South African bank ABSA has accepted an offer of $5.5 billion from Britain's Barclays bank for a 60-percent stake in the local group, the largest foreign investment in South Africa since apartheid ended. The deal follows regulatory approval by the South African authorities.
The ABSA board unanimously agreed to recommend the Barclay's offer after two large shareholders agreed to sell their 28 percent stake to Barclays.
A further 35 percent of shareholders have expressed support for the deal, which could give Barclay's a 63 percent holding in ABSA. Barclay's is to acquire 32 percent immediately and the balance later.
Finance Minister Trevor Manuel announced Sunday the Barclay's offer had won full regulatory approval, saying the transaction would be the single largest foreign direct investment in South Africa since the end of apartheid. Mr. Manuel characterized the deal as a vote of confidence in South Africa's economic and political development.
Tony Twine of Econometrix, an independent think-tank, told VOA that the deal is an indication of trust in South Africa's economy, and especially its financial sector.
"And it also gives a fairly clear signal that the financial sector is relatively happy with the South African situation and in particular the central banking system, within the South African context," he said. "And if that is seen to be healthy and worth investing in, a whole lot of other things in South Africa will look like they are worth investing in, as well."
Mr. Twine said that the sophistication of South Africa's financial sector means that putting together such deals is time-consuming, but he says serious potential investors can rest assured that the regulatory system works in their favor.
"Because of the complexity of the South African financial system, which is world class, there is always going to be a long route between point A and point Z, I think that it does show that there are no unnecessary stumbling blocks or uncrossable hurdles in the way of foreign investments in this or possibly any other sector," added Mr. Twine.
The Barclay's investment means a significant cash flow into the South African economy where the gross domestic product is about $500 billion.
But it remains to be seen whether the sellers will reinvest in equity or whether some will invest their cash in entrepreneurial endeavors. Mr. Twine says this is South Africa's greatest economic need.
"South Africa needs entrepreneurial risk much more than anything else at the moment to consolidate its growth rate at above four percent per annum, and in fact to make it grow at levels higher than that," he explained.
ABSA is one of South Africa's four major banks and the authorities are expected to carefully monitor the impact of Barclays takeover of ABSA in the coming months. Finance Minister Manuel says any future deals will be decided on a case-by-case basis.
The deal marks Barclays' return to South Africa, after leaving in 1986 during protests in Britain against doing business under apartheid. Before selling at a loss, Barclays was South Africa's largest bank.