Eight years on, ABSA finally gets Barclays’ African footprint – for R18bn

I’ll always have a soft spot for ABSA. In 1994, the bank took on an impoverished working journalist, gave him a properly paid  job, lots of responsibility (on the Exco as a Group GM) and a chunk of share options. What happened in the next two and a half years transformed my career. My boss, then CEO Dr Danie Cronje, became my mentor, teaching me a lot about values and how business actually works. Equally generous was the group’s tech genius Dr Alewyn Burger who introduced me to a new thing called the Internet. And the ABSA share price rose four-fold turning my share options into the seed capital that led to the creation of Moneyweb. So it was perhaps appropriate that my first out-of-studio interview back in television was at ABSA. Although I arrived 15 minutes late – downtown Joburg’s one ways are a challenge – CEO Maria Ramos was charm personified on the day when ABSA put the seal on its R18,2bn all-share acquisition of parent Barclays’s operations in Sub Saharan Africa. It took Barclays’ stake in ABSA from 55.5% to 62.3% and results in the ABSA name disappearing from the JSE’s lists. In this interview, Ramos talks to those aspects and her plans to fill the obvious gap in the portfolio – Nigeria.

ALEC HOGG: ABSA has announced the official combination of the Barclays African businesses and its South African ABSA business. Earlier today I spoke with the CEO Maria Ramos to find out a little more about the merger and, particularly, why it’s taken eight years for this deal to have been done.  It was announced at the time in 2005 when Barclays acquired control of ABSA that the SA bank would acquire its UK parent’s African operations. Why has it only now come to fruition?

MARIA RAMOS: Well, I can’t explain what has happened before.  I can just say that from the time that we’ve started pulling this deal together, which was last year, I think it actually moved quite speedily.  What we decided was that we wanted to bring the ABSA and the Barclays Africa businesses together now in this deal. Africa is a growing continent and one of the fastest growing regions in the world. This really made sense and we had started pulling together the two businesses operationally.  Last year we closed down the Barclays Africa operations in Dubai and brought them to South Africa and this brings to conclusion the transaction.  We took it to shareholders in December.  They voted overwhelmingly in favour of the transaction and here we are.  So I know if you go all the way back (to 2005) it probably feels like a very long time. I think we’ve looked at this as a significantly different transaction from the one that may have been contemplated eight years ago.

ALEC HOGG: Where to from here?  You are the second – if you were to take the South African banks – into Africa.  Standard Bank had a jump start on you. But you certainly are ahead of the other two of the Big Four. Is it going to be an aggressive expansion?

MARIA RAMOS: No. I think we’ve got a really good base in Africa. Barclays has been in Africa for over 100 years. We’ve got some really good businesses across the continent in some really fast growing economies. What we’re going to be doing now is making sure that we can take advantage of that platform we currently have in Africa. I know you are going to ask me, probably your next question, what about Nigeria? We’ve continuously looked at Nigeria and we’re going to be looking at Nigeria going forward. But we’re going to be working with the platform that we have in Africa at the moment and we think we’ve got lots to grow in the countries that we have and a great business.

ALEC HOGG: Why has it been so difficult for South African banks to get a foothold in the rest of Africa, particularly in Nigeria?

MARIA RAMOS: No, we’ve got a great business in Ghana, which is also in West Africa, and as I say, Nigeria absaremains on our radar screen. It’s about making sure that when we do go into Nigeria we go in there with the right acquisition and the right business.

ALEC HOGG: But it’s difficult, we saw First Rand slipping up (walking away from Sterling Bank deal in Nigeria) last week.

MARIA RAMOS: I don’t know about the First Rand business. I can just tell you that for us, in Ghana we’ve got a really good business. Barclays has been there a very long time and so it’s about, we’ve got a good platform and we’re going to keep growing it. It’s that what distinguishes this transaction from other transactions.  We’ve got with Barclays in Africa good solid businesses that have been there for a very long time and we’re very local, but we’re also very much part of a large global group.  So we can serve customers and clients in Africa, across the world and global clients doing business in Africa, South African and African clients doing business regionally, and we know that inter regional trade is also growing and we can take advantage of all of that.

ALEC HOGG: Are there any other obvious gaps on the continent?

MARIA RAMOS: For us I suppose Nigeria’s the big one, but there are other economies on this continent that are growing.  I think our first priority is to make sure that our existent businesses, our existing markets we can make sure that those grow, that those generate the returns that we know they are capable of generating before we go out and do further acquisitions.

ALEC HOGG: So is there work to be done bringing them up to your return on equity?

MARIA RAMOS: Yes, I think we’ve said that before.  I think we’ve said it’s a great platform and we need to make that platform work harder for us.  We’ve got all of the ingredients to do that. Being part of a global group is very much part of what already works for us and then there maybe one or two other things we need to do in addition to that.

ALEC HOGG: You know the other side of the coin (from the public sector side – Ramos was previously Treasury DG).  Has it been difficult negotiating with the central banks of the various countries Mauritius, Seychelles, Zambia, Ghana and so on?

MARIA RAMOS: Wee went into this transaction knowing that it was always going to be complex.  We had eight countries outside of South Africa. Regulators have very specific things that they want, that they need you to be mindful of.  We have been very mindful of the regulatory environment in every single country that we operate in, and so, yes, it has been a very detailed conversation and negotiation with regulators.  But I have to say that in every single country, including South Africa, this has been a very fruitful, very considerate engagement on the part of regulators and I think we’ve got very good results out of that.  We knew that it was going to be. We needed to be respectful of what regulators wanted and our processes have respected what regulators need to achieve in their own countries.

ALEC HOGG: Will you be bringing other parts of the ABSA set up into the rest of Africa now; things like online stock broking?

MARIA RAMOS: What we are doing is we have got a really good corporate and investment banking business in South Africa and it’s connected into the Barclays world. One of the really big parts of the original 2005 transaction was that Barclays set up a really good corporate and investment bank in South Africa in ABSA Capital. We’re going to be looking at opportunities to grow that across Africa. But there are other parts of our business that we are expanding across Africa, financial services being one of those.  So in the insurance business we’ve really done good acquisitions in Mozambique, in Botswana and in Zambia and we’re looking to expand that across other parts of our African business.  So yes, I think we’re looking at opportunities to grow within our existing platforms.

ALEC HOGG: As from the beginning of next month the ABSA Group name changes?

MARIA RAMOS: Yes, it does and I think that’s an important development and it’s also very much reflecting the fact that the group is now a Pan African group and so we needed to change the name.  So it’s going to become Barclays Africa Group Limited.  So that happens on the 2nd August.