South Africa’s largest pharmaceutical manufacturer, Aspen Pharmacare, may have announced a relatively tepid set of annual results for the year ended 30 June 2019, but the anticipation of a reduced debt load freeing up cash flows pushed its share price up 12% the day after its results announcement.
Standard Bank ends its Argentine adventure
Africa’s leading bank, the Standard Bank Group, will sell its remaining stake in ICBC Argentina to its Chinese partner, the Industrial and Commercial Bank of China (ICBC) for $181-million, thus completing its refocus on Africa that began in 2011.
Standard Bank Group will exercise a put option on its 20% stake in ICBC Argentina in favour of the Industrial and Commercial Bank of China (ICBC), which had assets worth $4,000-billion at the end of 2018. The transaction represents a value of $180.75m.
By 2011, Standard Bank Group had sold 80% of the Argentine bank – the country’s fifth-largest private operator according to Moody’s – for $600m to its capital and strategic partner, ICBC.
- In 2007, the Chinese giant had invested $5.46bn to buy 20% of Standard Bank, which at the end of 2018 had $147bn in assets.
Standard Bank Group entered the Argentine market by acquiring Bank Boston Argentina as part of a wave of international expansion, which also saw the South African leader establish itself in Turkey and Russia. At the turn of the decade, however, the Group refocused its activities on the continent, reducing its non-African portfolio.
Standard Bank Group CEO Sim Tshabalala said in a statement on 8 August “since the change of control, ICBC Argentina has performed very well financially.
- However, Argentina remains outside the group’s strategy in terms of geography, and there is little overlap in the customer bases” of Standard Bank and the Argentine bank.
Capital to invest in Africa
The put option between Standard Bank and ICBC in 2011 expires at the end of November 2019.
- The move comes in times of high macroeconomic and financial volatility in Argentina, following the results of the presidential primaries on 11 August. These were unfavourable to the outgoing president, and the peso immediately lost 22% against the US dollar.
The sale “frees up capital that the South African financial conglomerate can invest in its banking activities in Africa”, say Ceres Lisboa and Akin Majekodunmi of Moody’s. They also point out “the turnover of Standard Bank Group’s African activities outside South Africa has grown faster than that of its main operating company, Standard Bank of South Africa Limited”.
According to the ratings agency, at the end of June 2019, “the rest of the continent represented 23% of Standard Bank Group’s net asset value compared to 18% in 2016”.
- At the end of 2018, 31% of the group’s ordinary profits were African, compared to 28% in 2017. Angola, Ghana, Mozambique, Nigeria, and Uganda were the main contributors.
Standard Bank Group is present in 19 African countries, including Côte d’Ivoire, Kenya, and the DRC. The return on equity for these African operations was 24% in 2018, up two points year-on-year from 18.8% in South Africa.
This article first appeared in Jeune Afrique.