Chris Newson: “Mauritius’ growth rates reflect the global challenges at play”

Business Magazine caught up with Chris Newson during his brief visit to Mauritius, to get more insight on his outlook of Standard Bank’s performance here and his perspective of the Mauritian economy.

BUSINESSMAG.What is the purpose of your visit to Mauritius?

Firstly, Mauritius is part of the franchises we have outside of South Africa, over 17 businesses which make up our portfolio of the business. In the normal course, I try and visit up most of the franchises at some point in time. Secondly, we had a board meeting which I had the opportunity to be part of. Thirdly, we are going through the budget period right now, so we are thinking about the strategy of Mauritius and where we are going to take the business forward while making the country a part of that. It is thus a combination of reasons.

BUSINESSMAG. How does Mauritius fit into Standard Bank’s global strategy?

Very importantly, I think we have to break it down to component parts first. Standard Bank is all around Africa, it’s what we do and it’s the core of our business. My specific responsibility is for all the businesses outside of South Africa and within that, Mauritius plays a very important role. When we think of Mauritius, it’s not only about the financial contribution. It is very strategically positioned within the context of Africa, as a bridge to the continent and the flows to Africa. It is linked to China and India, and we see many multinationals and corporates using Mauritius as a gateway to Africa. Therefore, if we are in Africa, as we describe ourselves, our being in Mauritius is very strategic to our client base.

BUSINESSMAG. Are you satisfied with Standard Bank Mauritius’ performance after 12 years of presence here?

I think again, we are very satisfied with the strategic position of our business. It has been an important country business for the group. We have had some challenges which are reasonably well known and we have made some provisions in that regard. The financial performance, one never likes that but frankly, it’s firstly been managed very carefully. Secondly, we expect to continue to deliver financially. When we look at the risks of the business and in terms of the capital we have invested, we are confident that Mauritius is a franchise that will continue to bring in good returns and play a very important role in bringing financial flows in our businesses in Africa.

BUSINESSMAG. Where do you see these growth prospects coming from? Any specific plan to achieve these results?

Realistically, we see growth coming out of target markets in terms of the customer base. Our multinational client base is across Africa and they desire to continue growth of their activities through the opportunities we offer them via Mauritius. There are also some good opportunities for Mauritian companies and groups that are increasingly thinking about how to grow their businesses and expand them outside the country. Given our footprint and our knowledge base on the ground, in Africa, we can facilitate this.

On top of that, from a transactional platform perspective, we find that the volume of activities in Mauritius is increasing and, again, given our product offering, our relationships and our connectivity to the rest of Africa, we believe we can continue to grow those numbers.

BUSINESSMAG. Standard Bank Mauritius reported losses of $ 12.5 million for the financial year ended December 2012. Is this an isolated case for your business or are your other African businesses affected as well?

It is an isolated case. Those losses are due to investments related to a very specific portfolio of our activities. It was related to trade. So it is very much an isolated exposure. If you look at the rest of Africa, generally, our other African franchises continue to grow very strongly and we see that continuing in the future. If you look at 2012-2013, those growth rates are sitting between 30% and 50%.

BUSINESSMAG. It has recently been reported that Standard Bank Mauritius laid off around 40 employees, which represents around 30% of its workforce. How do you explain this drastic move?

I would like to highlight that this number was mentioned by only one newspaper. On our part, we mentioned that this was part of a strategy of refinement and that those figures were exaggerated.

Certainly, any organisation at some point in time, has to rethink the efficiency of the structures it has, in relation to a targeted client base. What you see coming out of Mauritius for the last three to four months is nothing more than that. It is in terms of focusing on what we think the key client base should be across all our businesses and aligning them to the activities of the group.

BUSINESSMAG. Could this be sending out the message that financial activities in Mauritius are not as shielded as the general prevailing perception?

The reality is that Mauritius is part of the global world and global activities will impact on the country. It is a matter of time to what extent this will happen. I think Mauritius can never feel shielded.

In my opinion, there’s recognition that the world is tough out there and it is a very tough period for the world to be going through. Mauritius is part of that world and I don’t think anyone should be reading more into this other than the fact that we have a specific portfolio and have a conservative view on it in the sense of going through a recovery process. It does not have a broader message for the banking sector or other businesses.

BUSINESSMAG. With regards to your non-performing loans in India, do you expect to recover these investments?

The answer is yes, categorically, we plan to recover it. We have a team working on this  and have put all our capacity into that. We are an institution that ensures we don’t run out of money and look to recover that through whichever processes we need to undertake to try and do so. There is some potential to recover these investments but these procedures take time. We will continue to focus on it.

BUSINESSMAG. How do you explain this incident? Were due diligence exercises not carried out sufficiently in depth?

I think we all have to recognise that these are not new portfolios. These are portfolios that have been going on for a number of years in the business. The fact is that they fell apart at some point. As an organisation, we constantly try and learn lessons from incidents of this nature and that may well change our approach to certain segments of business management in a few ways. We are a bank and the role of a bank is to take some risks and manage them.

BUSINESSMAG. What are the bank’s future prospects? Are there any specific plans and provisions for Mauritius?

The plans are positive. Part of what you are seeing in terms of the people changes is a real refocus and articulation of our strategy, and we expect to target a client base and the sort of activities that we, as a group, believe will help us differentiate ourselves and add value from a customer base perspective. If you ignore, for a moment, the risks of the business, you can only have positive results for the future from our Mauritian operations.

It has been a tough year for the bank but we have got a great team here and we are very well positioned with the full support of a large organisation that has Africa as its roots. Therefore, part of this initiative is to say that we have a long-term strategy for Mauritius and for banking in Africa. There may be tougher times and better times but they have got our full support.

BUSINESSMAG. What is your view on Mauritius’ 3.2% growth forecast for 2013, coming from someone who banks in Africa, a continent averaging an annual growth of 5% to 6%?

I think my view of Mauritius is positive. The current growth rates are obviously lower than Mauritius would like but they reflect some of the global challenges that are at play. If you look at the tourism sector, for example, there are challenges concerning the European market. My experience of Mauritius has always been positive, from a regulatory and government perspective as well. The policy and decision-making processes have been very sound and reflect, on the long-term, on how the economy has changed. I think credit is due in that regard. So while it would be great to be registering 5% to 6% growth rates like Africa, I think realistically, countries go through cycles of low growth rates. South Africa is a prime example of this. I would thus not be taking 3.2% negatively at all. It is about long-term thinking in the context of the policy decisions being made and building the base from which future growth will come from.

The Budget was an example of just another instance of the way Mauritius positions itself as a country aiming to be a facilitator for Africa. I was particularly pleased to see policies been set up to support Africa. This is a tangible commitment of the way Mauritius tries to position itself. My view is that Mauritius always tries to externalise itself very strongly and it has made tremendous progress in that regard.