Why we need specialist
problem-solvers in banking

South Africa is globally recognised as having one of the most resilient, well-capitalised and technically competent banking sectors in the world. These skills have been honed through a variety of different economic cycles and allow our teams to work on large deals – but who manages the risk when a sector or the economy as a whole hits an unexpected speed bump?

Whether we are looking at geopolitical issues such as the events in Eastern Europe or measuring the economic fallout from a spike in oil prices or rising global interest rates, this topic of “Distressed Assets” becomes topical for bankers, shareholders, asset managers and public sector entities.

This term often conjures up an impression of debt collectors, but the reality is that these are the matters which are brought to our Special Asset Management business. These could include high-profile restructurings for the likes of JSE-listed heavyweights Tongaat and Aveng or public-sector operations like the Land Bank or SAA.

Our day-jobs entail coming up with solutions to support our clients through challenging times, protect the bank’s capital and to bring leadership and strategic dialogue to complicated transactions.

These skills are likely to become increasingly important for a couple of key reasons in 2022 and into the medium term:

We will have a clearer picture as the big banks in SA start reporting, but while the risk has moderated since 2020, pent-up risk remains elevated.

While events in the Ukraine continue to unfold, the impact is already being felt with surging oil prices and global supply chains being interrupted yet again. This is unfolding just as we were beginning to return to pre-COVID-19 levels. The ordinary consumer may be feeling it at the petrol pump, but these shocks will be felt across the globe. South Africa may feel somewhat shielded geographically, however the ripple effects will wash through into our economy, the severity of which remains to be seen.

African State-Owned Enterprises represent one of the most interesting and challenging debt propositions at the moment. Many of these entities play critical roles in their respective economies, but require strategic restructuring to ensure their continued viability.

Matters such as Eskom, SAA and Land Bank in South Africa have dominated the headlines and resolutions of these matters require an astute appreciation of the social and political backdrop and constructive dialogue between affected stakeholders. Technical competence alone is insufficient, all stakeholders need to mobilise constructively towards an equitable solution. In an ideal world, the ability to move at speed is a key ingredient to a successful restructure, which has proved to be really challenging when working within the confines of the Public Finance Management Act in South Africa. Perhaps it would be worthwhile to consider practical enhancements that would enable a more effective approach to distressed public entities?