How to Break Into Investment Banking as a Big 4 Accountant in South Africa
If there’s one profession that bankers don’t respect, it’s the poor accountant.
Sure, consultants also get a lot of hate … but hey, at least top management consulting firms recruit at the same universities and MBA programs that bankers flock to.
For some reason, though, accountants always seem to attract skepticism and scorn from financiers.
But one exception to this rule is in South Africa – where the Chartered Accountant (CA) qualification is highly regarded and where many people who get into investment banking actually have it.
Our interviewee today did just that and leveraged his CA background, plus several years of work experience at a Big 4 firm in South Africa, to move into a full-time analyst role at a bulge bracket investment bank there.
Here’s how he did it, how recruiting in South Africa works, and how you can make the same transition from accounting to investment banking:
Q: I was surprised how positive you were about the CA qualification when you contacted me… but let’s go back to the beginning first.
Maybe you could start by walking us through your background and how you went from accounting to investment banking?
A: Sure. Unlike in the US and some developed markets, where bankers tend to gloss over accounting backgrounds and the CPA, the CA qualification is highly regarded in South Africa.
Many senior bankers do the CA and work at an accounting firm initially, and that was the exact route I wanted to take.
Back in university, I attended a lot of investment banking/finance-related events and got interested in the field.
But in South Africa it’s rare for investment banks to recruit entry-level hires for permanent positions in M&A and industry teams straight out of university, even from the top schools.
They do offer 2-3 year rotational positions, but you need to wait to get placed in a team permanently.
So I saw accounting as the most viable path to getting there.
I majored in it and joined a Big 4 firm after graduation, doing large multi-national audits as well as valuation and purchase price allocation (PPA) work.
I really enjoyed that, and I knew I could use it as my “spark” in recruiting and interviews.
After 3 years working at the firm (the time required for the qualification), I started networking with friends and family and using your interview guide to get in the right mindset.
My “break” came when a friend who had worked at a large international firm in London mentioned me to one of his contacts – the head of the M&A team at the bank I eventually joined – and personally recommended me.
It took close to a year of networking and interviewing off-and-on before I caught a lucky break via this contact.
After that, I went through a few more rounds of interviews with the firm and eventually won an offer there.
Recruiting, South African-Style
Q: Awesome, thanks for that summary.
So it sounds like recruiting is quite a bit different in South Africa – can you break it down and walk us through the process?
A: Sure. One of the most common “paths” here is to finish university, go through 3-year compulsory training with one of the Big 4 firms, pass the Board Exams, and then qualify as a CA – after which you then move into investment banking.
The overall process is a lot less formal than other markets; unlike London, for example, there are no real assessment centers or group case study exercises here, although they occasionally give psychometric tests.
Since banks don’t proactively recruit very much, they’ve switched to targeting individuals recommended by others at the firm – so networking and crafting a bullet-proof “story” are even more essential than in other markets.
Some banks here still use recruiters for middle-office and back-office roles and sometimes even equity research roles, but they do not rely on them for traditional front-office IB analyst/associate positions, at least at large banks.
Some smaller boutiques may use recruiters, especially if they don’t have a queue of people lining up to interview there.
Here’s what my overall process looked like:
- Step 1: Introduction to Head of M&A Team – I had a face-to-face interview with him, where he mostly focused on “fit” questions (why IB rather than accounting, etc.) and asked a bit about my valuation and financial modeling skills.
- Step 2: “Mini-Superday” – After that, I met the other team members in this group and went for a 1.5 hour-long “panel interview” where multiple team members took turns interviewing me.
This second round got more technical, and they focused on valuation, how to calculate cost of capital in emerging markets, and current events related to M&A deals in the region.
They asked a lot of questions on my views of the most likely future deals in South Africa and the rest of Africa – they do this because sourcing can be very important here, even at the junior levels.
They also asked about the types of clients I would focus on, what I knew about the deals they had done, and so on.
- Step 3: Meet with HR – Unlike with many banks in the US and Europe, meeting with HR was the LAST step of the process here. They asked about my tolerance for long hours, what I knew about the culture, and similar types of “fit” questions.
- Step 4: Psychometric Assessment Test – Fairly standard questions that you can find on many of the assessment center practice sites.
There were no case studies or modeling tests, even though I was an experienced candidate.
I think they were happy with my technical skills since I had done so much valuation work at the Big 4 firm; without that background, you might get more technical questions and case studies.
Q: Great. And what types of candidates are they looking for?
Any thoughts on how easy/difficult it is to get in?
A: It does vary based on the bank; for example, one local bank here has a graduate program specifically for people without any finance experience.
There are very, very few spots available at most banks here. In some years it might just be 1-2 full-time positions per bank depending on deal flow and team size.
So some banks actually recruit graduates for middle-office roles and rotate them around before bringing them to the front office.
Besides the CA qualification, knowing a language that’s useful in the rest of Africa can also give you an advantage.
Oddly enough, these days Mandarin Chinese helps you in South Africa, of all places, because Chinese firms have been so acquisitive in Africa and some banks here even have Chinese investors.
One person on my team even joined from Hong Kong recently.
M&A activity in South Africa is not spectacular, so lots of banks are looking north of the border to drive growth.
Nigeria, for example, is a super-hot market with a rapidly expanding middle-class and lots of consumer goods, industrials, and manufacturing deal activity.
They have a lot of natural resources as well, but infrastructure constraints limit activity – so most natural resource deals are sales of existing mines.
Most people who get into IB are still native South Africans. Laws and employment codes here make it quite difficult to hire non-South Africans since the local unemployment rate is so high.
So you’ll need some type of added bonus (e.g., language skills) to stand out over everyone else – otherwise, it’s highly unusual for bankers to leave the US or Europe to come work here.
Occasionally, people do get in from unrelated fields such as engineering.
It’s less common to move from other finance-related roles into investment banking since the CA to banking path is so common.
Q: Thanks for explaining all that. Did you want to add anything else on your networking strategy?
A: I mostly relied on personal contacts and alumni/co-worker networking. I did speak with a few recruiters, but they weren’t particularly helpful despite being well-connected.
I won a few interviews through them, but ultimately my contact who knew the Head of M&A made a recommendation that carried far more weight.
I know you’ve mentioned in-person networking events and information sessions before; I’m sure those could work as well, but I didn’t take full advantage of them since I had a decent existing network here.
To give you an idea of the numbers, I went through 17 interviews over a 10-month period (and networked with dozens of bankers in that period) before winning my offer.
The Investment Banking Landscape in South Africa
Q: Thanks – that’s officially the most detailed description of IB recruiting in South Africa that I’ve ever seen.
Can you tell us about the industry landscape there?
A: Sure. You see a mix of local banks and the global bulge bracket firms competing for deals here.
The local banks still win a majority of M&A deals in terms of value and quantity, but sometimes the global banks compete on the mega-deals. Just as in other markets, you’ll almost always see multiple large banks advising on the biggest deals here.
However, whenever the M&A space goes through a downturn, deal sizes often fall below the threshold that the international banks are targeting (i.e. they’re “below the bar“).
A lot of corporates here also bank with local South African banks, which gives those local banks a “relationship advantage” in winning deals; local banks also trump internationals in local currency lending.
In terms of deal types, M&A is quite common but you also see restructuring deals, ECM, rights issues, bond issues, and refinancings (especially in the years following an LBO bubble, when troubled companies need to fix their capital structure).
A fair number of private equity funds operate here, but there’s a dearth of high-quality assets to purchase in Africa.
Q: And what about the industry focus?
A: There’s a big emphasis on infrastructure and project finance here simply because so many countries in Africa are in dire need of infrastructure.
It’s difficult to run a great mining operation or distribute consumer products, for example, without solid infrastructure in place – so those needs drive many other sectors.
Mining also draws a lot of interest, but outside of South Africa the infrastructure is too poor for successfully extracting resources in many otherwise promising areas.
Big international mining companies also tend to be reluctant to buy African assets due to the high cost of setting up infrastructure.
South Africa itself is a different story, of course, and you know all about the diamond industry here.
Consumer retail is also huge in some countries, like Nigeria, where the GDP per capita is growing rapidly and the middle class is expanding.
It’s struggling more in South Africa since inflation is high and consumer disposable income has been falling due to rising fuel and utility costs.
Retailers tend to set up their own brands and leverage established distribution networks rather than building everything from scratch.
One underdeveloped industry is technology. You see some big multi-nationals like IBM and MSFT, but most local South African tech companies are not that big.
The government dropped the ball on developing the technology sector, but there is opportunity as local companies grow and the regulatory environment supports more and more tech (see: there are a few promising signs from public officials as well).
Q: You’ve been mentioning how many banks are looking north of South Africa for growth – do they typically have dedicated teams in those countries or do they still do deals out of Johannesburg?
A: Some banks have teams in Nigeria, Kenya, Tanzania, and other countries, and they may even offer retail banking there. Being able to lend in the local currency helps those firms win deals.
Others are a bit behind and don’t have retail banking operations in those countries – if they don’t have that kind of footprint in place, they’re more likely to originate and run deals from Johannesburg instead.
Q: Great, thanks for that information dump.
I know you’ve just started working fairly recently, but any thoughts or impression of the culture so far?
A: There’s a big divide between the international firms and local banks here.
My impression is that local banks are more relaxed, the hierarchy is not as strictly enforced, and junior bankers have to wear more hats (more “random” work and more responsibility, plus smaller teams).
Q: But I’m assuming that the pay is also lower at the local banks?
A: To give you a rough idea of compensation, most banks here pay up to 100% of your annual salary as your bonus if you’re a junior banker.
The exact percentage varies but it’s usually in the 50-100% range, based on conversations I’ve had.
Now, your base salary is significantly lower than it would be in the US or UK, but the cost of living here is also vastly lower.
On a PPP basis, you come out far ahead.
You see junior bankers here buying new houses, new cars, etc. whereas all of that would be quite rare in developed markets.
In terms of pay at local banks vs. international ones, it’s more variable at the local firms. As an example, one local bank here actually paid over 200% of junior bankers’ annual salaries in bonuses recently.
So, bottom-line: you will be living a very, very good life here even if, in absolute USD/GBP terms, the pay is less than in other places.
And before you ask: the hours at local banks tend to be more tolerable than those at international firms.
It’s not unreasonable to leave at around 8-9 PM in “less busy” periods, but when a deal heats up, expect all-nighters, long hours, and the usual craziness.
I’ve been quite busy lately, but I rarely leave past 11 PM.
Q: Awesome, thanks for sharing all that.
So I’m assuming you’re going to stay in IB for quite some time?
A: For the next few years, sure. I’m a fairly recent hire so I still have quite a bit to learn and I want to explore as much as possible first.
I’m interested in working in another team here, such as Leveraged Finance, and then getting into private equity or principal investing after that. M&A or Leveraged Finance are great ways to get there.
While local banks have an advantage in sell-side deal flow, the international PE firms from the US and Europe actually have a bigger presence on the buy-side in South Africa and the rest of Africa – so I would probably aim for one of them in the future.
Q: Great. Thanks for your time, and for giving us the full run-down on finance in South Africa!
A: My pleasure.
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