Investment Banking in South Africa
Investment banking in South Africa is not that popular. But how exactly the market is? Does the country have any opportunities for foreign nationals? How is the pay structure?
In this article, we will go in detail about all the questions posed above. Let’s have a look at the sequence below.
In this article, we will talk about the following –
- Services Offered by Investment Banks in South Africa
- Top Investment Banks in South Africa
- Recruitment Process of Investment Banks in South Africa
- Investment Banking Culture
- Investment Banking Salaries
- Investment Banking Exit Opportunities in South Africa
Overview of Investment Banking in South Africa
The 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. in South Africa is much different than the USA, the UK, and other Asian markets. And most of the time, when investment bankers talk about investment banking, they only talk about Asian, European, and American investment banking.
But how the South African investment banking market looks like! Actually, there are two main differences you would see in the South Africa market –
- First, the investment-grade in the South African market is pretty below par. As a result, investment bankers don’t get interested to go to South Africa for building their careers. However, multinational companiesMultinational CompaniesA multinational company (MNC) refers to that business entity whose headquarter is in one country, and its branches or subsidiaries extend across the globe in two or more nations. The MNCs aim at maximum revenue generation by spreading business worldwide. and Government in South Africa deal with large investment funds which are beyond the reach of local investment banks.
- Second, the fund’s local investment banks in South Africa deal with are all local funds. All of the funds are of South Africa and some are from the African continent.
From these differences, we can find out two major trends in the South African investment market –
- Firstly, investment banking in the South Africa market is emerging and a lot of markets are untapped and underutilized. So, if multinational companies spread their wings and build their offices in South Africa (which some multinational companies already did), there will be a huge opportunity for investment bankers.
- Second, as the market only deals with smaller funds and local investment banks don’t do business in other continents, there is a huge chance of linking all the market together and deal with larger funds.
If you are in South Africa or want to make your mark in investment banking, you have a huge opportunity because first of all, you will be entering into 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’s have a look at the most important services investment banks offer in South Africa –
- 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. and perpetuate with ease over a long period of time.
- 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 so that they can take all of 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’s why they find out opportunities to buy and sell investments and securities on behalf of the clients or for themselves. This is one of the key functions of every investment bank, And in South Africa as well, 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. of various investments for their clients and for themselves.
- Strategic Advisory in Principal Investment: This is another major function of investment banksFunction 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. 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 in making important investment decisions so that the companies can 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 has opened its first office. Thus, the chance for a new graduate who would like to join an investment bank would be great as of now.
Now, let’s look at the top investment banks in South Africa which you can aim to join in the near future –
- Absa Bank Limited
- African Bank Limited
- Albaraka Bank Limited
- Bank of Baroda
- Bank of China
- Bank of Taiwan
- Bidvest Bank Limited
- BNP Paribas
- Caylon Corporate and Investment Bank
- Capitec Bank Limited
- China Construction Bank Corporation
- Citibank N.A.
- Deutsche Bank AG
- FirstRand Bank
- Grindrod Limited
- Habib Overseas Bank Limited
- Hongkong and Shanghai Banking Corporation
- Imperial Bank South Africa
- Investec Bank Limited
- P. Morgan Chase Bank
- Mercantile Bank Limited
- Merrill Lynch
- Morgan Stanley
- Nedbank Limited
- Old Mutual
- Royal Bank of Scotland
- Sasfin Bank Limited
- Societe Generale
- South African Bank of Athens Limited
- Standard Bank of South Africa
- Standard Chartered Bank
- State Bank of India
- Teba Bank Limited
Recruitment Process of Investment Banks in South Africa
The recruitment process is similar to the USA’s investment banking market. Let’s have a look at the recruitment process –
- The focus of the Recruitment Process: Recruitment process in investment banking in South Africa is all about fit questions. If you decide to join an investment bank in South Africa, you should mainly focus on the fitment (as all the investment banks in South Africa look for the fit candidate and they rarely concentrate on the technical aspect of the interview).
- Background: South African investment banks hire people from graduate schools and who have experience in finance. Their primary focus is on people who have an accounting background. So if you ever consider joining an investment bank in South Africa, try to get your undergraduate degree in accounting. Having 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 you have experience in any big 4 companies, you will be given more preference than anyone else.
- Employment equity: In South Africa, maintaining employment equity is a big deal. If the investment banks hire 50% white candidates, they also need to hire 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’s 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 there is a lot of demand for great investment bankers, but there is less supply. Very few people are working in investment banking in South Africa. Thus, investment banks are looking for people who are best suited for investment banking. However, you need to keep in mind 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 required background, you will be able to 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, there was racial discrimination which didn’t let the blacks study or receive any social benefits. As a result, rarely people have good educational backgrounds 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.. Thus, investment banks in South Africa are hiring from foreign countries and there are many candidates from the USA, the UK, Australia and people who 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, there are usually three to four rounds 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 & finance and who can learn things quickly. The interviews are usually very easy to go through if you have a background in finance/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 enjoy a lucrative career.
Investment Banking Culture
The culture in investment banking in South Africa is quite diverse. Depending on the teams you are working in, you would enjoy a greater/lesser work-life balance.
For example, if you work in a bigger team, you will usually work Monday to Friday and you will be working around 70+ hours. And sometimes, you need to work at weekends as well. In smaller teams, the work hours are more and the work-life balance is not healthy. However, rarely there are all-nighters and 100+ hours of work per week. In the case of people who work in M&A deals usually, work 16-18 hours per day.
In the case of traders in investment banks, they work from 7 a.m. to 5 p.m. from Monday to Friday. Weekends are generally off.
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. You will be able to save a lot and will enjoy a comfortable life by working in investment banks. But as it happens in developing countries, there is a major disparity among income and lifestyle.
Investment Banking Salaries
Compared to the USA, the salaries in South Africa investment banking market is much lesser. But if you compare the standard of living, it’s 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’s look at the salaries of investment banks in South Africa –
So from the above, we can conclude that the average salary of investment bankers in South Africa is around R 240,000 to 620,000 (the median is R 430,000).
Let’s look at another graph to have a sense of the impact of educational qualification on investment banking salary –
From the above graph, we can see that if you have a bachelor 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’s 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 from their investment banking firms to other careers. Since the resources are very limited, usually, top talents change banks and always try to go to a higher rung.
But there are exceptions. There are few professionals who change careers and their prime options are two.
- Few professionals leave their investment banks and go to executive finance roles in other firms.
- Secondly, 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. is a good exit option for few other investment bankers.
Also, have a look at this detailed guide to exit opportunities in Investment BanksGuide 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.
South Africa will soon be a great market for investment banking. It’s emerging and most of the funds are below par, but many foreign banks are assuming the opportunity and creating branch offices to expand their business and attract more investment bankers.
Five years down the line, you would be glad that you have joined an investment bank in South Africa if you do because it would be a great place to work in investment banking in the very near future.
This has been a guide to Investment Banking in South Africa, their services offered, recruitment process, their culture, list of top investment banks in South Africa, salaries of investment banking, Jobs and exit opportunities. You may also have a look at the following article for learning more about Investment Banking