Finances

Abstract

Despite the huge adjustments that South Africa has been forced to make during the 1990s – the end of apartheid and the coming of majority rule, international diffidence at risking large stakes in South Africa which, all too often, takes the form of a ‘wait and see’ response to calls for investment, the demands for black empowerment, and the impact of the Asian economic crisis – the rand and the economy have remained remarkably strong. Confidence in a country’s ability to do things is often as important as the actual ability itself. One sign of this confidence was the rapid growth of the African Merchant Bank (AMB) which by late 1997 sought a listing on the JSE. The AMB was established in April 1995 with a R7 million investment from New Africa Investments Limited (Nail) and by October 1997 had raised its primary capital base to R500 million. As its chief executive, Rob Dow, explained, ‘In each of its three financial years, AMB has posted substantial growth in earnings, focusing on expanding its business activities organically, without resorting to acquisitions.’ Nail holds a 48 per cent interest in AMB, the American investment and merchant bank Donaldson Lufkin and Jenrette (DLJ), holds 15 per cent, management and staff hold 12 per cent while the rest is held by institutions. DLJ provides training and access to research and, by agreement with Nail, its merchant and investment banking activities in southern Africa would be conducted through AMB for a period of three years. AMB raised more than R6 billion in its first three years of operation for some 60 black business groups. In April 1998 AMB was granted investment grade credit ratings by Fitch IBCA which awarded A2 and BBB_ratings for AMB’s shortterm domestic debt obligations. Fitch IBCA said the ratings indicated that AMB had a strong capacity for timely payment in the short term and adequate capacity for timely repayment in the longer term.