Lakshman Bheenick: “I trust that political parties will appoint the best Prime Minister possible”

Standard Bank Mauritius marks 15 years of presence in Mauritius and has just posted two successive years of all-time high profits. Its CEO addresses several issues currently at stake in the country, namely politics and its influence on global business, the bank’s key activity.

BUSINESSMAG. Standard Bank, which originated in South Africa more than 150 years ago, started its operations in Mauritius in 2001. How do you look back on the bank’s track record here?

The bank’s track record has been a quite impressive one for its short span of existence in Mauritius and if we compare ourselves to the largest bank on the island, we may say we’ve done well.

We set up in 2001 and in 2006, as a result of a change in the Banking Act, the bank decided to pursue opportunities in the domestic market. This is where I was hired and the bank quickly ramped up from an odd ten people to almost a hundred people within a year. 2006 was a tipping point for another growth era. Then the financial crisis hit, which led us to review our strategy and the bank in Mauritius aligned its strategy with that of the group. We evolved. While BRIC (group of countries including Brazil, Russia, India and China, ed.) was the common motto and everybody was trying to get a share of those markets, we basically dropped out to become an Africa-centric bank. Now, we are exactly that in Mauritius. We are not present in the retail sector but are primarily an investment bank highly specialised in corporates.

I think it’s worth to note that the bank has managed to adapt itself to fast-changing global economic business conditions; be it the financial crisis or moving from an emerging markets era to an Africa-centric one. It is commonly admitted that Africa is still an opportunity and we don’t know where the next chapter will lie. I believe Standard Bank can still grow in Mauritius.

BUSINESSMAG. Are you personally satisfied with the bank’s performance?

Most certainly. In spite of the ups and downs of the corporate world, on the eve of our 15th year, 2014 was a record all-time high in terms of profitability and earnings, and 2015 was the same. So, after two successive years of all-time high profits, I cannot say that this is not good enough. I do believe that we’ve delivered the goods in Mauritius. I wish to thank the staff and all stakeholders for partnering us and believing in us. Earnings for our upcoming financial year will however be impacted by the slowdown in Africa.

BUSINESSMAG. What is the contribution of Standard Bank Mauritius to group revenue?

We are not that significant in the group perspective but we bring our fair share. Out of 20 countries where we are present in Africa, we play the top 10 league. The fact is that South Africa – where we enjoy number one position in the economy as a banking institution – is still the powerhouse of the Standard Bank group, contributing almost 70% of headline earnings. 30% is distributed across countries where we have a business in Africa. It’s not a surprise because South Africa has been and continues to be one of the largest economies on the continent.

BUSINESSMAG. You talked about an alignment of the bank’s strategy, locally, with that of the group. Was this done successfully?

Most certainly. The global strategy of the group is to be the leader in financial services in, for and across Africa. We definitely brought Standard Bank Mauritius in, for and across Africa at an investment banking level. Our client base is one that is primarily going to Africa including our Mauritian corporates. We delivered both for what I call the non-domestic clients as well as the domestic ones. We have yet to see the momentum pickup for African opportunities. I have no doubt it will happen.

BUSINESSMAG. How do you assess the measures introduced in the 2016-2017 national Budget meant to facilitate business on the continent for Mauritian companies?

I think each business needs to assess for its own. Each company has its own strategy, strength and risk appetite. Africa, it has been said many times, is not a country but many countries that are very diverse culturally as well as in terms of opportunities. I think there is enough being done at a policy or governmental level but more needs to be done at a corporate level. There is only so much that government can do; they will ensure that other governments support our companies. It is evolving in the right direction I would say. The continent is still a melting pot of opportunities, both good and bad.

Standard Bank can help Mauritian companies since we are present in 20 countries. We have the recipe for Africa and can share best practices.

BUSINESSMAG. What opportunities do you see on the continent right now?

I believe that the opportunities lie primarily in land and natural resources – which we don’t have locally –, as well as in banking. Besides, experience shows that in Mauritius, we’ve come from an era, in the 80s, where a lot has been done and there has since been a pickup in the lifestyle and the quality of life in the country. That has fuelled consumption locally and taken our economy to new levels. Now, there is an upcoming young generation in Africa which might have needs for very specific products and services. Therefore, I think consumption will increase on the continent as well and this is where the opportunity lies.

BUSINESSMAG. What about roadblocks like corruption, red tape and poverty?

These roadblocks can be overcome. Regarding poverty, firstly, I would say that it has to be considered after the opportunities which the continent represents for foreign companies as it can be alleviated by means of investments. As for red tape and political hurdles, they are rampant on the continent but there have been improvements at that level. My opinion is that the scale of these problems in Africa is the same as in European countries. You need to engage with the relevant stakeholders and the government is one of them. I have no doubt that if the government is supportive, you would be successful.

Such problems are part of the doing business world, whether in Africa or elsewhere. Nevertheless, according to me, in Africa, especially sub-Saharan Africa, the commitment towards better governance and minimising corruption has to improve.

BUSINESSMAG. Global business is at the core of your activities. How has the recent turmoil within the government regarding the offshore sector affected the industry?

I don’t think there has been any impact on the global business sector.

BUSINESSMAG. Was the renegotiation of the tax treaty with India surprise news for global business operators?

I don’t think it was a surprise; it has been in the making for a while and there would have been changes. I am fairly pleased that there has been an outcome. There have been significant incentives for doing debt with Indian companies, for banks specifically. The renegotiation of the treaty does not have an impact on Standard Bank, though, because we have not been focussing on India in recent years.

BUSINESSMAG. Does that provide you with a competitive advantage, now that your competitors have to look into migrating to other investment destinations?

It does not give us a competitive advantage because we align ourselves with the group strategy. We are focused on Africa, a continent with complexities that we understand. For others to tap into the continent’s potential, they need to harness those complexities. We are thus happy to compete.

Those who were deeply embedded in Indian exposures and client bases will need to rethink their organisation and listen to what specialists have to say about the new avenues that have been created. It is not like everything is gone. I even understand that we will now have a competitive advantage over our main competitor, Singapore. We might even gain back the volume of foreign direct investment entering India which we lost to Singapore recently. It will be interesting to watch.

The fact is that globally, there are other initiatives that are not favourable to jurisdictions like ours. The base erosion and profit shifting (BEPS) is one of them. We, as a country, need to understand and harness those changes taking place globally. The renegotiation of the tax treaty with India, in a way, is a blessing in disguise because it has prompted us to tackle the issue much, much earlier in terms of rethinking ourselves.

BUSINESSMAG. Former Finance Minister Rama Sithanen has recently said that there is no comparison when it comes to turnover regarding business generated by GBC1 companies in India and Africa even though the volume of companies continues to increase. Your opinion?

I think that’s a current status only, as things will evolve. We’ve seen, from our interaction with our various stakeholders in the market, that there has been a constant pickup on the Africa side and stagnation or downslide for India. In my opinion, there will be a rebalancing act and we will do more into Africa if we are willing to. It won’t just land within our space. I can say within my visibility that a lot of peers in the sector are doing much more into Africa now than they are with India.

BUSINESSMAG. How is Standard Bank Mauritius gearing up for the BEPS project of the Organisation for Economic Cooperation and Development (OECD)/G20 and laws such as the Foreign Account Tax Compliance Act (FATCA)?

It all starts with the group – because the whole Standard Bank group is impacted – and its view on how we accommodate and comply with those developments. Subsequently in Mauritius, as it has been the case for the FATCA, through continuous engagement with the stakeholders at local level, that is the government and industry bodies, specific institutions like ourselves have paved the way to comply. It is all a matter of complying in the first instance, though there might be a commercial impact. We have defended ourselves very well about not being on the black list of the OECD. We’ve always cleared our name and there is no doubt we are here to keep the jurisdiction clean and reputable.

BUSINESSMAG. What do you think of the proposed migration of investment banking responsibilities from the Bank of Mauritius (BoM) to the Financial Services Commission (FSC)?

There isn’t sufficient clarity around this proposal. I think there will be more to it and that it will be subject to how investment ban-king is being defined. Because of the debt component in investment banking, I don’t see the Bank of Mauritius not regulating lending in the country. All lending should be regulated by the Central Bank. Therefore, I have yet to understand. I think the loan and debt component will remain with the BoM. I would be surprised if everyone was allowed to lend for investment banking requirements. We need to see the specificities under that. I don’t think it’s a migration in its totality.

According to me, this initiative aims to welcome new investment banking activities in the country. We will need to be clear about what’s with the FSC and what’s with the BoM.

BUSINESSMAG. Are you of the opinion that there is enough space for new players to find their own niche markets in the banking industry at local level?

Yes, for players with niche market strategies. The world is constantly evolving, not to say innovating. There are new trends and products. Banks in Mauritius may not necessarily bring all the products that are out there so that those who want to come and invest into segments that are not being delivered here will have their space. However, those who come with the intention to take the traditional products market will suffer.

BUSINESSMAG. Is there no space for new segment A players anymore?

Well, I would say if you come as a retail bank deployed with brands, segments and infrastructure, there is no space, because there is enough of that. But if you come as an online bank for the retail sector, which we’ve seen in other markets, then you have a chance of making your way through. We should not underestimate the impact of technology in the banking sector. We’ve seen it in the developed market: banks are not deploying brick and mortar types of infrastructure. You can get banked online. How will our regulator address those types of institutions is, of course, another matter.

BUSINESSMAG. Mauritius aspires to become the new Singapore. Is this a realistic ambition?

I think it’s a tagline, simply. Singapore is well viewed but taglines are cliché. As I see it, we don’t need to be Singapore. We’ve already established our own reputation and brand and we should pursue our own objectives for Mauritius. You can say you want to become like Singapore but why not New York, London or another major international financial centre (IFC)?

BUSINESSMAG. Have we not become prone to too many delays and setbacks regarding this objective?

I think we are working our way up. It’s a matter of being committed and driving in the right direction. We are distracted by other things from time to time. Going cliché again, we are the Singapore of Africa. We can claim that status. Yet, we should be careful. Singapore plays a very important role for Asia. They are extremely focused; their gravitas comes from the various Asian economies which have prospered next to them, including themselves. As far as Mauritius is concerned, I believe that if Africa prospers, it will grow. So we should look at what Mauritius can achieve and what is within reach. Bank Malaysia out of the country, for example: yes. Will we be more successful than Singapore? No.

We need to see which markets we are focusing on. We’ve done our India piece, which has been reviewed. It is still an opportunity but there are many other opportunities to be seized. Those who visit Mauritius, and want to bank or manage their global activities from here are very happy about the jurisdiction.

BUSINESSMAG. Banking services for high net worth individuals form an important part of Standard Bank’s activities. How is the business faring?

The business is faring well. We need to be realistic about the fact that wealth is very selective. Wealth managers offer tailor-made solutions. You need to meet the expectations of the wealth segment and we still have a long way to go as regards the country itself and our bank. The opportunity is there. We need to be innovative and find the right solutions for the client.

BUSINESSMAG. Is the economic climate favourable enough to attract such clients?

In my view, it has nothing to do with the economic climate of the country. It’s more about the political stability and what Mauritius can offer in terms of transactions and services that the wealthy segment is looking for. Yes, there is wealth in Mauritius and then there is wealth globally. I think we are trying to position ourselves; at least Standard Bank is in this segment that pertains to wealth being generated globally, specifically in Africa and we will do what we can for Mauritius. It really depends on who you are banking with as well – it is not a volume game like retail. It is not transactional, it is more than that: it is advice.

BUSINESSMAG. Is the range of financial products in Mauritius varied enough to cater for their investments?

As I said before, innovation is constant and it is being led more and more by technology. So we need to get there. Some of us are already on track. Our products are very innovative, especially in South Africa and given the opportunity, we will definitely implement those in Mauritius as well.

BUSINESSMAG. Is it a good idea, on the part of the government, to rehash projects like the “métro léger”/Metro Express, year in year out?

I believe that infrastructure is core to the progress of an economy. The more infrastructures there are, the better. It does represent significant expenses in the near term but also massive long-term benefits. So decent roads, as well as airport, port, water and electricity infrastructures are important. The primary issue at stake in Mauritius is productivity. Our population still spends a lot of time commuting and reducing that time so that productivity may rise is essential. The Metro Express is therefore one of the options. It’s a pity this project has taken so long to materialise. I am hopeful that things will work out this time. We need to understand the rationale behind that.

BUSINESSMAG. On a more political note, do you see your next Prime Minister in Pravind Jugnauth?

I think banking institutions do what they have to do and politics is politics. I trust that the political parties will appoint the best Prime Minister possible depending on their own state of affairs at that particular conjuncture.

BUSINESSMAG. We’ve seen political influence impact certain banks, though…

The government will exercise its influence where it has stakes, without any doubt, which is a good thing because then, it can serve more specific policy-making purposes. If you want to lend to a sector which other banks do not want to lend to or promote, then the avenues of state banks can serve that purpose. In my own view, the next Prime Minister has to be someone who will lead the country to its next era of development or pursue what is currently the state of affairs. Who is the right person is beyond me.