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Although she would never publicly admit it, Barclays Africa’s diminutive CEO Maria Ramos was thrown a hospital pass with an Eben Etzebeth-type tackler looming. Only three months ago, the respected former Treasury DG who has been running SA’s biggest retail banking group since 2009, would have felt comfortable. Her business was one of the best performing of four key pillars in global banking group Barclays. Sure, the parent needed fixing, but selling the African operations would then have been down any list of possible actions. Then came Nenegate on December 9, shocking an already sliding exchange rate reflecting the cyclical impact of weaker commodity prices on all resources economies. On reflection, Nenegate exposed to the rest of the world the additional risk South African investment carried in its economically ignorant but all-powerful President Jacob Zuma. This a reality many in the local business community had quietly positioned against through establishing businesses offshore and refraining from domestic re-investment, reflected in buildup of record local cash balances. Once foreigners caught onto this reality, pressure on already struggling Barclays to withdraw would have been immense. It is no co-incidence the first talk of the UK group moving out of Africa surfaced within a week of Nenegate. But you can’t blame those directly affected from trying to spin it differently. They still have a business to run. – Alec Hogg
By Matthew le Cordeur
Cape Town – Barclays Group’s decision to pull out of Barclays Africa and Absa has nothing to do with any conspiracy or the economic environment in South Africa, CEO Maria Ramos said on Tuesday.
“It’s never easy to go through these changes, but we have strong results, a clear strategy and we are in great shape,” Barclays Africa [JSE:BGA] tweeted its CEO as saying. “We have 42 000 colleagues across the continent that are focused and energised. This is a fantastic franchise.”
“Changes in global banking regulatory environment made it difficult for Barclays (Group) to own a subsidiary like Barclays Africa.”
Barclays Africa closed 2% higher on the JSE on Tuesday, trading at R138.89 with a market cap of R117.74bn.
Speaking to Bruce Whitfield on Radio 702, Ramos explained that the UK-based bank’s decision to relinquish its 62% controlling share of its African unit was because it needed to get its own house in order.
“It has absolutely nothing to do with any conspiracy and has nothing to do with economic environment, whether it’s in South Africa or anywhere else across the continent,” she said.
Analysts and traders like TradersCorner.co.za founder Garth Mackenzie disagreed.
“The rumours of Barclays selling their African business first surfaced after (Nhlanhla) Nene was fired in December,” Mackenzie told Fin24.
“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.”
Slow dripping Chinese torture
Selling the JSE-listed company over two to three years was akin the slow dripping Chinese torture technique, BizNews publisher Alec Hogg said in his newsletter on Wednesday.
“With a known seller wanting to offload hundreds of millions of shares, potential gains for the Barclays Africa stock price are now capped,” he said. “This overhang will hurt the bank’s rating and dis-incentivise executive staff relying on their share options to build capital.
“It also tells us there was no ready buyer for Absa after three months of Barclays trying to source one,” he said.
Mackenzie agreed, saying Old Mutual also struggled to sell its Nedbank stake.
“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.
What’s the point?
Hogg said Barclays Group has made a market cap loss of £1.2bn since it disclosed that it made a £394m loss in 2015.
“The 2016 loss in shareholder value is three times what Barclays is likely to eventually raise from selling the entire African business,” he said.
“The lauded turnaround specialists, a recently injected chairman and CEO, have thus far hardly covered themselves in glory.”
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