Capital from the sale of 20% of South Africa’s Standard Bank to China’s largest bank, the Industrial and Commercial Bank of China (ICBC), will be utilized for accelerated organic growth, to support investments, to build critical mass in key markets and to establish a Global Growth Fund for private equity investments. Additional funds have been set aside for strategic capital reserves.

The plans were disclosed at an investor meeting in Cape Town where Standard Bank Group chief executive Jacko Maree and ICBC chairman Jiang Jianqing briefed shareholders and analysts on the strategic rationale and the benefits of the collaboration agreement.

Of the US$2.4 billion proceeds of the sale, US$450 million will be utilized in Africa, US$400 million is earmarked for growth in South Africa, US$300 million will be set aside for international activities, and US$200 million will be contributed towards the Global Resources Fund to be established by Standard Bank and ICBC. US$200 million will be set aside for private equity investments. The largest portion, $900 million has been earmarked as strategic capital reserves.

Jacko Maree says: “There is no doubt that this strategic alliance between the largest banks in China and Africa, which has the support of the Minister of Finance, the Governor of the Reserve Bank, National Treasury and the Registrar of Banks, is good for the country as well as the continent. It is consistent with government objectives of strengthening economic ties between South Africa and China and demonstrates confidence in South Africa and African financial services.”

China is one of South Africa’s most important trading partners with total imports and exports between the two countries rising from US$2.8 billion in 2002 to US$9 billion in 2006. Investments by China in Africa have increased from US$74.8 billion in 2003 to nearly US$520 billion in 2006. China has set a goal to double two-way trade with Africa to US$100 billion by 2010.

ICBC is the People's Republic of China's largest bank in terms of market capitalization. ICBC enjoys a dominant position in China, with more than 16,000 branches serving 2.5 million corporate customers and 180 million retail banking customers.

Standard Bank has established a framework of co-operation with ICBC whereby they will become the ‘partner of choice’. The two banks will have access to enlarged client bases and will do joint marketing to both existing and prospective clients. The focus will be on China, Africa and other emerging markets. The banks have already identified a list of 20 key customers to whom they will jointly market.