Barclays Bank is pulling out of Africa as a result of a strategic review by the new chief executive.
Strategic review by the new chief executive results in a dramatic withdrawal from Africa
‘Barclays Africa Group Limited’, of which ABSA Bank is a wholly-owned subsidiary, has 1,267 branches, 45,000 employees and operates out of 12 countries in Africa including Tanzania, Uganda, Mozambique, Ghana and Kenya.
Jes Staley, the new Chief Executive raised concerns about the volatile market conditions in Africa and Asia almost immediately following his appointment in October 2015.
Whilst no official statement has been made, it is now clear that following a strategic review by the new chief executive, Barclays have decided to focus on its core banking services in the UK and US markets, as part of this it is planning to pull out all of its operations in Africa.
‘Barclays Africa’, which has been operating in some parts of Africa since 1925, will therefore be sold off however exactly when this will happen is yet to be fully established.
Barclays Bank Egypt and Barclays Bank Zimbabwe are also expected to be sold, in addition to cuts, closures and staff redundancies in their operations in Europe, Asia, Russia and Brazil.
With Africa being seen by many as a major growth area, this decision is being met with very mixed reactions. Whilst there is no disputing the current growth potential in Africa, it is also clear that economic growth is slowing and a number of African currencies, including the South African rand are continuing to be hit by significant devaluations, in fact the value of the rand has fallen by almost 40% since the start of 2015.
Levels of apparent corruption across the African continent are also concerning the bank, especially as whilst they do not own all of the equity, they are responsible for all of the risk if a problem arises.
In addition to the problems in Africa, the current reduction in commodity prices, as well as the downturn in the Chinese economy are also proving to be a big challenge for Barclays Bank. The speed at which Jes Staley has reacted to these challenges is being seen by many as an indication that he is under pressure to turn the company’s performance around.
It is expected that long term repercussions will be felt as a result of this action by Barclays, and only time will tell whether or not other investors will follow their lead and sell parts of their businesses in order to focus on the safer UK and US markets