Barclays Comes Out of Africa; Who's Next?

It was the worst-kept secret in international banking circles. After nearly a century in Africa, Barclays  Bank is to retreat from the continent to concentrate on its core business in the UK and US.

New Chief Executive Jes Staley described the move as an attempt to “de-risk” the bank.  Given the perils involved in Anglo-Saxon commercial and investment banking — Britain’s RBS lost $2.8 billion in 2015 — Staley would appear to regard the climate for African financial services as very risky indeed.

Barclays Africa spreads across 10 African countries, but its risks are concentrated in one nation: South Africa.  Through its Absa Bank network, Barclays Africa serves more than nine million retail and corporate customers. Barclays picked up Absa in May 2005, when South Africa was considered an on-trend destination for emerging market investment, along with fellow BRICS, Brazil, Russia, India and China.

The commodity price rout has been the undoing for Brazil, Russia and South Africa, the three most-resource-reliant BRICS. South African growth declined to an annualised rate of just 0.6% in the fourth quarter, the lowest since 2009, and well below economists’ already-downgraded expectations. Such meagre growth won’t make a dent in the nation’s unemployment rate, now above 25% of the work force.

But with the possible exception of India, it’s political risk that is sinking the BRICS, South Africa included. Staley took the reins at Barclays little more than a week before South African President Jacob Zuma replaced his well-respected finance minister Nhlanhla Nene with the little-known political insider David van Rooyen. After a collapse in the level of the rand, Zuma dumped Rooyen three days later, drafting the highly-regarded Pravin Gordhan back to the post he held for five years up to May of 2014.

But Gordhan and Zuma are at loggerheads, according to the South African media, as a row over the South African Revenue Service boils over. Gordhan has been thwarted by Sars Commissioner Tom Moyane in attempts to revamp the agency, and Zuma has conspicuously failed to publicly back his finance minister.


By Laurie Laird.
Culled from Forbes.