Barclays – Absa Lead Charge For Bigger African Slice

South African banks have not been slow to see the opportunities that the rest of Africa has to offer but, more recently, the race to establish bases all over Africa has become increasingly fierce.

South Africa’s Absa Bank and its parent, Barclays Bank, will soon launch their One Africa strategy, a move designed to consolidate their significant African continental resources, take advantage of the present boom in commodities and attract foreign investment.

“We are working closely with Barclays,” reports Absa chief executive Maria Ramos. “They are in the process of moving their Africa head office from Dubai to Johannesburg, making South Africa Barclays’ financial centre on the continent. It is an expression of confidence in Africa by Barclays. The two banks will operate as one bank in Africa because Barclays has a footprint here which is big and solid.”

“Together with Barclays, we have a leading pan-African franchise,” says Ramos. “Nine of our 12 operations are the top three by revenue and our combined revenue increased to £2.4bn ($3.8bn) in the review period.”

UK-based Barclays bought 54% of Absa in 2005, aiming to become the pre-eminent banking group in Africa. In the intervening period, the two banks have kept their African operations separate, with the exception of Barclays Capital and Absa Capital.

The One Africa strategy appears to be the brainchild of the two banks’ new chief executives, with Maria Ramos heading Absa and Bob Diamond running Barclays. The banks now say they want closer cooperation as a driver to benefit from the economic expansion in Africa that has been outstripping more-developed regions.

Releasing Absa’s half-yearly results recently, Ramos agreed with forecasts that South Africa’s GDP would grow 3% this year. “That’s not shabby,” she said, “given the global phenomenon. Europe and the US are losing jobs. Their economies have significant problems.”

She conceded, however, that South Africa’s economy is not growing strongly enough to create the type of jobs it needs. “That requires a more sustainable global recovery.”  

Even though Africa had escaped the harshest effects of the economic downturn, “2010 was another challenging year for Absa given a slow, uneven economic recovery both globally and in South Africa. Nonetheless, Absa managed to report 17% higher profit before tax while continuing to invest significantly in our strategic growth initiatives. Our margin hedging strategy protected net interest income as rates fell to 36-year lows.”

In particular, it would be to Africa that the bank would turn its attention because “Africa presents a significant opportunity for Barclays and the decision to align Absa more closely with Barclays Africa by executing a One Bank in Africa strategy gives us better opportunities to serve clients across the continent, thereby enhancing our joint competitive advantage”.

The One Africa offensive has already begun a financial services onslaught in Botswana with a cooperative insurance marketing campaign that will expand into other African countries later this year, starting with Mozambique and Zambia.
 
FNB’s African safari

Absa-Barclays’ competition are not exactly dragging their feet. First National Bank (FNB) has been granted a licence by the Bank of Tanzania given the blessing of the South African Reserve Bank (SARB).

“FNB targeted Tanzania as a top priority country for investment because it meets our key criteria for establishing a bank in a new country,” says Danny Zandamela, CEO FNB Africa. The bank adds Tanzania to its existing portfolio of Mozambique, Lesotho, Swaziland, Botswana, Namibia and Zambia where its  innovations of telephone and cellphone banking are proving popular.

Nedbank joins the race

Earlier this year, Nedbank the smallest of South Africa’s ‘Big Four’ financial services institutions announced its intention to selectively expand into Africa and leverage its association with West Africa’s Ecobank Nedbank Alliance.

The Nedbank Capital division has already reinvented itself as it shapes up to tackle the Africa market beyond the Limpopo River. Managing director  of Nedbank Capital, Brian Kennedy, says the bank’s specialised finance and investment banking units have been organised into a single banking unit, with one profit and loss account.