Under Covid-19, private banking clients in Africa are demanding more advice—especially on foreign exchange and commodities.
The African market for private banking services was poised to grow, close observers said, until the outbreak of Covid-19 this year. Those expectations are now wilting along with growth projections for emerging African economies, but that means only that wealth managers will have to step up to the tricky task of guiding their clients through the pandemic-driven slowdown.
“All segments of [Africa’s banking] market have been impacted by Covid-19,” says Andrew Robertson, head of Customer Acquisition and Retention for Africa for Standard Bank, a longtime private banking player on the continent. “Due to economic pressures faced by businesses or individuals, we have seen a number of customers requesting access to debt relief where they have mortgages and/or lease agreements.”
These pressures come on top of two years of shrinkage in the overall market for wealth management services in Africa. Private banking clients, who include entrepreneurs, high-net-worth professionals and expatriates seeking to invest on the continent, saw their combined wealth decline by 5.4%, to $289 billion, as of the end of 2018, according to Wealth X’s World Ultra Wealth Report 2019. The number of the continent’s super-rich individuals fell by 3.2%, in contrast to a 0.8% rise globally.
Researchers at New World Wealth see Mauritius and Kenya displacing Nigeria and South Africa as the most promising African markets for private banking in the near future. Andrew Amoils, head of research at New World Wealth, ascribes this to their “well-developed retail banking systems, relatively stable markets and steady wealth growth [underpinned by] strong wealth-growth forecasts of 50% [over the next decade].”
Low expectations for private banking compound the challenges facing African banks since the outbreak, including a falloff in commercial lending. That has prompted banks to “buy more safer-haven domestic government bonds, especially following any increase in central bank liquidity” injections, says Simon Quijano-Evans, chief economist at Gemcorp Capital. “The expectation is that once the Covid-19 effects start to calm, nonresident investors would then step in again to purchase domestic government bonds, leaving domestic commercial banks to focus again on lending to households and corporates.”
Meanwhile, private bankers are moving rapidly to adapt. Most banks on the continent require anything from $100,000 to $1 million in assets to open a private bank account. But operators, including Investec Private Bank South Africa, lately say they are assessing each application individually.
Standard Bank is using Microsoft Teams to conduct meetings with customers, and providing a range of linked services for private banking clients across its African markets. “We have provided access to informative webinars covering a variety of topics,” explains Robertson, such as “personal investment strategies, economic impact of Covid-19, foreign exchange impact and outlook, future industry opportunities and/or risks, and access to commodity insights and reports.”
Standard Chartered, which has private banking operations in Nigeria, Kenya, South Africa and elsewhere, still sees Africa as a strong investment. “The growth in ultrawealthy populations in Africa will outpace that of Europe and North America over the next decade, with the number of high-net-worth individuals growing by 30%,” Demir Avigdor, market head of Europe and Africa, Standard Chartered Private Bank, tells Global Finance.
Like the other private banks on the continent, however, Standard Chartered has to rely on its digital offerings, including its mobile application, to continue seamless service to its clients. Avigdor says the Standard Chartered private banking app, launched in 2019, “has been incredibly beneficial during this period, as clients are able to access their portfolio information round the clock via desktop, tablet or mobile.”
Investec, which competes in South Africa with Standard Bank, is also relying on technology to maintain continuity for its private banking clients. Clients can access their local and international banking and investments through digital channels through a dedicated client-support center, complemented by a specialist and ascribed private banker.