Wednesday, October 27, 2021

Barclays’ exit should not dent Africa’s economic prospects

After a few months of speculation, United Kingdom banking group Barclays Plc confirmed Tuesday that it will exit the African continent following a decision to sell its banking business in the next 2-3 years. 

For the sake of those who have not been following the issue, Jes Staley, who took over as Barclays UK Chief Executive in December 2015, has since his arrival been undertaking radical restructuring of the British company. This entailed narrowing Barclays UK’s focus largely to investment banking. That restructuring has fortunately or unfortunately resulted in a decision to sell its stake in all its African business operations, including Barclays Bank Botswana. The majority shareholder of the local unit is however Barclays Africa Group Limited (BAGL). The British bank gave two main reasons in its attempt to explain the logic behind selling not just its African business but as well as those in Asia. Firstly, it would create “a very simple, clear vision for Barclays” as a bank focused on its two core markets of the UK and US.

Secondly, it has been explained that Barclays was “structurally challenged” as the majority owner of the African operation. It has all the downsides of owning 100 per cent of the business, but benefits from less than two-thirds of its profits. This could mean one and only one thing. The exit is not Africa but rather Barclays’s own problem. Barclays is simply saying it was accepting the fact that home (African) grown banks are successfully challenging the old colonial banks that previously dominated the banking industry. In short Barclays UK is saying it cannot deal with Africa anymore. This is so because the decision to quit Africa could just as easily have been a decision to quit international investment banking given that the aim is to reduce the group’s complexity, the impact of the UK banking levy and the capital charges for being a globally systemically important bank. 

But while we still come to terms and recover from the shock we have to be glad that Barclays UK has finally come out to make the announcement which has caused panic among its workers and customers across the continent……and now that the “key announcement” has been made, our focus will shift to the future. The process of finding the 62.3 percent stake buyer in the Africa Barclays Group Limited has begun. Although it is early days, the expectation is that both the parent and subsidiary have no doubt started probing a range of options, precisely on who will buy the stake at offer. As such we believe a scan for potential partners is ongoing; we ought to remain positive that the new partner will be of value—-One that will bring some creative thinking when it comes to product offering to the African market. Not one who is just interested in repatriating millions of profits back to their continent. 

Truth be told even though Barclays has maintained a presence in Africa for more than a century, the bank has been very slow in taking up the fresh opportunities that continue to present themselves in the past few decades. For instance in Botswana it has not fully made use of advanced technology to cater for the unbanked population. So the decision by Barclays UK to call it a day will give room for a fresh thinker. We applaud the Barclays Africa Group Limited’s assurance statement that the group is here to stay. But maybe we should caution them that although it is not entirely upon them on who ultimately comes on board, they should ensure that such is a “fresh thinker”. 

The new partners or owners should be reminded of the fact that although Barclays UK quit its Africa business, it was not because the continent has no growth potential.  In fact figures do show that Barclays UK made a better return on equity on its African business units than the investment bank that the group has chosen over Africa. So whoever is considering buying the 62.3 percent stake should be reminded of the fact that Africa has a huge potential. Such a group should be able to make use of modern technology to deliver financial services to those African dwellers living in communities that banks traditionally wouldn’t touch due to high operating costs for a low profit return. Over the years new banking models have emerged that seek to leapfrog existing banking models, the new owners of Barclays Africa Group Limited should be those who can be able to tap into the huge potential of digital banking. 

The #Bottomline is that the decision to quit Africa by Barclays UK has less to do with the economic uncertainty gripping our continent than it does with the British bank’s struggles elsewhere. So going forward, all the African business units needs is nothing but a fresh thinker who understands that banking should be more inclusive. This entails ensuring that mobile banking plays a transformational role in bringing banking to the majority of the population at much lower cost than is currently the case.

 

RELATED STORIES

Read this week's paper