a year ago, it was a heck of a learning experience because I went from running a finance function in South Africa where everyone is sitting with me and everyone reports into me, to a business across multiple geographies

“We’re all quite culturally diverse, as we come from different countries with different backgrounds, so have to look at different things that motivate everyone. It’s all about influencing and treating each other with mutual respect, and also accepting that sometimes we’ll disagree on a few things and leave it that way,” he explains.

Africa’s potential

Given Absa’s reach across Africa, Harcourt is extremely positive about the long-term prospects for the continent, despite the dangers that coronavirus poses in the short term.

“Markets where we have a presence have been performing well over the last few years, with a number of them showing strong GDP growth. South Africa is a large economy and was starting to show green shoots. Unfortunately, coronavirus presents tremendous challenges and has begun to spread in Africa. We are a resilient people and I am confident that the lockdowns that have been implemented in a number of markets will help to contain the virus and that we will recover strongly from this,” he says.

“Pre Covid-19 there was really only GDP growth in South Africa of around one percent. So I think of South Africa as the large stable base, the regional hub, but really the growth opportunity is across the continent- where it’s not unusual to see very growth rates of up to 10 percent.”

That growth contributed to  a one percent rise in 2019 headline earnings to Rand 16.3bn (£730m) compared to the previous year on revenue up six percent to Rand 80bn, although return on equity declined to 15.8 percent from 16.8 percent over the same period.

“We’ve been busy setting up operations in Nigeria, because if you look at our portfolio, it was probably the only thing we were missing. As the second largest African economy after South Africa, it has the growth opportunity in the continent, so you’d hope that when we’re through Covid-19 that opportunity will still be there,” he says.

There is limited experience to draw from the financial crisis as South Africa was “impacted to some degree but nothing like the rest of the world, in respect that there were quite substantial exchange controls in place then,” says Harcourt.

He thinks banks have a “massive role to play in each country in getting everyone through this”, especially in developing countries where he says governments don’t have the same available resources as the most developed economies. “They’re looking to banks to play a big role. We’re stepping up to the plate in that respect. We see ourselves as a critical part of ensuring we can solve this problem,” he adds.

Referencing the fact that under Barclays’ ownership the bank stopped lending for commercial property in 2008, a decision which made returning to the asset class a challenge, Harcourt says: “We need to be there for our clients because in the long run profitability will return, and we want our customers to look back and say that’s the bank we want to be with,” he adds.

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