Financial sector unease wanes as Barclays Africa looks inward

and foreign media that the much-vaunted efforts of Barclays UK to sell off Barclays Africa shares so as to focus on its United Kingdom and European operations was no crisis.

It is a tactical shift, the previously cloudy situation looked contradictory to local observers as Barclays Group Ltd was doing two incompressible things at the same time. One was to look for a buyer of its shares in Barclays Africa, and another to insist that its bank operations would remain in place and even looked like they were being consolidated.

How was that to be merged with intentions of the parent company to shift its investments from sub-Saharan Africa?
Barclays Group (UK) Ltd owns about 62.3 per cent of Barclays Africa Group, which means that a third of those shares, whether in Tanzania or elsewhere in Africa, remains under other financial groups.

That was also partially a point of disquiet among analysts, that despite a rather cautious exposure to African market vagaries via external ownership of a third of the shares of the continental (sub-Saharan plus South Africa) group, this was still not enough and it was adamant on getting out. Yet its top officials on the ground were vibrant and overly enthusiastic about its operations.

The fog that is now being cleared with better information being available on marketplace analyses, especially from London, can be said that it was based on two premises: first, being 'fear of the unknown,' as a new investor takes up shares, and then, if there is hidden failure lurking in the shadows, pushing the UK parent firm to abandon its Africa operations.

The conflicting winds of information concerning intentions of Barclays Bank PLC and its Africa operations, which singularly did not say why the bank wanted to leave the continent in the first place, left many people wondering if it was a case of approaching bank collapse.

Tanzanian sentiments are still anchored in instances of failures of foreign banks, though they tended to be newcomers on the scene, often engaged in pyramidal financial schemes, fated to collapse.

No such incident has happened over the past ten years and it was mostly a case of start up banks in Africa towards the mid-1990s, especially BCCI (Bank of Credit and Commerce International) which is often rated as the 'dirtiest bank of all time.' It was more or less launched on a pyramid scheme intention, put it to operation, took many people unawares, and many lost cash.

Owing to inability to distinguish start up banks and veteran financial entities of global reach like Barclays Bank, it was easy for spirits to be misdirected to all sorts of wondering and imagination.

At the same time, even if a moderately reassuring scenario was in place, that is, Barclays Africa is soon closing its doors but its shares are being passed to another group is not easy to figure out in a Tanzanian psychological context, not used to routine business decisions of mergers and acquisitions.

All instances of quitting the field, in a rather traditional way of looking at things, suggests far less business strategy than bank failure, which leads to acute worries about money deposited there, and could even lead to bank rush.

Only in the subsequent days, with reporting from Johannesburg and London in particular, could local analysts begin to picture what was happening. The point is that Barclays Bank PLC finds itself in the teeth of huge costs arising from over-exposure in Africa especially, not because the profit scenario is poor, but due to regulators.

There are regulatory problems in at least two spheres, first within the United Kingdom where Barclays PLC is seen as one among major global banks that could put global financial stability at risk with risky trading, in like manner as JP Morgan in the United States back in 2007-8 financial crisis.

A lot of regulatory hedging and precautionary assurances have thus been set up around the parent company, while in South Africa similar initiatives surround Barclays Africa Group.

Not many countries have picked up the queue from Britain and the United States to impose stiff controls on banks so as to forestall such disturbances as the collapsed housing loans scheme in the US from 2005-7. The idea is that banks made those lendings for lack of regulatory control.

The South African Reserve Bank has in particular given itself extensive rights of oversight on activities of Barclays Africa Group, It has to have a say in specific transactions or initiatives in its overall African reach, from the premise that such transactions can affect the South African economy, Africa or the global economy.

All these regulatory requirements lead to costs for transactions made with approval of London or Johannesburg for branch or national bank entities all over Africa, which thus brings up the need to disentangle shareholding and operations, so that each bank or group stands on its own.

With the parent company exiting the scene, the Reserve Bank clout in South Africa shall be rendered far less harmful, as the target of its controls is really the parent company, since to regulators, the bigger the bank, the greater the risks it poses.

So far there are strategic questions being raised in the Barclays PLC exit scenario, as to whether Barclays Africa should remain cohesive as a group, as then it runs regulatory risks from the South African Reserve Bank, pushed by a restive South African political climate.

Still it also appears that in the absence of the parent company, the best scenario is Barclays Africa to also dismantle itself into independent companies at the national level, which would use the Barclays tag or drop it as the case may be.

In the country, for instance, there are intense links being cultivated between Barclays and the National Bank of Commerce, as they were already linked on account of Barclays Africa having purchased ABSA group of companies in South Africa. Barclays banks are adjusting to regulatory pressure, no more.