Bali’s belching volcano gives bankers pause
12 October, 2017
The Truth About China/Africa Investment
7 November, 2017Euromoney, November 2017
In the 10 years since ICBC’s $5.5 billion acquisition of a 20% stake in South Africa’s Standard Bank Group, there has still been no bigger single China-Africa investment. Looking back now, the deal was remarkable for the speed and relative ease with which it came together. But has it worked?
Jacko Maree was puzzled. The chief executive of Standard Bank, Africa’s biggest, was attending the annual meeting of the African Development Bank in Shanghai in May 2007. Two things perplexed him, the first of them being what exactly the annual meeting of the African Development Bank was doing in Shanghai. The second was the sheer number of Chinese businessmen coming to ask him how to do business in Africa.
“I was just inundated,” Maree, who retired as Standard Bank CEO in 2013 after a 14-year stint but still serves on the board, tells Euromoney in Johannesburg. “It dawned on me that clearly some kind of instruction had gone out from the government that if you were a significant company, you needed an Africa strategy.”
This would prove to be the first step in what is still the biggest direct investment by a Chinese bank or company in Africa: ICBC’s 20% stake in Standard Bank. At the time it was the biggest single out-bound investment by any Chinese enterprise (a title now held by the ChemChina-Syngenta acquisition) and the largest single foreign direct investment into South Africa from anywhere. It created an ownership stake and a partnership agreement between China’s biggest bank and Africa’s biggest bank.
“It was an epoch-making event,” says Jiang Jianqing, former chairman of ICBC who instigated the transaction. “It brought together the largest banks in both Asia and Africa; and its new model of business cooperation driven by equity investment was the pioneering effort to boost financial cooperation between China and Africa.”
Cemented 10 years ago with a formal statement of agreement on October 25, 2007, it took place in a pre-financial crisis world in which China was only beginning to hog the capital market and M&A headlines. It was met with both interest and trepidation, with growing concern that it would anchor a period of Chinese colonization of Africa, but also a sense that it could be at the heart of one of the most exciting new investment flows in the world.
Much has changed in the intervening period, from China’s own economic model to Standard Bank’s entire international strategy, to say nothing of the impacts of the financial crisis itself.
So did it work? Yes and no. The combination has turned up on a disappointingly small number of headline deals but has delivered well on the bread-and-butter banking work behind the scenes. In the last two years, it has finally shown a sense of the corporate and investment banking momentum that many had hoped for a decade ago.
And years from now the deal may be chiefly remembered just as much for two almost accidental benefits it provided along the way: an opportunity for the Chinese bank to launch in Latin America and to take control of a London-based global markets business, something it would otherwise have had to build from scratch.
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And see also: The Truth About China/Africa Investment
