Barclays plc likely to foot demerger bill in Africa
Barclays Africa is setting up a team to manage the process of separating operations and systems from holding company Barclays plc, but says the cost will not be known for a while.
Barclays Africa chairperson Wendy Lucas-Bull told City Press that the process was being carefully managed together with Barclays plc, but it was too early to determine when it would be completed – and if it would have financial implications for the group.
“We are setting up a dedicated project office that will be adequately resourced and manned by sufficiently experienced and knowledgeable people,” Lucas-Bull said after the company’s annual general meeting (AGM) in Johannesburg this week.
“All outsourced services and intellectual property – including the brand and IT – are subject to commercial terms and licences, providing appropriate time frames to put in place alternatives,” she added.
Barclays plc is selling down its stake in Barclays Africa almost three years after combining the former Absa Group with its African units, excluding Zimbabwe and Egypt.
The parent company reduced its stake to 50.1%, after it sold a 12.2% stake to a number of institutions earlier this month.
Analysts said that while it was still early to quantify the direct and indirect costs of the break-up, it was likely that the parent company would foot the bill, as it had initiated the move.
“There will be a cost, but my sense is that because Barclays plc initiated the demerger, there is a strong argument that they carry the cost, or a part of it,” said Greg Saffy, a banking analyst at Cast Iron Capital.
A number of groups have expressed interest in buying the remaining Barclays stake, including a consortium led by ex-Barclays CEO Bob Diamond, the Dubai-based Abraaj Group and Patrice Motsepe’s African Rainbow Capital. Barclays CEO Maria Ramos and Lucas-Bull declined to comment about which major groups had shown interest.
Ramos told City Press that however the bid process panned out, Barclays would always be a part of Barclays Africa. Joint ventures and collaboration in corporate and investment banking were being explored even as the companies disengaged, she said.
“Barclays needs a partner in Africa and they have already said that they need to stay connected to us ... to deliver to their global clients in Africa,” Ramos said.
“That is why they want to hold on to whatever percentage shareholding in our business [they can], whether as a shareholder or a commercial partner.”
The company was also exploring using the planned sale as an opportunity to increase its black shareholding, Lucas-Bull said in reply to Mehluli Mncube, who was representing funds which hold about 4% of Barclays Africa, including the Eskom Pension Fund, Sentinel Retirement Fund and Mines Pension Fund.
Mncube said he would want to see Barclays Africa with more than 10% black ownership.
The bank’s black shareholding dropped after the exit of Tokyo Sexwale’s Batho Bonke Capital in 2012.
In response to City Press’ questions, Barclays Africa spokesperson Bhekizulu Mpofu maintained that the bank was compliant with black empowerment legislation and the financial services sector charter, which stipulated 25% BEE ownership at the holding company level, with 10% of that being direct ownership. He did not give figures.
Mncube queried whether Lucas-Bull’s R4.96 million pay for 2015 would be cut after she stepped down from the Barclays plc board in March, calling it “excessive”.
Outgoing Barclays Africa board finance committee chairman Trevor Munday defended Lucas-Bull’s package, saying that the group followed best practice and took external advice on executive pay.
Other shareholders were not happy with the way that Barclays Africa’s directors were paid – 18% of the votes cast at the AGM were against the company’s remuneration policy.
And Barclays Africa nonexecutive director Yolanda Cuba, also a former Mvelaphanda Group CEO, felt the wrath of the banking group’s shareholders when about 12% of the votes at the AGM were cast against her re-election.