A tide of investment flows is about to hit SA's shores as big players Citibank, Deutsche, JP Morgan and Bank of America Merrill Lynch face off in a serious tussle for market share.
And as they do, SA banks plan to grow their offshore presence as well.
Bank of America Merrill Lynch is on a drive to invest in Africa, aiming to add US$1,4bn to support its local business, which it sees as a platform for expansion. The head of global corporate & investment banking for Africa, Marcus Heilner, says the banking group wants to be No 1 among the international banks - in terms of investment exposure - when it comes to commitments on the continent. He indicates that the bank has to date managed to build up around $3bn in drawn and undrawn credit in SA.
"We aim to increase our basket in the country substantially," he says.
But what is it that makes SA so attractive?
Heilner explains that it centres on infrastructure growth, tourism and commodities (see graph as to why the company is timing it for around the soccer World Cup). Infrastructure growth in the country is seen as globally attractive at 24,9% of GDP, while demand for commodities from China and India is set to continue.
At present Citibank is the biggest player in this space at an estimated $6bn, according to Heilner, while others are at around $3bn-4bn. Bank of America Merrill Lynch is thus aiming to leapfrog JP Morgan and Deutsche Bank if its plan is successful.
It is understood that this expansion will not just be about trading, but hard investment, with Bank of America keen to build top investment positions in many areas, using its strong cash equities position as a platform.
But it is not just the big banks that are coming to play on SA's shores.
As part of the launch of its SA operations, Renaissance Capital, the emerging-markets investment bank, has brought in the experienced Clifford Sacks from Merrill Lynch to drive investment across sub-Saharan Africa, particularly in the mining, oil, financial and telecommunication sectors.
Another interesting new player to set up a base here this year is the Mauritius-based AfrAsia. It is not a retail bank set to compete head-on with the local banks, but will compete with the likes of Standard Bank and Investec on cross-border flows. It will also offer competition to FirstRand in India, for example.
AfrAsia CEO James Benoit says tax and fee rates are competitive, as Mauritius has more than 30 different tax treaties between governments, and is part of the Southern African Development Community. Free exchange of capital and liquidity make it compelling. The bank also has a strategic partnership with India's ICICI Bank, giving easy access to custodial services in India.
Africa is becoming economically integrated with Asia, says Benoit.
Services in support of asset managers are viewed as one growth area.
With its immense domestic market and export/import volumes, India is an attractive investment destination with growing appeal for SA asset managers.
Benoit feels that if commodity prices hold, there could be more acquisitions in the resources sector in Africa, while telecoms is another area of growth.
Another global player in SA is the home-grown Investec, which in 2002 became the first SA banking group to dual list in London and SA. Its three principal markets are the UK, SA and Australia.
But what about Africa? CEO Stephen Koseff says the continent is a tough place in which to operate. He prefers not to have established offices in all countries, but says he wants the bank to be nimble.
Standard Bank is the most entrenched in Africa of the SA players, with a presence in 18 countries. Its CEO, Jacko Maree, says his bank is in a good position relative to some of the big international players, like Goldman Sachs, which focuses on very big deals. "We can go a bit lower," he explains.
Maree also feels that merger and acquisition activity is picking up, though in Africa it's not of the classic big buy out kind, but more project driven.
Maree says Standard does have some advantages over the opposition as many of the deals will be dependent on relationships. But that doesn't mean he's going to sit on his laurels as the competition enters the fray.
"We will be trying to challenge ourselves," says Maree.
He says a problem some of the competition may encounter is that different countries require different skills and capabilities and it can take a long time for any company to transform after moving there from a single base.
He says that after the challenges of 2009, the big question for all banks is where growth will come from. This is overlaid by the changing regulatory landscape.
But Maree believes Standard is well placed, as it has a range of different businesses, including a strong corporate & investment division (it increased total income 6% to R27,7bn in 2009).
The director of transaction advisory services for Africa at Ernst & Young, Adrian Macartney, says a megadeal of, perhaps, more than $1bn, may get done in Africa in the next 24 months in the telecoms sector. He expects the company in the spotlight to be mobile operator MTN, which he sees as the most attractive asset in Africa right now.
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