Barclays has secured a deal after an eight-month courtship

South African Finance Minister Trevor Manuel has given the go-ahead for the move by the UK's third largest bank.

The deal marks the biggest single foreign investment in South Africa, and makes Barclays Africa's largest bank.

Barclays will pay 82.50 rand a share and Absa will also pay its shareholders a dividend of 2 rand a share, Barclays said in a statement on Monday.

High growth market

The UK bank has received written approval from 63% of Absa's shareholders, bringing to a conclusion talks which began in September 2004.

Barclays plans to buy a 60% stake in Absa.

South Africa is a dynamic economy with great growth potential Jorn Varley, Barclays chief executive

"This transaction accelerates our strategy to internationalise Barclays' earnings and increase exposure to selected high-growth, well-run markets," said Barclays chief executive John Varley.

"South Africa is a dynamic economy with great growth potential."

'Potential benefits'

The move brings Barclays back to the South African consumer market for the first time in 19 years.

The UK bank backed out of mainstream banking in South Africa in 1986 after protests about its dealings with the apartheid regime.

These are the early stages of a more forceful pipeline of foreign acquisitions in the local market Goolam Ballim, economist at Standard Bank Check Barclays' share price

Barclays upped its offer - originally 80.80 rand a share or �2.8bn ($5.3bn) in all.

Mr Manuel, announcing his approval at a news conference in Johannesburg, said the potential benefits of a Barclays/Absa tie-up outweighed any potential risks or disadvantages.

A finance ministry statement said it was a "vote of confidence in the country's significant political, economic and social progress over the past decade".

Absa chairman Danie Cronje hailed the deal as a "beacon of foreign confidence and investment in South Africa and the continent".

'Investment flood'

Barclays says it will be able to find cost savings of as much as 1.4bn rand ($232m) thanks to its skills in, for instance, the credit card market - which remains under-developed in South Africa.

Analysts said the deal may open the door to a significant increase in foreign investment which has been held back by concerns over high levels of unemployment and violent crime.

South Africa's economy is enjoying steady growth

"The confluence of Barclays and a variety of other small deals attest to the potential for profit in the local market and more broadly in Africa," said Goolam Ballim, an economist with Standard Bank group.

South Africa's economy has been performing strongly and annual growth is set to remain at about 4% over the next three years.

"This may well open the floodgates of investment in South Africa," said Colin Coleman, Goldman Sachs' managing director in South Africa.