Barclays returns to South Africa

Britain's Barclays agreed a $5.5 billion deal for control of lender Absa yesterday, marking its return to South African retail banking and the biggest direct foreign investment in the country.

The UK bank's long-awaited announcement is a major vote of confidence in the South African economy more than a decade after the demise of the apartheid regime and 19 years after Barclays' forced exit from the country. Britain's third-biggest bank will pay 33 billion rand ($5.5 billion) in cash for 60 per cent of Absa, South Africa's biggest retail lender, to boost its non-UK profits.

After eight months of talks, Barclays is offering 82.5 rand a share and Absa will pay its shareholders a dividend of two rand a share.

The deal heralds Barclays' return to mainstream banking in South Africa after it quit in 1986 because of protests in Britain against doing business under apartheid. Before selling at a loss, Barclays was South Africa's biggest bank.