Citigroup disappointed by South Africa investment


Johannesburg: Citigroup Inc invested to expand in South Africa. Now all the New York-based bank needs is deals.

“We have in the two last cycles appropriated additional capital to continue to grow our business, but we haven’t seen as big a deal flow to be able to execute against that,” said Citigroup chief country officer Peter Crawley. “We’re very much sitting on the side and battening down the hatches, planning for a difficult scenario. But hands on today, eyes on tomorrow.”

President Cyril Ramaphosa’s slow progress in returning the continent’s most industrialised economy back to growth is stunting takeovers and bond issuance and causing equity-related deals to plummet to record lows. His administration is also grappling with how to deal with power utility Eskom Holdings SOC Ltd, which has debt equal to about 8% of gross domestic product.

South Africa is one step away from falling out of the World Government Bond Index, with only Moody’s Investors Service assessing the nation’s debt as investment grade -- a rating due for review in November. The economy has shrunk four out of the past nine quarters, weighing on business and factory confidence. Spending by households, which accounts for 60% of GDP, remains weak, while the government’s expenditure continues to outpace income.

A number of foreign investors are “sitting on the sidelines” waiting for clarity on Eskom and Moody’s, Crawley said. More also needs to be done to appease foreign direct investors on property rights, he said, as the country debates how to give the majority black population greater land ownership. “Challenges are policy certainty and growth.”

While the value of mergers and acquisitions in the first half of this year rose 25% to 2.25 billion rand (US$160mil) from the same period in 2018, there were no deals of over US$100mil in the second quarter, according to data compiled by Bloomberg.— Bloomberg

Banking , Investment , Citigroup