Chinese banks extend reach in Africa, use local expertise

Feng Li was in a buoyant mood after a record day of business.

The executive vice-president of Bank of China Johannesburg Branch had overseen a 2.7 billion yuan (R6.08 billion) transaction on Nov 30 for a Mauritius client — the bank’s biggest single clearing deal in Africa.

It was further evidence that Chinese banks are playing an increasingly bigger role in the African financial sector.

Bank of China itself was authorized by the People’s Bank of China, China’s central bank, in July to serve as the clearing bank for renminbi business in South Africa. Even before that in the first eight months of this year, it was responsible for clearing 60 billion of the 80 billion yuan cleared on the continent.

“This was our biggest single transaction since we began renminbi clearing and because of the new authorization we expect to do more,” says Li.

The new financial firepower of Chinese banks was first demonstrated in 2007 when another Chinese state-owned bank ICBC paid $5.5 billion for a 20 percent stake in Standard Bank, Africa’s largest bank. It still remains China’s largest single foreign direct investment deal.

Sim Tshabalala, chief executive officer of Standard Bank, speaking from the bank’s office complex in Johannesburg’s Rosebank district, says the tie up has given his bank global reach.

“Not only are we are an African bank but we are now able to facilitate trade and investment throughout the world by virtue of this relationship,” he says.

One such example was financing State Grid Corporation of China’s $1.8 billion acquisition of seven transmission companies in Brazil in 2010.

With China Development Bank, one of China’s two largest policy banks, Standard Bank is also providing finance for Sino Hydro’s Kabompo hydropower project in northwest Zambia.

“We have participated in a number of deals where Chinese companies have bought assets in South Africa and the rest of the continent,” adds Tshabalala.

Chinese banks have not been afraid to bring in local talent to help run their operations.

John Tambourlas, now 65 and who began his banking career in 1967 in Johannesburg, is chief operating officer of China Construction Bank Johannesburg Branch, where he has worked for 14 years. Chinese members are actually outnumbered three-to-two by local South Africans on the bank’s executive committee. “I think the bank realizes that to succeed in South Africa it also needs the local market expertise,” he says.

Despite the slowing Chinese economy, its banks in Africa are showing no sign of letting up.

In October, BOC’s Beijing head office almost doubled overnight the Johannesburg branch’s capital from R1.2 billion to R2.1 billion so it could lend more. Only last month it provided a R3 billion facility to Transnet, South Africa’s state-owned transport company.