CYRIL Ramaphosa’s Shanduka Group has sold a 25% stake to China Investment Corporation, China’s sovereign wealth fund, for R2bn, saying this will enhance the group’s growth trajectory over the next 10 years.

China Investment will buy shares primarily from exiting shareholders, Old Mutual Private Equity and Investec banking group, and Shanduka’s black-owned and controlled empowerment status will not be affected by the transaction.

"Our shareholders want to exit, and this was an opportunity to bring in a shareholder who is much more long-term," Shanduka’s executive chairman, Mr Ramaphosa, said yesterday. The current private equity investors had fulfilled their investment mandates, with the parties "exiting on very good terms".

Old Mutual Private Equity said the disposal of its interest in Shanduka was part of its regular activities, which included finite terms for its investments.

"Our investment in Shanduka has been a wonderful partnership ... and our association with Shanduka over the past six years has been very rewarding on a number of levels," Jacci Myburgh, portfolio manager at Old Mutual Private Equity, said yesterday.

Mr Ramaphosa said it was the Chinese fund’s first investment in Africa, despite China having become a driver of economic growth across the continent.

As China’s sovereign wealth fund, China Investment has a credit rating that is rapidly becoming a gold standard across the world.

"It’s as good as it gets when it comes to getting in a foreign investor who has huge capital reserves to invest," Mr Ramaphosa said.

Shanduka would take the lead in investing and China Investment would sit on the group’s board, he said.

"This partnership will allow us to jointly explore future investment opportunities in SA and other parts of Africa. We believe it will present broader opportunities for both organisations and be mutually beneficial," he said.

Africa’s largest banking group, Standard Bank , acted as the exclusive financial adviser to Shanduka, with Standard Chartered Bank acting as exclusive financial adviser to China Investment.

Mr Ramaphosa said Standard Bank remained a shareholder, also referring to 2007, when the Industrial & Commercial Bank of China bought a 20% stake in the South African banking group for $5,5bn.

At the time, it was the largest deal of its kind in Africa, formalising and strengthening the growing ties between China and the continent.

Mr Ramaphosa also said China Investment’s stakeholding would not affect Shanduka’s holdings in global hamburger giant McDonald’s, after it bought a 20-year master franchise agreement to run all McDonald’s restaurants in SA earlier this year.

"They are happy that we have aligned with leading brands in the world — McDonald’s and Coca-Cola," he said.

McDonald’s has long been rolling out many hundreds of stores in China.

The China Investment Corporation is a wholly state-owned investment institution, with hundreds of billions of dollars under management. Its role is to make long-term investments that maximise risk-adjusted financial returns for the benefit of its shareholder.

Established in 2007 with the issuance of special bonds by the Chinese ministry of finance, it funded itself using about $200bn of China’s foreign exchange reserves.

Because its financing was grounded in financial instruments and subject to commercial obligations, China Investment states it has a strictly commercial orientation, driven by economic and financial interests.

It "is committed to maintaining the high professional and ethical standards in corporate governance, transparency, and accountability," it said on its website.

It said it selected investments based on established values and investment principles, and usually does not take a controlling role — or seek to influence operations — in the companies in which it invests.

China Investment’s "fundamental approach is to hold, manage, and invest its mandated assets to maximise shareholder’s value," the website stated.

Mr Ramaphosa said Shanduka would consider listing itself and its subsidiaries in time to come.

It has stakes in numerous South African blue-chip companies, including Alexander Forbes, Mondi and Bidvest .

By: Mark Allix

 BusinessDay