An interview with Sim Tshabalala: sustainable development and leadership at Standard Bank

Africa.com’s Teresa Clarke sat down with Sim Tshabalala, the CEO of Standard Bank.

Listen to the podcast below:

What is it about the World Economic Forum (WEF) that brings you and global business and political leaders from around the world to Davos every year?

Since the 1970s, Prof Klaus Schwab has demonstrated the ability to get civil society, business and government to come together to deal with the major issues confronting the world. From a Standard Bank perspective, as Africa’s largest financial institution, we believe that it is important for Africa to be plugged into those dialogues.  

The different conversation streams that happen here are on major global topics and then on the themes and sub themes for this year. You can also participate in panels on the sidelines of the event, which again deal with the big issues of the day. You get an opportunity to interface with your suppliers and clients, interspersed with the broad strategic discussions.

And then importantly there is the governor’s session, where we focus on the industry and the governors of that particular industry. It’s an opportunity to plug into what is happening globally, to meet clients, and to reflect.

This year’s theme for WEF is around stakeholders for sustainable development. What does that mean to Standard Bank?

Standard Bank is an African-based financial institution and its purpose thus is to drive growth in the continent as a whole. And growth for us has an economic dimension (GDP) and a social dimension, which is trying to contribute to human development and environmental sustainability. So when you take those values and those principles, they coincide with the big debates happening globally, which is, on the one hand, shareholder capitalism. So the duty of management is to generate and maximise profits for the benefit of the shareholders. The legal regime in many parts of the world compels management in business to conduct themselves as such.

Global business leaders have some new thoughts on that topic and are asking whether the only responsibility that business has is to its shareholders? Don’t you have responsibilities to your employees and society as well?

You have taken the words out of my mouth because that is the second part of the contradiction, which is stakeholder management. A stakeholder view of capitalism means that as an entity or organ of society you have a duty to all your stakeholders, including the environment, and your shareholders are just one of your stakeholders. So you have duties to your staff, customers, to society, to pay your taxes, and to contribute as an organ of society. Importantly it means that you need to contribute to reversing environmental degradation.

What are some actions that Standard Bank has taken around sustainability or towards its employees and stakeholders?

We are committed to environmental, social and governance global standards. And those are integrated into one of our five strategic value drivers.

First of all are our customers — our most important value driver. We exist to meet and measure their needs through net promoter scores.

Secondly, is our staff — how engaged and connected they are to our values and principles, and how committed are they to meeting the needs and demands of our customers and of society.

Thirdly, is risk and conduct. What sort of risk do we take with the capital and deposits that shareholders have given us, and how do we conduct ourselves? Are we treating customers fairly?

Next is financial outcomes — we’re a business after all, so we have to measure the finances.

And last but not least — are our social, economic and environmental commitments. Are they integrated and transparent? We are committed to human rights for example, that’s the social dimension. We have policies that deal with environmental commitment — for example how we are going to deal with the coal industry and the mining sector? We have signed the UN Principles of Responsible Banking. 

As a bank with a retail presence in 20 African countries, in some of those markets, particularly SA, you are being challenged by newer banks. How does Standard Bank compete with banks that use fewer people and leverage technology to deliver to the retail banking customer?

That goes to the heart of our sustainability. Standard Bank is an old-world bank. It has bricks and mortar, works with thousands of people and it provides intermediation services, risk management, insurance and asset management. However, its customers are used to being serviced by New-Age organisations such as Uber, WeChat and PayPal and they demand an experience as good as those services.

The new entrants replicate those kinds of experiences. To survive, Standard Bank either accepts that it will just do the back-end activities and lets other people do the customer interface because they are good at it, or Standard Bank can, as it decided to do, focus on improving customer experience at the same time as improving its own operations. We have to be ambidextrous in that process.

So we have to introduce apps, and we’ve done so. We have to make sure that the customer experience is as good as that of Google and do it at a cost that creates as much value as the customer has come to expect from the big techs.

We have spent a huge amount of money on our core banking system, which is the back-end, so that we can reduce the cost of product and service delivery. And we are partnering with other people so that we too may conduct ourselves as an ecosystem orchestrator, just like the big techs do.

If you asked me what may be perceived as a bank in the next five to 10 years, I would say that it would be a digital organisation that provides human experiences for its stakeholders. As Standard Bank we will be using the assets that we have — banking, insurance, asset management — to improve our customers’ journeys.

We are mindful of what fintechs and big techs do. They eat the slivers off the payment system or even assets on the liability side of the business. For example, we’ve been closely watching what’s been happening at Facebook and the like.

But we believe that the incumbents, if they become truly digitised and truly human, will be more formidable than our new entrants for the simple reason that they have the customer base. They are operating in a heavily regulated industry and they know how to manage risks in addition to having the data and the main information.

So Standard Bank will survive, and I think we will have succeeded when people don’t use the word “bank” when they describe us. Standard. Just Standard. You’re the Standard. That’s a good name.

Globally it seems as if large banks like yourselves have challenges in figuring out how to be nimble against the fintechs. In building customer journeys, do you think it’s something that you will build or buy, or do you require others to have this expertise?

We believe that in the modern world in order for you to be able to survive and then compete successfully you have to go into partnerships with others and that will range from transactional partnerships that are short, medium and long term. You buy other fintechs or new start-ups or you buy them with other people. In our case we are quite open to partnering, including partnering with competitors.

Let’s use the example of Uber partnering with BMW in the ride-hailing mobility business. So there you have a quintessential engineering company that is positioning itself as a mobility business. It’s in partnership with its competitor in an interesting new part of business and that analogy implies “premium banking”. 

And the point really is that when you develop relations with your client and when you enter new territories you have to present yourself as a banking institution; where you can partner with others, and buy into new businesses.

One of your themes is “Africa is our home, we drive her growth”. How have you experienced being a South African institution moving into the rest of Africa. How do other countries view you? 

We will survive and thrive because we are an African institution that just so happens to have our headquarters in Johannesburg. Our financial laws, regulations, support networks and infrastructure are now in Johannesburg but we could as easily be in Nairobi, Lagos or Maputo because we are not a South African institution but an African institution.

How do you define an African institution?

An institution that operates throughout the continent and is not defined by where its headquarters is. So that is what we are building and what we are aspiring to become. 

When people look at our entity in Uganda, Stanbic Uganda, it is intertwined with the society it operates in. It is listed there and participates in the capital markets. It is run and managed by Ugandans. The board is governed and managed by Ugandans. We are shareholders and conduct ourselves with the utmost respect for the local laws, regulations and norms of Uganda.

The same applies in Nigeria. Standard Bank is the quintessential Nigerian bank. It is seen as such. We conduct ourselves as local. It relates to society in Nigeria and we conduct ourselves as a majority shareholder accordingly. There are benefits to being an international player and that’s why society tolerates us.

There have been interesting events that have tested us. You can say all these things in theory until you have xenophobia in SA and people ask “well, are you South African or are you African”? Is it appropriate that South Africans conduct themselves as such. That episode was extremely difficult. We proved the credentials of our institution and we were ashamed of the fact that South Africans conducted themselves the way they did.

But those South Africans don’t represent the 52-million South Africans. They had an important point to make but we have to have reverence of the laws and emotions of people in Nigeria and other countries whose nationals were in SA and treated with such disrespect. We came through that process really well, because we demonstrated that we are African and not just South African.

And how did you demonstrate that?

By speaking out publicly against the events and by engaging with the local leadership in each instance — doing it respectfully, organically, apologising when necessary, and reflecting our credentials as an African institution. I think if it happens again we would do the same.

Can you talk a little bit about your definition of the brand? What do you think about leadership in terms of Standard Bank and your personal leadership??

I am a lawyer so I start with categories and definitions. A leader is someone who provides direction and importantly provides people with faith and health. Faith and health is important in my own make-up, how I conduct myself where I work.

Here’s why this is relevant.

In modern work and in a place like Davos we are debating stakeholder capitalism. An important element of stakeholder capitalism is how you lead organically in an environment where there are so many conflicts and how you resolve those conflicts. I believe you then start with values and purpose. Standard Bank has a set of values and a purpose. You have to measure all your activities against that purpose and those values. And it just so happens that Standard Bank’s purpose and values mirror mine and the things I believe in.

I believe that ethics, faith and hope are all interrelated. We then talk about technology and whether there are ethics in tech. Is a spear technology? When is it appropriate to use a spear? During the first, second and third Industrial Revolution those issues rose and these issues are arising today. How do you use artificial intelligence? How do you make sure that your models aren’t biased, because mathematics and algorithms are all about assumptions? So how do you make sure that there is no racial agenda in those algorithms?

I believe that values and principles matter. As a leader, I bring that to the table in how I run the organisation and in the business objectives.

Standard Bank has been in existence since 1862. It has always played an important role in society and the notion of stakeholder management, even though people did not use that notion, has always been there. For example, from day one Standard Bank provided financial services to the wool industry; it was inextricably intertwined with the society in the Eastern Cape.

Standard Bank is committed to making sure the African continent plays its rightful role in the world. To do that it has to grow and provide the soft and hard infrastructure to allow people to participate. And so I believe this is the African century. We need to take this opportunity to contribute to Africa’s development, drive economic and human development, and contribute to a sustainable environment. All these issues are being addressed at Davos this week.

We reported from the UN last September because you were playing an international leadership role in signing the principles for responsible banking, leading more than 100 banks around the world to adopt a set of principles. 

Yes, in addition to all that we already offer participants in the international world of finance. We participate in a whole lot of other institutions where we are contributing to making sure that the finance industry, and banking in particular, makes a contribution to environmental issues, social issues and governance. The argument we’ve made related to all of these areas is that it is actually quite important for the world to agree on a common set of standards in dealing with bonds, social commitments and governance.

All these instruments that we are assigning and committing to are important but they are potentially creating noise because there are so many different standards and commitments that you are making. So yes, we are signatories, but I keep taking people back to just the fundamentals. It’s about making sure that you are acting as an organ of society and contributing to all stakeholder demands, which are often in conflict.

So for example, you and I flew to Davos and that deals with the environmental issue. The carbon footprint to fly to Zurich and then to drive to Davos is enormous. So when deciding to come, how do you strike a balance between the environment, the carbon footprint and social issues? It’s important for social dialogue to happen. How do people get there? How do you and I as responsible executives contribute to that balance between lowering the carbon footprint and the social aspect of job creation?

And my favourite example: the instrument you are using to tape this conversation uses power and electricity. So how big is that footprint relevant to the importance of communication?

My point is that Standard Bank is participating in these discussions because it believes it is an organ of society and that Africa, as I said at the beginning, has to be a participant in those discussions.

This article was paid for by Africa.com.