Following its 66-year presence in Botswana, it appears that the death knell has well and truly sounded for British giant Barclays in Africa. Confirmation of this came with the revelation this week that the brand is to be withdrawn from the market within the next three years as the British bank divests from Africa.
The Barclays Africa Group Limited (BAGL) will however, continue operating under a different name in Botswana and eight other African countries. In South Africa, BAGL operates under its flagship, ABSA brand.
Last week, London-based Barclays Plc applied to South African authorities to reduce its shareholding in BAGL to below 50%. If the latest divestiture plan gets regulatory approval, BAGL can contractually continue to use the Barclays brand in the nine African countries for only three years.
“Shareholders are advised that Barclays Plc has submitted an application to the South African Reserve Bank for approval to reduce its shareholding in the group to below 50%.
From the date on which Barclays Plc reduces its shareholding in Barclays Africa to below 50%, BAGL can continue to use the Barclays brand in the rest of Africa for three years,” said Barclays Africa Group in a statement.
Following a March 2016 agreement to divest from African operations, Barclays reduced its stake from 62.2% to 50.02% last August. The agreed terms provide for contributions by Barclays Plc to BAGL totalling £765 million (R12.8 billion), primarily in recognition of the investments required for the group to separate from Barclays Plc. From this amount, about £515 million (R8.6 billion) will go towards investments required in technology, rebranding and other separation projects.
Barclays Bank Botswana, which is 67.8% owned by BAGL, however, maintained that Barclays Africa will stay the same and that the sell-down will not affect Barclays Africa’s shareholding in its African operations, including Barclays
“Barclays Botswana continues to have a clear strategy in Botswana and remains focused on executing that strategy,” said Barclays Bank Botswana spokesperson, Spencer Moreri.
He noted that Barclays Botswana is a profitable business, which is well capitalised and financially independent of Barclays Plc. He stated that interest in the individual subsidiaries, including Barclays Botswana, is held by Barclays Africa and that the operations are not for sale individually or collectively. Moreri also indicated that the Barclays brand has deep roots in Africa and that the bank will undertake the transition with care while keeping customers updated.
“Our brand may change over time, but our commitment and ability to provide great customer service remains the same,” Moreri said.
A notice from the bank indicated that for a transitional period, BAGL would receive certain services from Barclays typically for up to three years.
“The expectation is that the financial contributions will neutralise the capital and cash flow impact of separation investments in the group over time,” it said.
However, it was noted that the separation process will have an impact on BAGL’s financial statements for the next few years, most notably by increasing the capital base in the near-term and generating endowment revenue thereon, with increased costs likely over time as the separation investments are concluded.
Consequently, it is expected that BAGL will start to report normalised results that better reflect the underlying performance of the group once the contributions have been received.