Standard Bank's Kumbi G.: Financing Africa's TMT

Kumbi (00:00)
Standard Bank started off financing the wool trade in Port Elizabeth, then got into diamonds and gold. So mining was a big feature of the bank, just as it was for our country and as the rest of the continent as well. So

It's very clear how we organize ourselves according to sectors. So the bank with incorporated investment banking is split into a number of sectors. I've alluded to mining. There's energy and infrastructure, financial institutions, diversified industries, consumer, et cetera, et cetera.

Chase Le Roux (00:40)
Welcome back to the scrums.com fintech arena, the ultimate podcast for fintech leaders eager to stay at the forefront of industry trends. Today, we're super privileged to have a conversation with someone who's shaping the future of telecommunications, media and technology in Africa. We're joined by Mr. Kumbi Gundani, who is the head of the TMT sector at Standard Bank. He has facilitated significant transactions across the African continent and what makes this

super important is that he understands the unique challenges and opportunities within the African market. He's a true expert in the space. He has one goal, which is to empower businesses to thrive in the digital age.

We're super privileged to be speaking to you today, Kumbhi. Welcome to the Scrums.com Fintech Arena.

Kumbi (01:24)
Thanks, Chase. Quite excited to have a chat. Been connected to your business for a while now. You have a very inspirational and great founder and quite happy to support all you do. And hopefully we can get some insights into the markets that further develop and propel the sector.

Chase Le Roux (01:43)
amazing, Kumbhi. So I suppose the first place I want to start off with is, and dumb it down for us, please. What does the Standard Bank Telecommunications Media and Technology Department do for the bank and for your clients?

Kumbi (01:59)
Yeah, so it's usually a very, very difficult question to respond to, which one should expect not to be, because this is how we brand ourselves. But I think the best way to explain it is to highlight the work that we've done as we've developed telecommunications media and technology. So the bank is an odd 162...

years old, so it's an institution. And over the years,

bank has been able to follow a couple of trends as they've developed and built out its capability. Standard Bank started off financing the wool trade in Port Elizabeth, then got into diamonds and gold. So mining was a big feature of the bank, just as it was for our country and as the rest of the continent as well. So

It's very clear how we organize ourselves according to sectors. So the bank with incorporated investment banking is split into a number of sectors. I've alluded to mining. There's energy and infrastructure, financial institutions, diversified industries, consumer, et cetera, et cetera.

So TMT is one of those sectors. And how do we...

position TMT in the market, it's quite simple. So 30 years ago, Vodacom and MTN set up their mobile telecommunications operations in South Africa. If you think about that period of that time, the major investment was in the tower infrastructure, the spectrum that was available, as well as the cables that...

connected the towers and fed data. We funded that. Most of these mobile network operators have got a very huge CapEx budget. You'll hear annually Vodacom, EMTN spent 12, 20 billion, and Talcom, and Salsee, and Ray, et cetera. All that CapEx spend is either funded through retained earnings or it's funded through debt. So a standard bank would be...

we helped with the financing of the debt. That's what created the telecommunications pillar. And over the years, as the sector matured, we then helped the mobile network operators expand into the rest of the continent. So we helped MTN expand, Vodacom expand. And then as we expanded our own footprint and set up in 20 African markets, we started also helping the incumbent players or the local players and some of the international ones, including Airtel.

Axia, IntelliCell, Orange, et cetera, as they developed their markets. And then as the telecommunication sector started evolving, most of these players started looking at ancillary services. So they started looking at...

building out fiber connectivity. And we followed them in that process as well. So we started helping with long distance fiber, who were big support of Neotel, big support of Liquid. And as the MNO started developing their own in partnership with undersea cable providers like Secom, we also started financing those projects. So the value chain started building out.

and expanding. And that is the nature of the space that we're in. It's constantly ever evolving. It's never at a standstill. So every iteration you've seen within the telecommunications space, we've supported. Towers, fiber, now fintech. We're even looking now at low earth orbit satellites as well. So that's the telecommunications pillar. And effectively,

Most of my discussions with clients, be it CFOs, CEOs, around how they want to expand their business and remodel their business. And then we then figure out whether we can finance it or how we can make that financing sustainable. And obviously, as the telecommunications infrastructure got laid, applications started getting built on top of them. And some of the first applications were media applications. You might remember the days of sending MMSs.

And after BBM, there was Mixit, actually Mixit completely. Yeah. And then, you know, the younger parts of the people who follow your podcast, who probably talk more recently around Instagram, etc.

Chase Le Roux (05:41)
Yes, mix it. I forgot about mix it.

Kumbi (05:55)
But as those applications got built, we started focusing on seeing how we could support those type of businesses as well. So on the media side, we both support both digital and analog media. And we supported the likes of Multi-Choice, the likes of Prime Media, and obviously the big OTT providers being Meta, et cetera.

And the interesting component of that is when you look at what media did, media showed that in Africa we had the highway infrastructure from a digital perspective to be able to bring in higher application use cases into the ecosystem. And that's where the technology part came in.

You might recall one of the key features of the African landscape is how we're just able to leapfrog certain areas of investment and technology. So there was quite a huge debate on whether the telecommunications backbone was strong enough to be able to take on high-end applications.

We were part of that and we supported a big part of that development and that led to the technology component of the business.

And it's really that we've supported some of the notable companies, some of them were your peers, EOH, AdaptIT, as they've gone on to develop applications, both from an enterprise and a consumer perspective, that have then been laid over this digital infrastructure that we've had. And as I always explain to my colleagues,

Digital infrastructure is the one form of infrastructure that I know that does not have 10-year investment cycles without disruption. You can have roads, you can plan for a road for 10 years. All you just have to do is expand the network. You can put a bridge, you can put it in for 50 years, or you have to really come and do as maintain it. In TMT, we don't have anything like that. Data centers that...

where new spanky and interesting and fit for purpose 10 years ago have to be repurposed with new kits quicker than anything. And that's what's then created the digital infrastructure pillar, which I credit mostly for the fintech explosion that we've had over the past few years.

So in summary, that's what telcos media and technology means at Standard Bank. It's effectively powering the trends that we see as they shape and develop themselves within the African ecosystem and consumer base.

Chase Le Roux (08:27)
You've touched on some super relevant points there, right? And I think that no one quite understands how fast the sector moves unless you're in it and you're at the coalface and you're sitting there and constantly looking for innovative ways to get involved and obviously build up the African continent. And Standard Bank's been there for ages, as you mentioned, over 120 years. But you yourself have been in this space specifically at Standard Bank for more

than 10 years, right? I'm sure a lot's changed. And naturally, of course, the hot topic is...

is AI, right? And I'm sure that you guys are looking into some innovative ways there to sort of get stuck in and probably looking for what's required to make potentially Africa's first AI unicorn come to life, which must be an exciting venture. But if I was that venture and I was looking for Standard Bank to assist,

whether it be sort of the data and infrastructure that's required. And, you know, we all know that the AI space is super, super crucial to ensure the data is safe, secure, you know, to allow institutions like Standard Bank or any large financial service or anyone in the fintech space to leverage. What makes you guys at Standard Bank

preferred partner. How do you guys differentiate yourselves across your competition?

Kumbi (09:48)
That's a good question.

Let me answer your question in a different way. So as I alluded to in the introduction, we've been part of the evolution of the sector. But a key part of our philosophy and approach is to be client-led. And that's what I was trying to highlight. That's the common thread.

So, of course, we are subject matter experts, but we don't profess to know our clients' businesses better than we do, or better than they do. And a key feature of how we look at every situation is around the common denominator of partnership. So, if anyone has...

a business and they want to think about growing it, diversifying it, even stabilizing it, turning it around. We are all ears. We basically lean on the institution and I'll talk a bit about the institution. are in over 20 markets in Africa.

We have centers in the US, in the UK, in the Middle East, and in Asia. 20 % of our equity capital is owned by the largest bank in the world, Industrial Commercial Bank of China. And as you know, being in this space, of the cutting edge, most cutting edge innovation is coming from China.

I know people try and focus only on the latest ones being DeepSeek. But if you think of probably one of the best investments in this country from a stock perspective being Nasper's. Nasper's was a key part in developing Tencent, which is still by now a global leader.

So we have the muscle and the brain capacity to be able to use both global thinking and local insights given our presence. The team I'm part of is about 30 odd people split across the different markets.

And all we do every day is to focus on telcos media and technology, TMT. There's no split focus. We're not touching on a bit of mining and then coming back and trying to understand what's happening there. Every day we wake up, breathe and vent related on TMT.

One of the benefits of working with us is you're working with people who are also part of the environment that you are in as a business, if you're in the space, which then leads to the point on, you know, what is it that you can expect from Standard Bank? As I alluded to, you'd expect a partner, but even more, one good part about technology is its ability to compound and the network effects.

Financially, one of the key attributes of any financial instrument is really compounding. But where technology takes it to the next place is network effects. And that's what we have. We have network effects in the case that, of course, sometimes we get novel business cases that come through, but over time, we've been able to build such a rich network that can understand

some of the problems and challenges that almost every business in the space is grappling with. And in the events that we can't, we're very happy to connect to parties that we believe can be able to assist. And then the area we truly pride ourselves in is we're then able to create fit for purpose solutions. So if you come to us and you want to expand into another market or into another country,

or you want to re-dig your balance sheet, we're able to then give you that advice that's bespoke to your business and the segment that it's playing in. And we can then overlay the TMT perspective onto it.

Chase Le Roux (13:20)
Amazing, Kumbhi, thanks. That's super, super clear. And you've mentioned a few times, you know, that you guys have been the catalyst in a lot of Africa's ability to leapfrog technology, right? And I think that Africa has always been at the forefront of being able to leapfrog. And I think that with today's sort of landscape, you know, moving into the ARR,

whatever it may be, what do you think some of the most significant challenges are that are sort of faced in the TMT space across Africa? What are you seeing as sort of the key challenges that need to be overcome in order for us to move fast in this new age?

Kumbi (14:00)
Yeah, so this is an interesting one because when I look at...

at this space. It's one that is inextricably bound to what's happening globally. When I speak to businesses, yeah, I always tell them that whenever they build a solution, they should have a global outlook to it, or they should overlay a global perspective to it. Because this is one of those sectors where, as you're investing in a product,

Another firm in Palo Alto might be investing in something similar that will disrupt your product in an instant without them even having set presence in South Africa. So when I look at the challenges in the space, most of them are very similar to the challenges that are facing businesses in the rest of the globe.

Chase Le Roux (14:37)
Yeah.

Kumbi (14:50)
And of course, they're nuanced ones, know, more particular ones that we face in South Africa. in general, the biggest challenges are the ones that are endemic to us and international players as well. And the first one is just the rapid pace of development in the space.

And I say that because it's a key feature as well that makes this space very attractive and interesting. you know, if you think the most disruptive, excluding the Trumps, the terrorists that have been announced by President Trump, but

Chase Le Roux (15:19)
I'm definitely going to ask you about that. here and what some of your thoughts are.

Kumbi (15:23)
One of the most disruptive.

elements in the past quarter was around capex spin when it related to data centers. And if you recall, for the past 18, 24 months, data center capacity has been on rocket fuel-like growth. It's just been phenomenal.

And it was premised on this thesis that all these applications due to their workloads will need a lot of data center capacity. And then DeepSea happened. Now, you might have a view on how it came to be or how it didn't. But the reality is it's then altered perspective when it came to investment cycles.

in the space. Now, if you are building a massive data center in South Africa, your equity story before DeepSea was quite easy. Post DeepSea, you had to do a bit more work to justify why this capping spend will ultimately lead to a return that's worthwhile. And that shows you.

that in the space you're not insulated from what in other sectors they call Black Swan events. Here you live with Black Swan events and those Black Swan events happen from your competitors, peers, from anywhere. So that is still the fundamental challenge, which is all the businesses in the space have to be constantly on the bleeding edge of innovation.

That's an area where they cannot let their foot off the pedal because if they do, they will definitely be disrupted. Another case we see more recently is what's happened with low Earth orbits. And I know Starlink is very topical in South Africa.

you look in the rest of the continent.

Prior to Starlink's rollout, it was very clear that fiber and microwave were the two ways that data capacity could be deployed. So if you're building a business on that, if you're looking for partnerships related to that, all you really had to focus on was the MNOs and the FNOs. And they were in country because they needed...

presence on the ground by nature of the technologies that they deployed. And it was very easy for regulators to regulate them. And then Starlink happened and Project Kuiper. And now you've ASTS. So if you are rolling out a business plan and you are too married to your view of the world, you got quickly displaced.

Chase Le Roux (17:31)
Changed everything.

Kumbi (17:41)
Because whilst the adoption of Starlink has not led to the obsolescence of microwave and fiber, it has definitely led to some disruption because users now have more choice and as a consequence of that, they can then have a shift in pricing power and all those elements that affect your business plan. So in my view, the biggest challenge still remains staying at

the cutting edge of whatever you are developing or working on. So that's a global thematic. More locally, of course, we definitely need more equity in our markets. know, one of the biggest features of the United States and why it's done so well in the space is

because of the abundant equity capital that's available to founders and entrepreneurs when it comes to that. Now, South Africa and Africa by no means have been failing in this, but more can be done in this regard. We're still yet to get to the peaks that we saw in 2022, 2023 when it came to...

FDI and investment into tech startups. So we definitely still need to enrich our equity capital base. This is across the stack from seed all the way to mature, from angel all the way to private equity and even listed equity markets.

Because that is actually the lifeblood of this space. As you know in your business, I'm sure many times you have startups coming to you asking for payment delays because they are doing equity raises. And that's a feature that creates a bottleneck and definitely leads to a drop off of some quality companies. And so more work has to be done.

Chase Le Roux (19:18)
Exactly.

Kumbi (19:26)
to do that. However, there's like many positives, right? And in the case, actually think in South Africa, in Africa, we're punching above our weight here. And we still have quality developers, quality, hungry entrepreneurs who are willing to build use cases that have got good problem.

Chase Le Roux (19:42)
And let's be honest,

used to solving problems daily, right? Faced with challenges here in Africa that most of the world will never ever be able to comprehend. So maybe it is that mindset that it's just, I'm so used to solving problems that just, you know, carry on biting through and getting through. I think that that's a...

Kumbi (19:47)
Thanks.

but also being able

to be agile enough to export these ⁓ solutions. And there many cases where South African companies have been able to export their capability internationally. Two years ago, in the honor of working with Skulk from Intersector, they've built a phenomenal business, which is on the security fintech side. And started off in Stellenbosch.

Chase Le Roux (20:05)
Yeah.

Kumbi (20:22)
essentially helping banks with dealing with security and now established in Atlanta, expanding rapidly in the United States. And there many, many of these businesses. And that's what I saying on the point on the challenges. The challenges are, you know, this is a global space. But the opportunity is you can easily export what we create here internationally.

Chase Le Roux (20:45)
Yeah, it's coming to just a click of a few buttons, right, in this fintech space. think that that's probably the biggest thing that I've seen is people not quite understanding the opportunity or businesses not quite understanding the ability of, you know, this, we no longer have any borders, right? Yes, you can talk about Trump completely knocking the Goa agreements out and doing all of that, but that's still on...

Kumbi (21:03)
Mm.

Chase Le Roux (21:10)
on goods, right? It hasn't, and hopefully it doesn't migrate across to services. But I still think that a lot of the fintech space is predominantly on services, which is still has the ability to cross borders. And then the second thing is, you know, I don't know, but it's across, it's definitely across most businesses and the discussions that I've had, but, you know, AI.

You mentioned it to me a little bit earlier, isn't just about a chat interface. The impact is effectively limitless. And when you look at it as a limitless opportunity, it's really about getting to the bottom of it first.

because everyone's going to catch up with you as it always happens. But getting to it first is super crucial.

So get stuck in as a business and understand what this next chapter looks like. Be willing to adapt, actually. Probably a message that I'm getting from you for the entire organization. If you don't buy into the future trend, you've got to fall behind as well. It reminds me a little bit of that Netflix scenario, right? When they used to deliver DVDs to your door and they stopped doing that and put it on...

on the web and the entire company, at least 50 % of them were like, well, this is a ridiculous decision, me go. And that's absolutely fine. But you have to be able to change and grow. mean, ultimately, Netflix is a success story. So look at where they are now. But Kumbhi, just the last question here, quick fire, what's your favorite book and why?

Kumbi (22:41)
These are always the tricky questions that one gets. Right now my favorite book is Richard Wiser Happier.

And I'm big into autobiographies or biographies. I think, yes, of course, AI is good. But the reality is, as human beings, still learn via experience. And one of the ways that I learned the most is going through the experiences of people who there before I was. And from investing and...

From a geopolitical as well as personal perspective, I found Richard Weiser-Habie quite good in how they broke down the different investors, how they went through their life cycles, dealt with life, and were able to reach the objectives and goals that they have.

Chase Le Roux (23:28)
amazing it can be. Well, thank you so much for joining us today. I think you've shared a lot of your expertise and most certainly given me a deeper understanding of how some of these topics are impacting businesses on a day to day. So thank you so much for your time.

Kumbi (23:45)
No, and thanks to you. I love the work that you guys are doing at Scrums and you're also a case of a business that's started in South Africa and is now definitely dominating internationally and we're very lucky to have your business around.

Chase Le Roux (23:58)
Thanks, Kobi. We definitely want to make Africa proud. To everyone else, guys, thank you so much for tuning into this episode of the scrums.com fintech arena. If you found today's conversation valuable and you want to stay ahead of the trends, subscribe to the podcast and join us next time as we continue to uncover the stories and strategies behind the world's most influential fintech leaders. Until then, keep innovating and remember that the future of finance is just a conversation away.

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