beyondbrics

Trade between BRIC countries and Africa is often seen as one-way traffic – with the fast-growing emerging powers, notably China and India, seeking to exploit the continent’s natural resources.

But there are increasing examples of African companies, predominantly South Africa groups, looking east for opportunities in Asian markets. Among them is Sanlam (SLM:JNB), South Africa’s second largest insurer, which has announced plans to pay R1.9bn ($266m) for a 26 per cent stake in Shriram Capital, the holding company of the Shriram conglomerate.

Sanlam, which has been active in India for about five years,  already holds 26 per cent stakes – the maximum legal foreign ownership in Indian insurance companies – in two of Shriram Capital’s insurance subsidiaries.

“This is just consolidating and showing the strategic intent of what we are doing there,” Johan van Zyl, Sanlam’s chief executive, told beyondbrics. “We’ve been working with the group for about five years and we like what we see. There are a lot of synergies between the businesses we are invested in, so instead of just holding 26 per cent at the subsidiary level, we have now rolled up our interest up to the top level.”

South Africa is Africa’s largest and most advanced economy and was invited into the Brics circle earlier this year in spite of it starkly lagging its Bric peers in terms of  population, economic size and growth rate.

It boasts by far the continent’s most developed corporate sector, including its financial services, and its companies have been particularly active in moving across borders into other Africa states.

Other South African financial services firms also have footholds in India – Old Mutual entered the Indian market 10 years ago by forming a joint venture with Kotak Bank, while FirstRand has a full-scale banking licence in India.

Shriram Capital is no stranger to international cooperation. PE giant TPG is a shareholder with a stake in the holding company of nearly 15 per cent. The group’s partners in its extensive financial services operations including Bank of America Merrill Lynch and Citigroup.

Van Zyl said that in addition to the obvious opportunities of having a presence in the huge and fast growing market, the fact that India has a British colonial history, like many African markets, adds to its attractiveness.

“What’s nice about India is English is the working language and it has the same sort of regulatory system to what we see in Ghana, Kenya and Nigeria – it’s all the old colonial influence,” he says.

In contrast, China is an altogether more complicated option. Sanlam has looked at opportunities in the Asian giant “but there’s nothing we can contribute there; we don’t understand the language, we don’t understand the culture, the regulatory system – there must be big opportunities but maybe for somebody else.”

Still, he thinks the trend of SA companies looking to expand into fast growing emerging markets will continue.

“The big areas where there are massive numbers of people not being served by financial services is really India, Indonesia and the whole of Africa – that’s where I think the scope is and there’s a bit of a scramble for that,” van Zyl said. “And we (South African entities) are as well placed as anybody else to get our share of the pie.”

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