Standard Chartered's Socio-Economic impact in East Africa

16 April 2018 Authored by Consultancy.africa

East Africa is becoming increasingly crucial in the African economic scenario, driven by the strong regional economies of Kenya, Tanzania and Uganda, and Standard Chartered Bank is one organisation that has been active in promoting growth in the region. According to a report developed by Dutch consultancy Steward Redqueen, the bank has had nearly $3 billion worth of value-added impact in the region. 

Integration is the driving principle in the East African economy. The three key economies in the region, namely Kenya, Tanzania and Uganda, are engaged simultaneously in the diversification of their own economies to reduce dependence on commodities or agriculture (in the case of Tanzania), and the promotion of external trade with each other’s economies.

The three countries together form the Eastern African Community (EAC), which has been particularly active in promoting regional economic integration, first through the establishment of a customs union for the region in 2005, and subsequently through formation of a common regional market in 2010.

Since then, the EAC has become the most economically integrated bloc on the continent. In 2015, British multinational banking institution Standard Chartered made the decision to capitalise on the regions growth ambitions, announcing its commitment to further invest in Africa in general, with specific emphasis on the EAC.

Inter-regional trade in the EAC region

According to a new report, commissioned by Standard Chartered bank, and developed by Netherlands-based consulting firm Steward Redqueen, the bank has been considerably successful in its efforts thus far. Value-added impact of an institution encompasses cumulative salary amounts, profits by companies, and taxes paid.

The report found that the total value-added impact of Standard Chartered’s operations in the EAC has amounted to $2.8 billion, which amounts to 2.1% of the GDP of the three countries combined. The figure also includes the generation of more than 1 million jobs, which amounts to 1.7% of the region’s total labour force. 

Specifically, the bank ramped up its lending operations in all three countries, which has substantially boosted loan activity. The Standard Chartered’s total outstanding loan amount in the EAC region currently amounts to approximately $3.4 billion, comprised both of general loans offered to local firms, as well as funds to facilitate international trade. 

Overview of Standard Chartered impact in EAC

Broken down by country, Kenya leads the pack with outstanding loans amounting to over $1.7 billion; a trend that has increasingly come to the fore in recent times in light of the country’s public debt levels. Kenya is followed by Uganda, which has an outstanding loan amount of just over $920 million, while Tanzania brings up the rear with an amount just over $690 million.

When viewed against the backdrop of the overall economy, the outstanding loans with Standard Chartered amount to 7% of the total outstanding domestic credit in Kenya, 9% in Tanzania, and a staggering 26% in Uganda, which signifies the sizeable influence that the bank has had in funding the region’s business environment.

One positive undertone to the bank’s operations in the region is that most of its financial activity is conducted in line with its sustainability aspirations, which were published in 2017. The aspirations are designed to be consistent with the UN’s Sustainable Development Goals (SDGs).

Value-added impact relative to GDP per sector

Therefore, the bank has engaged in lending and sustainable initiatives across a range of sectors, although some have benefitted more than others. As per the report, the total value added by Standard Chartered to the region’s wholesale & retail trade sector, as well as to the manufacturing sector, stand at just over 3% of the entire EAC GDP. Other sectors that have benefitted substantially are transport & communication, business services and agriculture, all of which saw value added of more than 1%.

The in-depth report was prepared by Steward Redqueen, a strategy consultancy and analyst firm that is based in the Netherlands and has additional locales in Barcelona and New York. The firm has been operational since 2000, and lays special emphasis on sustainability, in addition to the quantification of impact to inform transformations.

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