China Enters Africa's Financial Markets with Another Record Breaking Investments
By Jan van Rooyen(1)
All the regulatory and shareholder requirements for the purchase of a 20 percent stake of South Africa’s Standard Bank by the Industrial and Commercial Bank of China have been met and the transaction has been finalised. At an estimated cost of US$4.8 billion, the ICBC has acquired 11.11 percent of the aggregate issued ordinary share capital of Standard Bank Group from existing shareholders at a cost of US$4.78 per share. The equity investment surpasses the R30 billion transaction in 2005 between Barclays Plc and the Absa Banking Group in which Barclays acquired a 56% stake in the Absa Banking Group. At 1.3 times the average annual foreign direct investment into South Africa from 2004 to 2006 the ICBC’s investment is the largest foreign direct investment (FDI) transaction into South Africa and the largest ever Chinese acquisition in the financial sector.
A GROWING INTERNATIONAL PRESENCE
With 1,501 branches and a presence in 18 African countries as well as in major financial centres in Europe, North America and Asia the ICBC investment has positioned Standard Bank as a formidable regional player as well as a growing international figure. The group plans to leverage the substantial rise in Standard Bank’s tier one capital base as well as access to capital to assist in further expansion internationally, targeting penetration into Asian and African markets. Standard Bank and the ICBC are in the process of finalising the terms of a US$1 billion global resource fund that will focus on opportunities in China and Africa specifically in the areas of mining, metals and the oil and gas industries. Each bank will contribute US$200 million with the remainder made up through third party funding, the fund will have a 10 year term.
THE ICBC – A CHINESE FINANCIAL GIANT
Listed in Shanghai and Hong Kong, the ICBC is China’s largest bank with more than 180 million personal banking customers, 2.5 million corporate banking customers, 16,000 branches in the People’s Republic of China and 100 branches throughout the rest of the world. Overtaking Citigroup in July 2007 as the world’s biggest bank by market capitalisation, the bank has aggressively pursued international expansion. In December of 2006 the ICBC entered into agreements to acquire a controlling stake in Indonesia’s Halim Bank as well Macau’s Seng Heng Bank in August of 2007.
ANOTHER VOTE OF CONFIDENCE FOR AFRICA FROM CHINA
The ICBC investment is a strong vote of confidence in South Africa’s financial institutions establishing a crucial financial gateway between China and the African continent as a whole. Further benefiting China and South Africa’s relationship, the ICBC investment will help South African industries to make significant strides towards further market penetration into China and Asia. China’s engagement in Africa has been steadily increasing over the past decade, with this recent investment signaling yet another sector of Africa’s economies in which the Chinese are actively pursuing. The confidence gained both politically and economically will go a long way in solidifying China’s role on the continent, the Southern African region and within regional stalwart, South Africa.
(1) Jan van Rooyen is a Director at Consultancy Africa Intelligence - jan.vanrooyen@consultancyafrica.com
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