SA crisis hits Barclays’ plan to exit Africa
Barclays’ plan to sell its African business and pull out of the continent are being hindered by SA’s political upheaval and credit-rating downgrades, according to banking sources and fund managers.
The British bank gave itself two to three years to sell its controlling stake in Johannesburgbased Barclays Africa when it announced the plan in early 2016 and sold 12% in May 2015 in an “accelerated bookbuild” — a share sale held over a short period of time.
It had been planning another accelerated bookbuild in the past two weeks, but pushed it back because of concerns over investor appetite due to political and economic uncertainty in SA, according to a banking source familiar with the plans.
The source, who asked not to be named as they are not authorised to speak publicly, did not say when the deal might now take place.
A spokesman for Barclays in London declined to comment.
SA has been mired in business uncertainty since late in 2016 when the ANC pledged to radically transform the economy following losses in local elections that were partly caused by anger over inequality that persists more than two decades after apartheid.
The ANC said it would redistribute the wealth to the black majority, but has not outlined how it planned to do so.
Investor unease increased two weeks ago with the sacking of finance minister Pravin Gordhan, which led to S&P cutting the credit rating of SA and its banks to junk.
Fitch also pushed Pretoria’s debt into junk territory and is expected to also downgrade local banks in the coming days.
The pool of potential buyers to which Barclays can sell shares in its African business to is also shrinking, according to bankers, as the mandates of some institutional investors, including pension funds, do not allow them to hold an asset that is sliding on credit ratings.
“Barclays Plc has to make a tough call — go ahead and sell Barclays Africa at a low enough price that will attract investors or wait, possibly a few years, until the situation has stabilised,” said Kokkie Kooyman, portfolio manager at Dekker Capital.
The British bank said early in 2016 that it planned to reduce its 62% stake in its African business to below 20% by 2019 as part of its plan to exit Africa to focus on the US and Britain.
As well as hindering its global strategy, delays in the sale timetable could throw up regulatory problems.
Barclays is partly relying on funds raised from the stake sale to meet capital requirements that were identified as a concern by the Bank of England in a November “stress test” aimed at gauging its ability to withstand financial shocks. The lender faces the annual test again late in 2017 and the British regulator could ask it to submit plans to raise extra capital if it has not met the requirements.
Barclays planned to sell its remaining 50% stake in chunks as it was struggling to find one strategic buyer that would satisfy SA’s regulators, sources said. Barclays Africa earns more than 80% of its revenue in SA.