British Firm Joins Exodus, Pulls Out of South Africa

JOHANNESBURG, South Africa —  Standard Chartered, one of Britain’s largest banking companies, Friday announced sale of its South African subsidiary to local investors in what will be the largest foreign divestment from this strife-torn country.

Standard Chartered, whose local subsidiary is South Africa’s second-largest bank, said it is selling its 39% interest in Standard Bank Investment here for the equivalent of $254 million at present exchange rates.

Both the size of the sale and Standard Chartered’s 22,540 local employees make its pullout the largest yet in the multiplying foreign withdrawals from South Africa.

Although local financiers said they were happy that ownership of the bank is now totally South African, some acknowledged as well that the withdrawal will further erode business confidence in the country and increase its international isolation.

Standard Chartered officials refused to explain the reason for the bank’s withdrawal from South Africa or to comment on the increasing exodus.

Local directors welcomed “the consolidation of the group under a strong and stable South African leadership,” saying this will “open up a variety of opportunities locally and internationally offering potential for future growth.”

Standard Chartered has been a financial mainstay in South Africa for more than a century and has played a major role in financing foreign trade and in underwriting economic development within the country.

Exodus Primarily American

Like other large multinational corporations, Standard Chartered had repeatedly declared its determination to remain in South Africa and to work for political, economic and social change here rather than pull out. But, as pressure grew on it in Britain and the United States, it began to look for ways to divest.

Last November, London-based Barclays Bank sold its 40% stake in Barclay’s National Bank, South Africa’s largest bank, to local investors, and Citicorp sold its local subsidiary to Barclay’s two months ago.

Although more than 100 American companies have pulled out of South Africa in the past two years, relatively fewer West European and Japanese firms have left. The American exodus has included International Business Machines, General Motors, Exxon, Coca-Cola, Kodak and Firestone Tire & Rubber.

Standard Chartered’s withdrawal became certain late last year, according to banking sources, when the profits from its rapidly growing American operations nearly doubled those from South Africa--and were threatened by U.S. sanctions legislation.

Among other things, Standard Chartered owns Los Angeles-based Union Bancorp, the holding company for Union Bank and United Bank of Arizona. The big British banking firm also owns several smaller firms around the United States and has its own offices in six American cities. Unlike Barclays, which sold its South African subsidiary at an almost give-away price, Standard Chartered was determined to get as good a sale price as possible, these sources said, and negotiated better terms.

Under the sale agreement, half of Standard Chartered’s shares will be bought by two life insurance companies, 10% by a gold mining company, 10% by a local conglomerate, 5% by the bank’s pension fund and the balance by the general public and bank executives.

Standard Chartered, Britain’s fourth-largest banking group, had assets of $47.7 billion last year and a net income of $208.7 million.