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Russia’s largest private bank expands into Africa

Press Release – Gazprombank
23 April 2014

Russia’s largest private bank, Gazprombank, expands into Africa through South Africa.

First Russian commercial bank to operate in South Africa brings broad emerging markets expertise and innovative funding methods to the continent

Johannesburg – 25 April 2014 – Gazprombank (OJSC), one of Russia’s largest banks, is to launch a local office in Johannesburg by July this year and a licensed bank representative office by the end of the year.

Gazprombank is the first Russian commercial bank to start operations in South Africa. The bank’s expansion into Africa forms part of its emerging markets strategy. It already has a presence in Asia – in China, Mongolia, and India. It also has offices in eastern and western Europe.

In Africa, with an emphasis on SADC and medium to large projects, Gazprombank will concentrate on the mining, infrastructure, and energy (both fossil and green) sectors. It will also focus on trade finance between South African and Russian companies. Its participation in investments will range between US$10MM and US$200MM per transaction across the various sectors.

Oleg Vaksman, Gazprombank deputy chairman, says that the bank has chosen to base itself in South Africa because the economy provides good legal and financial fundamentals and many of the bank’s potential partners, in the form of financial institutions, are also based in the country. “What we bring to the African environment is the fact that we come from an emerging market ourselves. So we understand the operating environment and what the real financing needs and opportunities are. We understand both the need for flexibility and the firm risk management required to be successful in emerging markets. Our expertise and experience combined with the local knowledge of African financial institutions, will enable us all to put innovative deals together that will not only provide finance but, we believe, will drive further economic development in the region.”

One of the possible approaches the bank may apply in Africa is ‘multi-sourcing’, in which the financing parties to a transaction use, for instance, a mix of syndication, private placement, or bond issues to raise the necessary capital for projects.

“Emerging markets don’t have much experience of using one another’s capital but the process offers significant advantages in terms of avoiding currency risks,” Mr Vaksman says. “We therefore want to put to work these and other means, such as direct rouble to rand trade, of making it easier to do ‘in BRICS’ business.”

Gazprombank has appointed Musa Capital, a Johannesburg based private equity and advisory firm that has been operating across the African continent for the past 18 years, as one of its African advisors. The two companies have begun collaborating on a number of initiatives.

Musa Capital co-founder, Antoine Johnson, believes that Gazprombank will have a significant transformational effect on the continent and, in doing so, exemplify the potential of BRICS.

“Gazprombank is neither a development nor a retail bank but, because its preferred modus operandi is to work alongside local financial institutions in bringing new entrants into the sectors on which it will focus, it will broaden the reach of available capital. Also, because it will fund ‘south to south’ technical education, it will deepen the societal value of its investments in projects.

“In addition, Gazprombank’s focus on new players and new technologies, including those it can introduce to Africa from, for example, the energy and agricultural sectors in Russia, has the potential to bring originality into businesses and even create new markets.

“Both BRICS and Africa need innovation to succeed. Gazprombank is ideally positioned to give expression both to the promise of BRICS and to innovation as a vehicle for transformation.”

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