Barclays Africa: the tough sell: a stalling economy and a tough regulatory environment mean that Barclays PLC could find it difficult to offload its Africa business.

Author:Saigal, Kanika
Position::INSIGHT
 
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At the beginning of the year, tensions were running high in the head office of Barclays Africa Group (BAGL) in Johannesburg, with rumours circulating that banking giant Barclays PLC planning on pulling out of Africa.

As the rumour mill churned, BAGL executives allegedly sent out a circular to all employees to allay concerns: in short, the notice assured employees that Barclays PLC, the bank that owns 62.3% of BAGL, would not be selling its shares in the group.

Just a few weeks later, on 1st March 2016, Barclays PLC head Jes Staley officially announced that the bank planned to exit its African operations in the next two to three years to focus on business in the US and the UK. On the same day, Barclays PLC's share price fell 8.72%.

Employees and customers were confused about what this would mean for their jobs and deposits. Supposedly, Barclays employees in Johannesburg were seen ripping down posters and covering up signs with the Barclays name emblazoned on branch walls, leaving only the Absa brands logo for customers to see. Barclays PLC bought a 55% stake in Absa which was then incorporated as Barclays Africa in 2013.

"We weren't supposed to know what was happening," says David Hodnett, deputy CEO of Barclays Africa in an interview with African Banker.

"If we had found out before the announcement that Barclays PLC intended on selling down its stake in BAGL--then legally Maria [Ramos, the CEO of BAGL] and myself would have had to announce this as part of our responsibility to the Africa group. We officially found out when the rest of the world did."

Hodnett admits: "We were preparing for something, but we weren't entirely clear on what that something was until the announcement was made."

Regulatory issues back home

Despite the promise of growth, attractive demographics and untapped potential, banks have been pulling out of emerging markets for some time. In February 2015, Citigroup announced that it would be selling its retail-banking and credit-card operations in Brazil, Argentina and Colombia; in August 2015 HSBC sold its Brazilian business for $5.2bn to Banco Bradesco.

Reeling from the commodities downturn, currency pressures and the outflows of foreign exchange, some hanks in Africa have been scaling back--especially in those countries that have been hit hardest. But Africa's economic stress has little to do with Barclays PLC pulling out, says Hodnett. Instead, Basel III recommendations and regulations around capital requirements for...

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