Cape Town – Barclays Group’s decision to exit Barclays Africa was accelerated when President Jacob Zuma fired Nhlanhla Nene as Finance minister, according to an independent trader on Tuesday.
The UK-based bank, which has a 62.3% stake in Barclays Africa (formerly Absa) announced on Tuesday that it will disinvest over the next two to three years.
“The rumours of Barclays selling their African business first surfaced after Nene was fired in December,” TradersCorner.co.za founder Garth Mackenzie told Fin24.
Barclays CEO Jes Staley said on Tuesday that he was simplifying the structure of the bank, focusing on its core UK and US business and building a Trans-Atlantic bank.
“It seems that Barclays was divesting of non-core assets already, but the decision to exit Africa may have been accelerated after that event as well as the risks of a ratings downgrade of South Africa.
“The weakening of the rand, (which dropped 25% against the dollar in 2015), has negatively impacted the value of Barclays’ investment,” he said. “Particularly in the past six months.”
This is important as South Africa contributes 84% to Barclays Africa’s profits. “So this is still essentially a South African bank and less an African bank,” said Mackenzie.
He said that in the 11 years that Barclays has owned its stake in Barclays Africa, the annual return (including dividends) was around 4% (in pounds). “This is not enough for an emerging market asset and the associated risks,” he said.
The delay in exiting Barclays Africa was likely because they could not find a buyer.
“Barclays has indicated that it will sell down to a minority stake over the next two to three years, which suggests that no suitor has been found to buy the stake,” he said.
“Old Mutual struggled to sell its Nedbank stake, so it is no major surprise that Barclays would battle to find a suitor for Barclays Africa,” said Mackenzie.
“One would think that a logical suitor might be Bob Diamond’s Atlas Mara, but there has been no expression of interest from them as yet,” he said.
Diamond is the former Barclays CEO, whose new bank is buying up banks in Africa.
“Barclays Africa remains an attractive asset with good governance and a very juicy dividend yield, but the risks related to the country seem to overshadow that,” said Mackenzie.
“The move does come as something of a surprise given that Barclays have invested a lot of time and money in re-branding the old Absa business and they looked pretty committed to their African business until recently.”
The repercussions of the decision have already started, with an
announcement that Barclays Africa chairperson Wendy Lucas-Bull will step
down from the Barclays Group and Barclays Bank board with immediate
effect.
This is to “ensure that no conflicts of interest exist
as a result of her being a member of these boards,” Barclays Africa said
in a statement on Tuesday.
Her status will be that of independent non-executive chairperson on the boards of Barclays Africa and Absa Bank.