Barclays' plans to sell its African operations and exit the continent have been hampered by political turmoil in South Africa and a downgrade in its credit rating, bankers and fund managers said.
The British bank gave it two to three years to sell a controlling stake in Johannesburg-based Barclays Africa when it announced the plan in early 2016, and in May last year called for an accelerated bookbuild. ” (a short-term stock sale) and sold 12% of the stock. Temporal.
The bank had planned to further accelerate its bookbuild in the past two weeks, but postponed the deal due to concerns about investor appetite amid South Africa's political and economic uncertainty, said a banker familiar with the plans. .
The official, who requested anonymity because he was not authorized to speak publicly, did not say when the agreement would be made.
A spokeswoman for Barclays in London declined to comment.
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South Africa has been in trouble since late last year, when the ruling African National Congress (ANC) promised fundamental economic changes following defeats in local elections, fueled in part by anger over deep-seated inequality that persisted more than two decades after apartheid. The future of the economy is uncertain.
He has said he will redistribute the country's wealth to the black majority, but has not said how.
Two weeks ago, the sacking of the respected Minister of Finance Pravin Gordhan caused significant investor anxiety, with S&P Global Ratings downgrading South Africa and its banks to junk.
Fitch is also expected to downgrade local banks in the coming days, pushing Pretoria's debt into junk territory and its heavy exposure to sovereign debt is closely tied to the government's credit profile.
The downgrade raised the risk of prolonged economic stagnation and undermined investor confidence in banks, whose performance is closely tied to the economy, wiping out more than R132 billion ($9.5 billion) in market capitalization in two weeks. Ta.
The pool of potential buyers for Barclays to sell its stake in its African operations is also shrinking, bankers said. The reason is that some institutional investors, including some pension funds, are not allowed to hold assets with declining credit ratings. evaluation.
“Barclays faces a tough decision: sell Barclays Africa at a low enough price to attract investors, or wait perhaps a few years until the situation stabilizes,” said Cocky Kooyman, portfolio manager at Decker Capital. ” he said. Cape Town.
“Pay the price”
Early last year, the British bank announced plans to reduce its 62% stake in its African business to below 20% by 2019, as part of a plan to exit Africa and focus on the US and UK.
In addition to jeopardizing the company's global strategy, delays in sales schedules could pose regulatory issues.
Barclays will rely on part of the funds raised from the share sale to meet capital requirements identified as a concern by the Bank of England in a November “stress test” aimed at gauging resilience to financial shocks. are doing.
The company faces another annual review later this year, and if it doesn't meet the requirements, UK regulators could require it to submit plans to raise additional capital.
Sources said Barclays is increasingly considering selling its remaining 50% stake in bulk as it struggles to find a strategic buyer that satisfies South African regulators.
Barclays Africa generates more than 80% of its revenue in South Africa, but also operates in nine other countries, including Kenya, Ghana, Botswana and Mozambique.
The company, along with domestic peers Standard Bank, Nedbank and FirstRand, has been hit hard by South Africa's economic instability and credit rating downgrade. They rely heavily on wholesale funding sources such as bonds, whose costs have soared following the downgrade, leaving them exposed to economic issues such as rising unemployment.
South Africa's 'top four' banks have fallen between 7 and 13 per cent over the past two weeks.
Facing the possibility of losing even more supporters in the 2019 national election, the ANC party has promised to overhaul the economy with a focus on wealth redistribution, but has not disclosed details of its plans. do not have.
The policy aims to win back core voters in a country of 54 million people, where 80 percent of the population is black, but much of the economy remains in white hands in terms of land and business ownership. It is being This corresponds to approximately 8% of the population.
“Banks are paying the price for the political uncertainty we've seen in the country over the past two weeks,” said Ron Krippin, a fund manager at Kratos Capital in Johannesburg.
“As an investor, hearing words like 'radical economic transformation' creates uncertainty about economic policy, including further downgrades and bank funding costs.”
Source: CNBC Africa