Investment Banking In South Africa Overview Top Banks

Investment Banking in South Africa

Investment banking in South Africa is not that popular. But how exactly is the market? Does the country have any opportunities for foreign nationals? What is the pay structure?

In this article, we will detail all the questions posed above. But, first, let us have a look at the sequence below.

In this article, we will talk about the following: –

Overview of Investment Banking in South Africa

Investment bankingThe Investment BankingInvestment banking is a specialized banking stream that facilitates the business entities, government and other organizations in generating capital through debts and equity, reorganization, mergers and acquisition, etc.read more in South Africa differs greatly from the USA, the UK, and other Asian markets. And most of the time, when investment bankers talk about investment banking, they only speak about Asian, European, and American investment banking.

But what the South African investmentInvestmentInvestments are typically assets bought at present with the expectation of higher returns in the future. Its consumption is foregone now for benefits that investors can reap from it later.read more banking market looks like! There are two main differences you would see in the South African market: –

The investment gradeInvestment GradeInvestment grade is the credit rating of fixed-income bonds, bills, and notes as assigned by the credit rating agencies like Standard and Poor’s (S&P), Fitch, and Moody’s to express the creditworthiness of and risk associated with these investments.read more in the South African market is pretty below par. As a result, investment bankers don’t get interested in going to South Africa to build their careers. However, multinational companiesMultinational CompaniesA multinational company (MNC) is defined as a business entity that operates in its country of origin and also has a branch abroad. The headquarter usually remains in one country, controlling and coordinating all the international branches.
read more and governments in South Africa deal with large investment funds beyond the reach of local investment banks.The fund’s local investment banks in South Africa are all local funds. Therefore, all the funds are from South Africa, and some are from Africa.

From these differences, we can find out two major trends in the South African investment market: –

Firstly, investment banking in the South African market is emerging, and many markets are untapped and underutilized. So, investment bankers will have a huge opportunity if multinational companies spread their wings and build their offices in South Africa (which some international companies already did).As the market only deals with smaller funds and local investment banks do not do business in other continents, there is a huge chance of linking all the needs together and dealing with larger funds.

Suppose you are in South Africa or want to make your mark in investment banking. In that case, you have a huge opportunity because, first of all, you will be entering an emerging market, and at the same time, there is a great chance of growth in the investment banking market.

Services Offered by Investment Banks in South Africa

Local investment banks limit their services to the top few. Let us have a look at the most important services investment banks offer in South Africa: –

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Corporate Finance Advisory: When investment banks in South Africa serve their customers, there is one common theme across all companies. The companies want to maximize their shareholders’ value. And having someone to advise through short-term and long-term planning always helps. Local investment banks help clients maximize their shareholder valueShareholder ValueShareholder’s value is the value that company shareholders receive as dividends and stock price appreciation due to better decision-making by the management that ultimately results in a company’s growth in sales and profit.read more and perpetuate with ease over a long period.Strategic Advisory in Institutional Research: Local investment banks take a major role in institutional research. Thorough research is required before making any significant decisions. These banks help institutions with research and strategic advisory take their major decisions prudently. And it also helps the local investment banks hone their skills.Sales and trading: Local investment banks understand the value of investments. And that is why they find opportunities to buy and sell assets and securities on behalf of the clients or themselves. That is one of the key functions of every investment bank, And in South Africa, local investment banks perform sales and tradingInvestment Banks Perform Sales And TradingOne of the main functions of an investment bank in the country is sales and trading, in which the investment banking sales team pitches clients for trading ideas and the traders team executes activities related to the purchase and sale of securities and other financial instruments in the market for itself or on behalf of its clients.read more of various investments for their clients and themselves.Strategic Advisory in Principal Investment: This is another major function of investment banks Function Of Investment BanksInvestment banks perform various functions for their clients, including initial public offerings (IPOs), mergers and acquisitions, risk management, equity research, structuring of derivatives, merchant banking, and investment management.read more in South Africa. These banks finance major transactions for their clients to help them reach their goals and, as a result, charge a commission/fee from the clients. Other than financing, these investment banks also help the companies make important investment decisions to mitigate risks and optimize returns.

Top Investment Banks in South Africa

South African investment banking market is one of the emerging markets in the world. In 1994, Morgan Stanley, a major global investment bank, opened its first office. Thus, the chance for a new graduate who would like to join an investment bank would be great.

Now, let us look at the top investment banks in South Africa that you can aim to join shortly: –

Absa Bank LimitedAfrican Bank LimitedAl Baraka Bank LimitedBank of BarodaBank of ChinaBank of TaiwanBidvest Bank LimitedBNP Paribas South AfricaCalyon Corporate and Investment BankCapitec Bank LimitedChina Construction Bank CorporationCitibank, N.A.Deutsche Bank AGFirstRand BankGrindrod LimitedHabib Overseas Bank LtdHongkong and Shanghai Banking CorporationImperial Bank South AfricaInvestec Bank LimitedJ.P. Morgan Chase BankMercantile Bank LimitedMerrill Lynch South Africa (Pty) LtdMorgan Stanley South Africa (Pty) LimitedNedbank Old MutualThe Royal Bank of ScotlandSasfin Bank LtdSociete Generale GroupThe South African Bank of Athens LimitedThe Standard Bank of South AfricaStandard Chartered South AfricaState Bank of IndiaTeba Bank LtdUBS South Africa (Pty) Ltd

Recruitment Process of Investment Banks in South Africa

The recruitment process is similar to the USA’s investment banking market. Let us have a look at the recruitment process: –

The Focus of the Recruitment Process: The recruitment process in investment banking in South Africa is all about fit questions. For example, suppose you decide to join an investment bank in South Africa. In that case, you should mainly focus on the fitment (as all the investment banks in South Africa look for the fit candidate and rarely concentrate on the technical aspect of the interview).Background: South African investment banks hire graduate schools with finance experience. Their primary focus is on people who have an accountingAccountingAccounting is the process of processing and recording financial information on behalf of a business, and it serves as the foundation for all subsequent financial statements.read more background. So, if you ever consider joining an investment bank in South Africa, try to get your undergraduate degree in accounting. An accounting degree will help you get an interview easily at a South African investment bank. Moreover, if you come from a different country and have experience in any of the big four companies, you will be given more preference than anyone else.Employment Equity: In South Africa, maintaining employment equityEquityEquity refers to investor’s ownership of a company representing the amount they would receive after liquidating assets and paying off the liabilities and debts. It is the difference between the assets and liabilities shown on a company’s balance sheet.read more is a big deal. If the investment banks hire 50% white candidates, they must employ 50% black candidates. As a result, the investment banks take a lot of time offering the candidates. Usually, it takes around 4-6 months to close a position. It is not because the interviews are more rigorous; rather, maintaining employment equity is the most important thing in the recruitment process.Demand & Supply: The best part of the investment banking career in South Africa is a lot of demand for great investment bankers. Still, there is less supply. Very few people work in investment banking in South Africa. Thus, investment banks are looking for people best suited for investment banking. However, you need to remember that you need similar qualifications and background to crack the jobs in investment banking, and there is no easy way out. But if you have the necessary knowledge, you can get an interview without much hassle.Impact of Apartheid: One of the major issues in South Africa is the impact of apartheid. From 1948 to 1991, racial discrimination did not let the blacks study or receive social benefits. As a result, people rarely have a good educational background to qualify for investment banking jobsInvestment Banking JobsThe investment banking job description is a formal narrative that lists out the essential qualification, basic skills and technical skills required in a candidate to fill in the vacant investment banker position. It also explains the roles and responsibilities to be performed in this job position.read more. Thus, investment banks in South Africa are hiring from foreign countries. As a result, many candidates from the USA, the UK, Australia, and people came to South Africa after working abroad.Interview Rounds: The recruitment process in South African investment banking is similar to the employment process in the USA. Thus, three to four rounds are usually done before extending the final offer. Usually, people give the first round for fitment, where the investment bankers see whether you are fit for that particular bank or not. Then you will be going through a case analysis round (though the focus on the technical aspect is much lesser), and you need to present a case depending on a hypothetical situation. Finally, you will be sitting with the MD and the HR representative to go through the final round of interviews. The idea is to find someone who has a good hold over concepts in accounting and finance and who can learn things quickly. The interviews are usually very easy to go through if you have a background in financeFinanceFinance is a broad term that essentially refers to money management or channeling money for various purposes.read more/accounting since the interviews are not focused on technical mumbo-jumbo. So prepare well and earn the pre-requisites to join an investment bank in South Africa. And you would be on your way to enjoying a lucrative career.

Investment Banking Culture

The culture in investment banking in South Africa is quite diverse. Depending on the teams you work in, you would enjoy a greater/lesser work-life balance.

Here people are very cordial and love to hang out. As a result, investment banks often sponsor social events, parties, and networking events. These events help people hang out, make connections, do networking, and create new opportunities for each other.

As a whole, you would be able to live greatly in South Africa. That is because you will save a lot and enjoy a comfortable life by working in investment banks. But as in developing countries, there is a major disparity in income and lifestyle.

Investment Banking Salaries

Compared to the USA, the salaries in the South African investment banking market are much lesser. But if you compare the standard of living, it is pretty low in South Africa, and as a result, you will be able to live comfortably within the salary you earn in investment banking.

Let us look at the salaries of investment banks in South Africa –

source: glassdoor.com

So, from the above, we can conclude that the average salary of investment bankers in South Africa is around R240,000 to R620,000 (the median is R430,000).

Let us look at another graph to have a sense of the impact of educational qualification on investment banking salary: –

source: payscale.com

From the above graph, we can see that if you have a bachelor’s degree in B.Com, your chances of success in investment banking are higher. And your second preference in education can be a Bachelor of Science.

Now, finally, let us look at the salary of investment banking compared to the compensation of other professionals.

The median salary of investment bankers in South Africa is around R 475,000 per annum.

Investment Banking Exit Opportunities in South Africa

In South Africa, people rarely exit their investment banking firms for other careers. However, since the resources are limited, top talents usually change banks and always try to go to a higher rung.

But there are exceptions. Few professionals change careers, and their main options are two.

Few professionals leave their investment banks and go to executive finance roles in other firms.A hedge fundHedge FundA hedge fund is an aggressively invested portfolio made through pooling of various investors and institutional investor’s fund. It supports various assets providing high returns in exchange for higher risk through multiple risk management and hedging techniques.read more is a good exit option for a few other investment bankers.

Also, have a look at this detailed guide to exit opportunities in Investment Banks.Guide To Exit Opportunities In Investment BanksAmong the several exit options available to investment bankers are: 1.Private Equity 2.Hedge Funds 3.Strategy Consulting 4.Fin-Tech 5.Advisory for large corporates.read more

Conclusion

South Africa will soon be a great market for investment banking. It is emerging, and most of the funds are below par. Still, many foreign banks assume the opportunity to create branch offices to expand their business and attract more investment bankers.

Five years down the line, you will be glad that you have joined an investment bank in South Africa. If you do, it would be a great place to work in investment banking very shortly.