Cape Town — In a huge deal for South Africa and the continent, one of China's major banks is to buy a one-fifth share of Africa's largest bank.
The Industrial and Commercial Bank of China Limited (ICBC) said in an announcement released from Beijing today that it had agreed to acquire 20 percent of the enlarged share capital of South Africa's Standard Bank Group Limited.
The ICBC said that based on the Standard Bank's issued share capital on October 23, it was offering R36.67 billion, or 42.31 billion Hong Kong dollars for the stake.
The Chinese bank plans a shareholders' meeting on December 13 to approve the deal. It also has to be approved by the South African Registrar of Banks, the China Banking Regulatory Commission, the Johannesburg Stock Exchange and Standard Bank shareholders.
The ICBC is reported to be the world's largest bank by market value. Reuters news agency reported on Thursday that Standard's share price on the Johannesburg Stock Exchange rose by 6.05 percent in response to the news. The bank had issued a cautionary announcement on Tuesday that negotiations were under way which could affect the share price.
In a statement filed with the Johannesburg Stock Exchange, Standard said it viewed China as "a key component of its long-term strategy given its increasing economic linkages to the African continent and its acknowledged material impact on global economic growth."
It said it and the ICBC hoped to "lay the foundation for significant expansion in Africa." Standard operates in 38 countries, 18 of them in Africa.
The Standard described the deal as the "largest foreign direct investment" into South Africa, and a "landmark transaction" for the continent. The partnership would place the bank "at the cross-roads of economic interaction between China and the African continent," it said.
However, South African sources told the Financial Times of London that South Africa's central bank, the Reserve Bank of South Africa, would limit the ICBC's stake in Standard to about 25 percent. Standard said in a press statement that foreign ownership, which currently stood at about 25 percent, would rise to about 40 percent, leaving the bank still majority South African-owned.
