Goldman Sachs is cutting staff in US and Europe, but growing in Africa

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So far it is just a rumour, but one that is likely to be confirmed on October 18th when Goldman Sachs will release its third quarter results. The bank could announce a further 700 to 2,000 job cuts on top of the 1,000 lay offs already announced two months ago, in a bid to cut costs by $1.45bn, or 5% of total expenses, in the light of deteriorating market conditions. There is even talk of bonuses being cut.

Analysts expect Europe and the US to bear the brunt of the redundancies and cost cuts, while Asia will be relatively unscathed. In Africa meanwhile Goldman Sachs is going in the opposite direction, trying to increase its presence in the continent. A turning point was South Africa's recent admission into the BRIC group of fast-growing emerging markets, which Colin Coleman, Goldman Sachs SA managing director, described as "an important leverage point, which enhances our ability to leverage policy and speak loudly for Africa."

This week Goldman Sachs issued a 1.25bn rand five-year floating rate bond in South Africa, the first non-African multinational to raise local currency debt on the continent's largest capital market. The entire issuance has been placed in the institutional market. It is a small amount - equivalent to $151m - but significant as it shows GS's interest in boosting its relationship with the South African authorities. "The move reaffirms the bank's commitment to South Africa," Goldman Sachs said. Part of the money raised will be used to support and grow its local operations and to strengthen its ability to service clients in the region.

"The news is not surprising," says Razia Khan, head of Africa research at Standard Chartered, "given the depth of South Africa's financial markets and strong investor appetite for rand-denominated assets, at least until recently, until gold started to give up its gains post-Federal Open Market Committee."

Through its long-established South African office Goldman Sachs has recently advised Edcon, African Bank and Transnet on their respective international bond offerings this year. It has also advised Massmart on its recent sale of a 51% stake to Walmart Stores of the US, and China's Jinchuan on its acquisition of Metorex, a copper producer.

Goldman Sachs is expected to fight for a bigger slice of the African deal advisory pie following the appointment of Gregg Lemkau to the newly-created position of head of M&A in Europe, Middle East, Africa and Asia-Pacific. Lemkau, a GS veteran, has been co-head of the global technology, media and telecom group since 2008 and is regarded as a real expert who has now been asked by GS to "expand market share by deepening client relationships, enhancing our leading execution standards and strengthening the integration of M&A with our financing products."

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