Introduction by the chairman              
 Our vision and values                      
 Sustainability report overview              
 Group overview                               
 Group executive committee          
 Executive summary                           
 Stakeholder engagement               
 Economic contribution                    
 Corporate governance and ethics
 BEE and FSC                                   
 Shareholders                                
 Customers                                        
 Employees                                     
 Suppliers                                         
 Corporate social responsibility
 Environment                                    
 African footprint                                  
 International footprint                       

Addressing the needs of previously unbanked markets and customers

   
 

We acknowledge the importance of South Africa’s broad-based transformation agenda, and from a customer perspective, have resolved to support it by:

  • providing appropriate banking products and facilities for the low-end retail market;
     
  • structuring appropriate lending products for emerging businesses;
     
  • making appropriate infrastructural investment finance available; and
     
  • working with government, development agencies and other relevant customers.

We simultaneously need to manage the risks inherent in such products to ensure that the cost-to-value ratio of new products supports client retention and growth. In this way, we protect the interests of our shareholders while serving the interests of a broader range of stakeholders.

Some of our important recent initiatives to innovate or improve products and services in this regard include the following:

Retail initiatives

Mzansi

In October 2004, the Mzansi industry-wide initiative was launched. This initiative has been designed to attract a high percentage of the country’s unbanked people, estimated at more than 13 million South Africans. Further details of Standard Bank’s Blue Account can be found in this report.

EPlan account

Our EPlan product offering, introduced more than a decade before the signing of the charter, continues to grow. By the end of 2004, we had approximately 3,1 million established EPlan active accounts, a 12% increase on the number reported at the end of 2003 and we have 137 EPlan distribution outlets in South Africa.

Society scheme

The Standard Bank society scheme enables groups of people in a community to join together in a savings initiative. The balance of the savings and investment accounts held under our society scheme increased in value, year-on-year, by 18% from R623 million to R734 million.

FuneralPlan

Our Standard Bank FuneralPlan provides funds to enable customers to pay for funeral expenses in the event of the death of a principal or nominated family member. We have sold more than 778 000 policies since the inception of FuneralPlan in 2000. The number of policies in force increased by 24% during the year. FuneralPlan beneficiaries, combined, are insured to the value of R7,2 billion.

With the increase in Aids-related deaths of family breadwinners, our FuneralPlan has enabled families to bear some of the financial burden associated with the death of a loved one. We paid a total amount of R255,4 million during the year to about 27 000 beneficiaries.

African Bank Investments Limited

Through our joint venture with African Bank Investments Limited (ABIL), we continue to provide microloans to qualifying Standard Bank EPlan customers through their EPlan accounts. We ended the year with a joint-venture loan book worth R568 million, a 49% increase on the R380 million recorded at the end of 2003.

Our microlending business with ABIL has become a significant growth area for us, in line with the growing demand for low value loans from people who were mostly excluded from receiving microloans in the past. Most of the loans (about 90% of the total number) are granted to qualifying individuals from households earning a gross monthly income of less than R7 500. The average value of a loan granted during the year was R3 500 with the average loan term being 17 months.

The necessary risk management processes are in place when granting small loans to ensure that borrowers clearly understand the terms and conditions of the contracts they sign. Key to this commitment is that representatives and agents offering the microloan facilities act ethically. We must at all times respect the need to ensure that no customer runs the risk of being overborrowed. Our customer default rate of 6,5% was well managed throughout the year.

Some of the other initiatives we are involved with include:

Virtual Market Place: We have a 19% interest in Virtual Market Place (Proprietary) Limited, the company that owns the MySchool brand. MySchool provides a variety of technology solutions aimed specifically at the South African school community.

Edu-Loan: We have a 45% equity stake in Edu-Loan, an established education finance company based in greater Johannesburg. We entered into this business alliance to assist students to gain access to affordable and effective financial assistance for education purposes and to extend a product offering beyond our traditional student loan offering. Edu-Loan granted 56 654 loans (2003: 50 112) totalling R200 million in value during 2004 (2003: R165 million).

Wholesale initiatives

Infrastructure financing

Our operations in South Africa and elsewhere in Africa are currently involved in three major infrastructure funds:
  • the South African Infrastructure Fund (SAIF);
     
  • the African Infrastructure Investment Fund (AIIF); and
     
  • the Emerging Africa Infrastructure Fund (EAIF).

These funds have become important funding vehicles for several countries and economic sectors at a time when efforts are being intensified to accelerate the development of the continent’s infrastructure. Most of this development is being conducted in crucial areas such as: power, energy, water supply, telecommunications, transportation and logistics, education and healthcare.

The three primary and closely interrelated objectives of infrastructure development, shared by Standard Bank are to:

  • narrow the development gap between Africa and the world’s developed countries;
     
  • increase Africa’s attractiveness as an investment destination; and
     
  • eradicate, in time, poverty, diseases and illiteracy by building human capacity and creating new opportunities for economic development.

SAIF and AIIF are private equity funds aimed at making investments in vital, commercially viable, infrastructure projects such as bridges, roads, harbours, airports, energy facilities and water projects. SAIF has closed its investment period, having invested R740 million of the R804 million capital raised. AIIF is among the largest private-sector investors in new and revamped African infrastructure. The balance of the AIIF was R1,3 billion at the end of 2004. We committed R250 million during the year. We are a cornerstone investor in AIIF and play an active role on the governing boards of both SAIF and AIIF.

R142 million was invested in infrastructure projects by AIIF in 2004 and it is anticipated that a further R650 million will be invested during 2005. This represents a significant share of the total investments in infrastructure private equity in Africa. The availability of this private sector capital will significantly enhance the successful implementation of infrastructure delivery.

The complementary EAIF provides debt financing to commercially viable private-sector infrastructure projects in sub-Saharan Africa. Two important social objectives underscore these projects: poverty relief and economic growth in line with the environmental and infrastructural objectives of the New Partnership for Africa’s Development (Nepad).

The EAIF has raised commitments for US$305 million of which US$25 million is from Standard Bank. They have provided a total of US$92 million in debt financing commitments for infrastructural projects during 2004. An additional amount of US$100 million is expected to be committed for projects in 2005.

picture: The launch of the industry-wide Mzansi bank accounts in October 2004.
The launch of the industry-wide Mzansi bank accounts in October 2004.

Investments and project financing

Our investment and project financing arm is governed by the relevant statutes, regulations and guidelines applicable to our direct and/or indirect investee countries. In turn we rely on all borrowers and other financial beneficiaries to uphold best practice development guidelines for social economic and environmental sustainability.

We ensure that project executors and their development partners, including contractors, follow best economic, social and environmental practices in all project areas, including project design, engineering, procurement, construction and site rehabilitation.

No major project is financed without the bank’s prior perusal of the findings and recommendations contained in an independently commissioned environmental impact assessment (EIA). We also maintain a stringent policy and procedures for monitoring developmental projects to ensure that they remain in compliance with agreed principles and criteria. Non-compliance by project custodians can lead to a breach of contract.

An example of an infrastructural project founded on principles of good governance and sustainable development was Sasol’s recently completed US$1,2 billion Mozambique Natural Gas Project (MNGP). We were the lead arranger and underwriter of the commercial funding.

Public-Private Partnerships (PPPs) are increasingly being used to finance government infrastructure and to ensure more sustainable ventures. Although PPPs are not a new concept worldwide, South Africa has successfully initiated a number of PPPs in the last five years for financing the development of key infrastructure.

The Department of Trade and Industry (DTI) was one of the first government departments to initiate a PPP solution to its real estate needs, and this accommodation project won Euromoney’s African PPP Deal of the Year in 2003 (DTI project). Arranged by Standard Bank, and sponsored by Rainprop Consortium, the project has the highest share of empowerment equity in any PPP deal to date.

This DTI project had a number of sustainability challenges:
  • the new site was contaminated by a few fuel station leakages and Standard Bank employed pollution consultants to monitor the clean-up process and establish future safety mechanisms;
     
  • the commitment to high levels of empowerment equity required complex financing solutions. Standard Bank arranged a combination of mezzanine and SME finance to support the black contractor shareholders; and
     
  • the project served as our impetus to urban rejuvenation in the Sunnyside area of Pretoria. Community participation and consultation was a special feature of the design and implementation plans.