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China-Africa investment 'picking up pace'

18 January 2012

The scale and pace of investment by Chinese companies across the African continent is picking up, with South African financial services group Standard Bank alone responsible for advising Chinese companies on recent deals worth more than R10-billion.

Two large deals were concluded in 2011, namely the US$1.3-billion sale of mining company Metorex to Jinchuan and the sale of a 25% stake in black economic empowerment (BEE) investment holding company Shanduka to China Investment Corporation for R2-billion.

Closer to home, Standard Bank was also recently worked with the Industrial and Commercial Bank of China (ICBC) to provide funding to the value of $835-million for the Morupule B Power Project in Botswana.

Standard Bank's close relationship with ICBC stems from the Chinese bank having purchased a 20% stake in Standard Bank in 2007 for about $5.5-billion.

Other China-Africa transactions where Standard Bank was involved includes a $400-million debt refinance with Equinox, an Australian-listed mining company with African operations; a $470-million export finance facility to the Ethiopian Hydro Power plant; and a $5.5-billion financial advisory mandate to the Ghanaian Railway.

"The scale and pace of Chinese transactions on the continent is clearly picking up pace, especially in the area of mining and minerals," Standard Bank Group's Brad Webber said in a statement this week. "Standard Bank forecasts that merger and acquisition (M&A;) activity between Africa and China will continue to grow and expand."

Largest China-Africa deal in 2011

The Meteorex sale was the largest China-Africa deal in 2011, and involved Chinese mining group Jinchuan acquiring 100% in the issued share capital of JSE-listed Metorex for $1.3-billion.

The transaction was finalised this week following several months of negotiation between the parties and efforts to obtain clearances from regulators in The Peoples Republic of China, South Africa, the Democratic Republic of the Congo (DRC) and Zambia. Metorex mines copper and cobalt assets in Zambia and the DRC.

"As part of the transaction, Metorex will be delisted from the JSE but will continue to operate as an entity within the Jinchaun Group," said Webber. "Jinchaun is a serious player in the copper space with significant resources to grow Metorex."

He said the deals highlighted Standard Bank's unique position and exposure to African and Chinese markets. "Standard Bank Group's customers benefit from our knowledge and expertise in emerging markets, particularly Africa and in the resources sector."

SAinfo reporter