China to extend Africa acquisitions

Tom Burgis – The Financial Times

Copyright The Financial Times
July 30 2008
China is readying to move into Africa on a scale that far outstrips
its acquisitions on the continent to date, according to the South
African bank that is laying the groundwork.
High-level groups of bankers from Industrial and Commercial Bank of
China and Standard Bank, respectively China and Africa’s biggest
banks, are examining potential targets in Africa’s oil and gas,
telecoms, base metals and power sectors, executives at the
Johannesburg-based lender have told the Financial Times.
Clive Tasker, chief executive of Standard Bank’s business in Africa
excluding South Africa, said the resultant deals were likely to be at
least as large as ICBC’s $5.5bn (£2.7bn, €3.5bn) purchase last year of
a 20 per cent stake in Standard – itself the largest foreign direct
investment in post-apartheid South Africa.
But Standard bankers admitted that building a relationship with their
Chinese colleagues is proving more difficult than they had
anticipated. Billed as a “combination of giants” by ICBC chairman
Jiang Jianqing, the union was finalised on February 14, months after
the initial overtures.
Beijing expects trade with Africa to hit $100bn by 2010, which makes
the rationale for ICBC to gain access to Africa’s biggest pan-African
banking network clear.
For Standard, apart from the capital injection to bolster its
reserves, reward shareholders and fund expansion, the most tempting
fruits of the deal depend on using the connection with ICBC to open
doors to Chinese investors and guiding them into Africa.
“The honeymoon is over,” said Tim Thackwray, Standard Bank’s head of
investment banking for Africa. “Now the hard work starts.”
Beyond the tribulations of marrying Chinese and South African
corporate cultures, negotiating the upper echelons of ICBC – including
establishing links with their counterparts – is taking time, Standard
executives said. ICBC is majority-owned by the communist-run state.
All the same, Mr Thackwray added: “I would be disappointed if I
couldn’t point to a big juicy deal by Christmas.”
Standard is establishing a 20-strong team in Beijing.
Standard and ICBC “can build a superhighway that connects China and
Africa,” said David Munro, Standard’s chief executive for corporate
and investment banking across Africa.
The first child of the banks’ “strategic partnership” is a global
resources fund they are finalising and which they hope will grow to
$1bn once third-party investors come on board.
Standard has 1,000 branches in 18 sub-Saharan African countries and a
presence in a further 21 nations worldwide. In the past year it has
made acquisitions in Nigeria, Kenya, Turkey and Argentina. This week
it expanded its operation in the Democratic Republic of Congo, where
Beijing last year signed an infrastructure-for-commodities deal worth
up to $8bn.
It expects to finalise a licence next month to operate in Angola, one
of the world’s fastest growing economies whose burgeoning oil wealth
has already attracted significant Chinese interest.
Nigeria, the most populous country in Africa, and Ghana, a bastion of
political stability, were also ripe for Chinese deals, Mr Thackwray
said, with Mozambique and Congo close behind as they emerge from
conflict.
Several executives said that corporate China was looking at targets
beyond the mining sector, which has dominated the Asian giant’s
African investments as it seeks to satiate its thirst for commodities.
Copyright The Financial Times Limited 2008
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