Our Africa focused strategy is proving to be the right one as we continue to grow our businesses across Africa despite the elevated levels of macro, political and policy uncertainty experienced in many of the markets in which we operate.
During the past financial year our Africa regions franchise contributed 30% to the group’s total income and 25% to the group’s headline earnings.
Our headline earnings were up 4% to R23 009 million, while headline earnings per share also grew 4% to 1 440 cents. Our cost-to-income ratio decreased slightly to 56.3% from 56.5%.
2016 was a tumultuous year. Globally, the ambiguity in the run-up to the UK's "Brexit" vote and the US election, as well as the contrarian outcomes, drove uncertainty and volatility. During the year, China’s policy stimulus continued and growth stabilised, providing some support to commodity prices, while OPEC's decision to trim output helped to lift oil prices.
In sub-Saharan Africa, widespread drought in east, central and southern Africa continued, which placed strain on food supply and drove inflation. Oil-export reliant countries remained constrained on the back of low prices, and many countries tightened monetary policy in an attempt to control inflation. Despite these headwinds, the more diversified oil-importing east African countries continued to offer better macro prospects, attract investment and outperform.
In South Africa, the threat of a sovereign downgrade by rating agencies to sub-investment grade persisted throughout the year. This in turn negatively impacted the already weak business and consumer confidence and further delayed much needed domestic investment and job creation opportunities. Inflationary pressures brought about by the drought and the weak exchange rate placed additional pressure on already constrained consumers.
Global trade activity should pick up on the back of policy stimulus and a gradual normalisation of large economies, such as Brazil and Russia. However, uncertainty surrounding US policy direction under the new administration, Brexit negotiations and the broader European macro outlook may pose downside risks to global growth prospects.
Sub-Saharan Africa’s GDP growth is expected to be 2.8%, buoyed by global trade, resource demand and improved economic prospects generally. South Africa’s forecast growth above 1% is an improvement, but remains subject to event risks, such as rating agency and political decision points during the year.
With these dynamics in mind, we look to our clients, to the challenges and opportunities they may face, and seek ways to partner with them on their journeys in 2017 and beyond. As we focus on delivering market-leading client experiences, we continue to invest in our client-facing digital capabilities to enable our clients to transact independently and safely anytime anywhere.
As we look to the year ahead, we remain steadfast in our commitment to doing the right business the right way. In this context, we continue to embed a culture of responsible business practices. We remain committed to delivering through-the-cycle headline earnings growth and ROE within our target range of 15% - 18% over the medium term. In order to do so, we recognise the need to balance prudent capital management with appropriate return-based resource allocation and leverage.
Banks play an important role in society which is broader than creating shareholder value. We seek to create value for all our stakeholders - clients, employees, shareholders, government and communities alike. In doing so, we continue to contribute meaningfully to the social, economic and environmental prosperity and wellbeing in the markets in which we operate.