The piece “Standard Bank outlines products for Malawi’s minerals sector” featured below was initially published in Malawi’s Mining Review Issue Number 21 2015 that is circulating this January 2015.
The full edition can be read here: Mining Review No. 21 January 2015.
To learn more about this monthly publication, edited by Marcel Chimwala, read the post about the “Voice of the mineral sector in Malawi”.
Standard Bank outlines products for Malawi’s minerals sector
Standard Bank is a giant when it comes to financing mining project in Malawi. Mining Review Editor Marcel Chimwala had this online interview with Standard Bank Malawi Head of Investment Banking Shakir Satar to find out what products the leading bank has on off for Malawi’s growing minerals sector. Excerpts:
Q: As growth prospects for the minerals sector look high in Malawi, how is Standard Bank Malawi well placed in terms of its history and biases as a bank to cater for this promising sector? Please give as examples of the mining projects that have benefited from Standard Bank’s services.
A: Standard Bank has a rich pedigree in the mining industry. Since Standard Bank’s establishment, the Bank has evolved to service other key sectors and entrench itself as a key Financial Institution servicing the Mining Sector in Africa. We have a strong African mineral heritage that runs deep, from exploration to logistics to risk – we see the bigger picture. The group’s activities in mining date back to the development of the Kimberley diamond fields in 1878. Since then, Standard Bank has been a key financier in numerous landmark mining projects throughout Africa. We thus understand the industry and are able to marry the skills of corporate finance to geology and mining engineering. Our knowledge of the mining sector scratches far beneath the surface.
Standard Bank has a 151-year history in South Africa and started building a franchise in the rest of Africa in the early 1990s. We currently operate in 20 countries on the African continent, including Malawi, as well as in other selected emerging markets.
Our multi-disciplinary teams based in key financial hubs around the world strongly position us to assist our clients in dealing with the rising opportunities and associated risks and challenges in this sector. This includes advising on acquisitions and investments, raising debt and equity capital, structuring solutions and assisting in day-to-day trade flows and treasury management.
Just to mention a few, notable mining transactions Standard Bank have been involved in are as follows:
- In 2012, Standard Bank was one of the syndicate bank’s which financed $180mn in Project Finance for Paladin’s Kayelekera Project
- Standard Bank acted as joint lead arranger to First Quantum Minerals on their recent USD 1 billion corporate financing. The facility provides the company with funding lines for planned capital works at Kansanshi and the construction of their Sentinel Project in Zambia. The Sentinel Project has an estimated capex cost of SUD1.7 billion. First Quantum is a long standing client of the bank’s since the original project financing of Kansanshi in 2003
- Standard Bank was appointed as the sole lender and arranger to De Beers Marine Namibia (“Debmarine”) on a USD70 million term facility. The proceeds of the financing would be used to fund the purchase of the Peace in Africa (“PIA”) exploration vessel from De Beers Consolidated Mine (“DBCM”). The PIA is one of the most specialised marine diamond mining vessels in the world
We are the largest African bank with a strong presence in Malawi; being one of the few banks in Malawi with a fully dedicated Investment Banking Team. In addition, as part of an international banking group we are able to structure much larger capital injections for our clients with easier access to foreign currency where need be. Standard Bank aspires to be the leading Corporate and Investment bank in, for and across Africa with a deep specialisation in natural resources.
Q: What products do Standard Bank offer, which are tailored for the corporate world, in particular firms in the minerals sector, equipment suppliers/importers etc? On this subject, we expect you to talk about type of accounts suitable for companies, overdraft facilities, loans etc.
A: Our offering to corporate clients comes in three specialist areas: we have Global Markets, Transactional Products and Services, and Investment Banking. We use our expertise in these three specialties to deliver the highest quality products to our customers with robust risk management measures in place.
In Global Markets, we offer foreign exchange, money markets and fixed income products. Our Investment Banking offering is organized as follows: advisory services and comprehensive financing services. Some of the products and services we offer in Advisory Services include valuation of companies, project finance and debt related advisories and strategic partner searches amongst others. Comprehensive Financing Services comprise of strategic equity investments, project financing, asset finance, corporate finance and structured trade finance. Through Transactional Products and Services, we offer overdrafts, short-term loans, call loans, letters of credit, guarantees, bills and trade finance facilities. We also offer Investor Services, which include custody, transfer secretarial services and trusteeship services. Our cash-in-transit service allows us to transfer the physical money from our clients to the bank so they can focus on the running of their businesses.
Q: You will note that most of the companies in the minerals sector source their funding from foreign financial institutions. How ready is Standard bank to finance mining projects understanding that large-scale mining projects require large capital investments?
A: Standard Bank in uniquely positioned to provide financing solution to mining companies in Malawi. Our Investment Banking team in Malawi is able to leverage off our sector and product specialists based in key financial hubs to provide the optimal funding solutions. Our extensive African footprint and presence in key financial markets enables us to connect to key sources of capital which enables us to arrange and fund large scale mining projects.
Q: Most mining companies have an international background and require prompt fund transfers from different countries. How is Standard Bank placed in the international banking system to cater for these transfers?
A: Standard Bank Limited in Malawi has established relationships with correspondent banks in all major currencies which enables smooth transfer of funds internationally. As part of the Standard Bank Group, we are also able to leverage off the long standing presence of the Bank in the International Banking System as well as the strategic partnership with the Industrial and commercial bank of China.
Q: Information technology is at the core of mining in these modern days. How has Standard Bank advanced in terms of electronic money transfer technologies and other relevant technologies that are used by the corporate world?
A: The Digital Revolution is here and Standard Bank is going to become a key player in using information technology to deliver unprecedented digital platforms to our customers. Our New Business Online (NBOL) system gives our customers a global view of all their accounts held by Standard Bank as well as any other agent bank. The system keeps an 18-month transaction history and allows our customers to check their account balances, transfer funds between accounts and make payments from the comfort of their offices. The system is also compatible with accounting systems such as SAP and sends email and SMS alerts as agreed beforehand with the customer. This also means that our customer does not have to visit every bank to which they are making a payment as they can submit a single file that makes payments to all banks in Malawi. The Electronic Funds Transfer System (EFTS) enables our customers to make bulk payments like salaries and supplier/contractor payments securely and efficiently. Our digital payments systems mean that mining companies do not have to expend their resources to take salary and allowance money to the employees working in the field. They can instead use the technology platforms we provide to pay their employees in the field through the mobile banking platforms. The employee will then go to the nearest agent to get cash if they need to do so. The employee can also make any utility bill payments on these platforms. Our clients will also benefit as it means that their employees do not have to spend long periods travelling back and forth to check their balance or pay bills during working hours. With the digital platforms that we offer, we see no reason why payments should be delayed as delays usually affect the relationships between customers and their counterparts, be it suppliers or staff. With these technologies, we believe that Standard Bank is in the opportune position to meet the transactional demands of the mining industry and the country as a whole.
Q: It is believed by a cross section of minerals sector investors that local funding is expansive as interest rates are relatively high locally as compared to other countries. Will you comment on this assertion as Standard Bank Malawi? Will you explain the advantage of sourcing project funding locally from Standard Bank other than from foreign financial institutions if any?
A: It is correct that local currency debt funding is high in Malawi and to large extent prohibitive for long tenors. When embarking on a large scale project it is important to engage with an advisor to establish the funding requirements whether in local or foreign currency and come up with an optimal funding structure for the project. This will be a combination of debt and equity financing which will minimize the cost of funding and create a prudent funding level.
Standard Bank through its Investment Banking division is able to assist mining companies in advising and sourcing capital locally and through international markets.
It is important to understand that for large scale projects, they cannot be financed through local sources alone.
Q: What advantages are there for investors to source financing from Standard bank as compared to other local financial institutions?
A: As mentioned, our strategic presence in key funding markets such as Johannesburg, London, New York, Dubai, Hong Kong, Beijing and Singapore enable us to connect to various pools of capital.
Standard Bank also has a strategic partnership with Industrial and Commercial Bank of China (ICBC) who own 20% shareholding in Standard Bank. This relationship has enabled us to partner with key Chinese investors in some major projects in Africa.
Q: What products do you have on offer for members of staff of companies in mining and related sectors?
A: We offer companies the opportunity to provide their employees with accessible, flexible and relevant personal financial solutions. Through our workplace banking capability, we are able to conduct banking services on site for the employees as agreed with their employer. Even though we offer this service at no additional cost of the employer, we are able to offer preferential pricing to their employees across all levels in the organization. Standard Bank is able to deploy its resources to ensure that we can literary bank the entire company effectively. As for the employees, we offer them everything from current accounts, savings accounts and various types of loans with competitive disbursement times. We have recently started to offer the “Funeral Plan” product to our customers; the product aims to cover funeral expenses. We know that the digital revolution has indeed landed in the country and that the people of Malawi have warmed very well to banking on their mobile phones. Standard Bank is heavily invested in delivering excellent and competitive digital banking solutions and we hope that by doing so, we are able to be there for customers where we do not have physical presence. Specifically in regard to the Mining companies, we will be introducing a few innovations in the near future but it is too early for us to reveal our plans. Clearly, we intend to be the miner’s bank, and we plan to bank each miner in the country.