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30 APRIL 2016
Barclays sell-down is looking up

by Andile Khumalo: Chartered Accountant (SA), former investment banker, investor and operator of businesses in media, marketing, communications, technology and financial services.

The announcement by Barclays Plc that it will be “selling down” its 62.3% holding in Barclays Africa Group was met with relative negativity from most South African media.

Many read the much-rumoured step by the UK banking giant as a vote of no confidence in the African and specifically the South African economy. Nothing could be further from the truth.

First, we need to ensure that we distinguish between Barclays Africa Group (the former Absa plus banks in 14 African countries) and Barclays Plc (the UK-headquartered banking giant that owns a majority share in Barclays Africa Group).

Apparently, many of the African countries, including their regulators and central banks, initially misunderstood the announcement to signal the shutdown of Barclays’ in-country operations.

Even some customers believed this meant that the bank was packing its bags and going back to England. The bank had to urgently put together an extensive media campaign to calm everyone’s nerves, which I suspect was achieved.

Second, we need to understand that nothing is happening to Barclays Africa Group, other than its major shareholder announcing its plans to sell all or a part of its shares in the business.

Naturally, a major shareholder exiting any business will cause panic, but this exit has more to do with the challenges faced by Barclays Plc, regulatory and otherwise, than it has to do with us, the African countries.

Another impact the Barclays Plc exit may have on the African operations is a loss of the franchise and brand name, whose prestige has been enjoyed for almost 100 years on the continent. However, it’s too early in the game to speculate when this will happen, if at all.

What seems more certain is that the South Africa operation will retain its Absa brand. It appears that the “Barclay-risation ” of Absa will be averted.

The brand has grown tremendously since the amalgamation of some of South Africa’s banks in 1991 creatively gave rise to the name Amalgamated Banks of South Africa, Absa.

So the English are going, Africa is not going to die, and South Africans can keep their Absa. However, another opportunity beckons.

For many years now, black business formations have been agitating for the creation of a black bank. Many have tried over the years, but due to various factors, including tighter regulation and the four-bank strategy of the central bank, it has proved difficult to achieve this.

Well, here is your chance, Black Business Council, Black Management Forum, Association of Black Securities and Investment Professionals, Association for the Advancement of Black Accountants of Southern Africa, et al.

An obvious partner would be the Public Investment Corporation, which could take a sizable stake in the bank and warehouse it for black investors.

Last year, a number of banking BEE deals matured, mostly at a profit for their investors, but nothing that resembles a black bank was created — although it’s worth noting the progressive strides being made by the likes of Nedbank in appointing black executives in key operational and strategic positions.

There is clearly an opportunity to do something transformative in the industry, with more than 60% equity of a large bank in Africa’s most developed economy suddenly available.

Hopefully, we won’t look back at this and lament the missed opportunity to move the needle in what has otherwise been sluggish economic transformation.

This article first appeared in the Business Times section of The Sunday Times

khumalo.co is the investment office of Andile Khumalo, a Chartered Accountant (SA), former investment banker, investor and operator of businesses in media, marketing, communications, technology and financial services. Visit our InfoCentre or website.

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