DETERMINANTS AND EFFECTS OF FOREIGN MERCHANT BANK ENTRY INTO SOUTH AFRICA
Date
2011-07-14
Authors
McNaughton, Mary -Jane
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Abstract
The expansion of foreign-owned banks into South Africa portrays similar characteristics to those of foreign bank entry into other emerging economies of the world. The literature on the determinants of entry and implications of foreign bank presence has focused on developed markets in Europe and the United States, while literature devoted to emerging economies has predominantly examined Asia, Eastern Europe and South America. Drawing on the international studies of foreign bank entry, this report attempts to critically analyse the reasons behind the expansion of foreign banks into the South African market. The report also examines the impact that foreign banks have on the South African banking industry, and identifies apparent comparative advantages that international foreign banks have over their South African counterparts. Lastly, the paper includes a survey of what the Investment Banking landscape in South Africa may look like for Global Investment Banks in five years time.
The research elicited some interesting findings. Foreign banks are entering the South African economy to capitalise on various new market opportunities offered by a sophisticated and interesting financial market and well-developed infrastructure. They also, however, are nurturing their customer relationships by following global companies abroad in order to serve their investment and commercial banking needs in these markets. Global banks are in a strong position to offer services to multinationals due to their global brand, international location and global network. Many foreign banks have identified Africa as an untapped market with attractive business opportunities. Since South Africa is the ‗listening post‘ into Africa, foreign banks have an added advantage in holding a presence in South Africa. Foreign banks operating in South Africa hold comparative advantages in that they exist as global financial networks. They can, for instance, draw on their parent bank‘s capital base and the group‘s global knowledge base. Lastly, foreign banks have introduced healthy competition and efficiencies into the local banking market, and have contributed to South Africa‘s competitiveness in the global financial market arena.
Description
MBA - WBS
Keywords
Banks and banking, Foreign banks