Goldman Sachs gets approval to operate as a local bank in South Africa

SOUTH AFRICA – Goldman Sachs Group, an investment bank, has received approval from South African regulators to operate a bank, as the Wall Street firm seeks to tap into fast-growing economies on the continent.

The company also became a member of the Johannesburg Stock Exchange’s interest-rate and currency-derivatives market. It will offer fixed-income products, foreign exchange and South African government securities, to corporate and institutional investors.

Goldman Sachs, which has been present in South Africa for more than 20 years, in December appointed Jonathan Penkin as head of the local business. The firm already provides advisory, wealth- and asset-management services to corporations, investment firms, government institutions and individuals.

Goldman’s expansion into South Africa coincides with the reduction of other brokers, including Macquarie Group, Arqaam Capital, Deutsche Bank and Credit Suisse Group.

Despite the country’s economic downturn, South Africa has the most promising capital markets on the continent, which is home to half a dozen of the fastest growing economies in the world.

Goldman has been undertaking strategic initiatives to counter falling revenues by entering new markets and diversifying income sources. Along with expansion in core banking, the company entered into a deal with Investec, a South Africa-based investment bank, to fortify equity trading in the region.

Apart from South Africa, the bank has also applied for a banking license in Japan in order to offer global cash management services. Also, Goldman has plans to double the workforce in China over the next five years and intends to add to its advisory, markets and merchant banking operations in the mainland.

Moreover, in January, the company launched a mobile app for Marcus, an online-only retail bank to boost consumer banking revenues. Such efforts are likely to improve top-line growth, going forward.

Earlier this month, Goldman Sachs announced that reporting would be revised into new business areas. In a statement from the Securities and Exchange Commission (SEC), the Wall Street banker said it had created a consumer and wealth management unit that will include Marcus and the Apple credit card.

The South African economy had gross domestic product (GDP) of just under US$400 billion, which made it attractive to Goldman Sachs. Africa accounts for about 2 percent of global GDP and 15 percent of the world’s population.

Africa’s working-age population is expected to increase to nearly a billion by 2030, up from 705 million in 2018. To avoid unemployment, the continent needs to create around 12 million new jobs annually.

Africa’s e-commerce volume is expected to reach US$75 billion by 2025, and FinTech’s economic output is expected to contribute US$150 billion to GDP by 2022.

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