After being a vital pillar in the banking environment in most of Africa for over a century, the UK-based Barclays Plc has virtually disappeared from the high streets of African cities.
But contrary to appearances, Barclays has not retreated from Africa; instead, there is a repositioning of its African businesses through its private, investment and corporate banking franchises focused on South, West and East Africa. Amol Prabhu, Barclays Country CEO for South Africa and Market Head for Africa, is in conversation with Mushtak Parker.
There have been many rumours Barclays divesting from Africa. Can you set the record straight as to the bank’s proposition for Africa, going forward?
Amol Prabhu: Let me give you a brief background history. In March 2016, Barclays announced it was going to separate from ABSA. Over a number of years subsequently, it proceeded with share sell-offs. We started at about 62% and we now own just over 7% of the shares.
The important point is that we are now separate entities, independent of each other. Barclays is charting its own history and going forward with a new chapter in Africa. We have been on the continent for over a century. Business models change and adapt over time. Our focus has always been on our clients in Africa and it has remained so during this period of change.
This ‘leaving Africa’ notion is misunderstood. Yes, our visible retail presence on the continent has now gone. Our private, investment and corporate banking businesses throughout the period have however continued to support the global needs of our South African and other African clients, and equally important, our global clients seeking to invest into African countries.
You referred to the separation of Barclays Africa from ABSA. Part of the confusion seems to come from the way similar forms of the brand name ‘Barclays’ can be used. Can you to clarify the legal status of Barclays in Africa?
It was not Barclays Africa but Barclays Plc, the London entity that was involved in divesting from ABSA. When I mention Barclays, I am referring to the global Barclays Plc entity in London. Barclays Africa used to be a holding company for some of the subsidiaries operating on the African continent, including one whose name was changed into ABSA.
Barclays Plc is now spearheading our private, investment and corporate banking activities in Africa. I came to South Africa three years ago to head our operations and I am based in Johannesburg. We are actively recruiting talent and this office is growing at a rapid pace. We have over a hundred people globally that focus on Africa.
We have stepped back a bit to re-evaluate our business in Africa and assess where we add real value. The real question is: ‘Why would clients want to use Barclays?’ It could be a Nigerian, Kenyan or South African corporate.
We have engaged with over 200 clients over the last two years to find this out and how we can improve our services from a business perspective and add value. It became clear that the Barclays brand is very strong to them, as an independent stable financial provider with the ability to link African clients to its global network.
What was the rationale behind Barclays leaving the retail banking sector in Africa?
The initial decision to separate from ABSA and sell down the shares was for regulatory and financial accounting reasons post the global financial crisis in 2008, especially around the treatment of subsidiaries. It was not a knee-jerk decision. A lot of thought went into it. But it was also part of a forensic evaluation of Barclays’ global businesses.
We were evaluating where we were adding value, where we can operate and provide connectivity for clients, and most importantly, [how] to guide clients that would wish to use us.
In Africa, especially in the markets we have a presence in, such as South Africa, Kenya and Nigeria, there are quite a few banks that operate there, and clients have a choice. Barclays had to be appropriately positioned if we were to win a market share.
Bank ownership, especially by foreign investors, has assumed a political context. You mentioned regulatory and financial accounting reasons for the decision to divest from the retail banking sector. Did the above kind of consideration also feature in the decision?
The short answer is I don’t know. I was not in a senior position at the bank when the initial decision was made.
As a firm, we are absolutely committed to diversity and meaningful transformation. The local talent we are hiring is quality South African talent. We regularly send young people from our office in Johannesburg to London, where they can engage with and learn from the entire global banking team. They return with greater experience and knowledge which they can then impart to our South African clients.
Our diversity and transformation footprint are not confined to South Africa, but apply to our entire global network starting with the UK. South Africa is a huge opportunity for us. As a firm, we are heavily investing in South Africa. The way the franchise is developing, especially in the way we can support our African clients, is excellent.
What are your priorities for Africa going forward?
Our core activities are private, investment and corporate banking. In South Africa we are licensed to do all three types of banking businesses. We are licensed with the South African Reserve Bank and the Financial Sector Conduct Authority. The importance of this is that it shows our commitment to the country. These licences take time, energy and investment to get, but allow us to bring our whole bank to our South African clients.
All three businesses are moving forward, growing, and working with each other in developing the franchise.
Let me give an example of this. If you have an entrepreneurial family, where the father is the chairman and a sibling the CFO of the family firm, and they are looking to grow, then obviously, they are private clients in their personal capacity, but in their professional capacity they may also need investment or corporate banking services, particularly if the business is seeking to expand overseas.
We do have vibrant businesses in South Africa which are doing well but are increasingly interested in exploring new markets abroad.
Elsewhere in Africa, we focus primarily on Anglophone countries such as Kenya, Nigeria, and Ghana, where our brand particularly resonates. People know Barclays and often have an emotional connection with the firm. This could have been through their first job or while studying in the UK. Here again we are looking at providing all three lines of business.
We don’t add value on the local, local, local. We add real value for individuals and firms which have overseas needs. From a company perspective, they may need to raise money from the global debt market or be looking to list on the London or New York stock exchanges.
It could be a strategic M&A (mergers and acquisitions) deal where they are either looking to purchase another company or trying to sell a part of their business. Recently, in South Africa we represented Consol Glass in their sale to the Argyll Group, and Massmart in selling some of their businesses to Shoprite.
In addition to the three regions in Africa, we have three main markets and jurisdictions where we are very active – the UK, where we began; the Middle East, which has historical links with East Africa; and the US, where we have a huge presence following our purchase of Lehman Brothers in the aftermath of the 2008 global financial crisis. We see our business growing organically across all the African regions and in the three wider global jurisdictions where we are active.
However, we are also looking at business opportunities in Morocco and Egypt. We are not everything to everywhere, but are very focused.
There are also opportunities for inorganic growth. Credit Suisse recently announced that they are exiting their private banking client book for Sub-Saharan Africa, excluding South Africa.
We have entered into a referral agreement with Credit Suisse whereby when they offboard their clients, those clients are referred to us and have an opportunity to join Barclays Private Bank if they wish to. This client book, particularly in West and East Africa, runs into the billions of dollars.
What is the scope and size of Ultra High Net Worth Individual (UHNWI) wealth in your prime markets in Africa?
Private wealth in Africa is estimated at about $2tn. Of this $1tn is concentrated in South Africa, Nigeria, Egypt, and Kenya. We are very focused on all four countries.
The position for the Mass Affluent Market, Family Offices and UHNWIs is that diversified portfolio management is essential, especially if overseas assets – cash, real estate, stocks – are involved. African families value the future of their children, especially [their] education and careers. There is a big pool of funds in this respect that is especially directed towards the UK.
Globally, there is also increased interest in the Environmental, Social and Governance (ESG) issue, Socially Responsible Investment (SRI) and Sustainable Investments. Philanthropy is also taking off. For African clients, UK real estate is phenomenally popular. During periods of volatility, we have seen a greater inflow into portfolio management.
Reputation is important for a bank. Your business will disappear if you do not have stability, integrity, history, and robust risk controls. We are robust in the above respects in all of our global footprint.
The demand for infrastructure investment in Africa and elsewhere is huge. Does your investment banking side include investment in infrastructure?
Infrastructure does play a role to a certain extent, and we have a specialised team in place. We are also focusing on the telco sector, natural resources, fintech and financial services.
As a group we have signed up to achieving Net Zero by 2050. As a financial institution, we are also supporting our clients in developing ESG strategies, such as a just transition in energy, decarbonisation, etc.
Our role is very much supporting clients in their ESG journey and linking them to our global network.
We are a global British bank. I am extremely focused on working on accelerating and increasing that connectivity throughout Africa. We have worked a lot with the UK’s departments of trade, business and development, under their different names, which themselves are focused on the continent’s infrastructure needs, trade finance, export credit and investment insurance, renewables and transition to clean energy projects.
We either support the financing structures or ensure that the right parties are connected – for instance, an infrastructure player in the UK interested in investing in an African country.
Using sukuk for infrastructure is a growing phenomenon in West Africa, where Nigeria and Senegal have raised funds regularly over the last four years, in addition to other sovereign issuers. Is this a potential area of interest for Barclays?
Barclays has a track record in the sukuk market. I spent a number of years in Dubai where I worked on several such transactions, including leasing and commodity finance-based sukuk issuances. If it is the appropriate issuer with the right balance sheet, business sector and underlying sharia-compliant sukuk structure and asset pool, then I can’t see a problem.
From a debt finance market point of view, the pricing has to be competitive compared with equivalent conventional debt instruments. The other consideration is the ability to access an investor universe, say in the Middle East, Europe, or Asia, which you can tap into for such instruments.
This may not be as easy as for conventional bonds and debt instruments. There is also the need for a requisite underlying legislative and regulatory framework to facilitate sukuk issuances.
The investment, corporate and private banking sectors in Africa may be getting crowded, with the involvement of various players, especially from abroad. How do you perceive your global competitors, such as Standard Chartered Bank, ICBC Standard Bank, and so on?
There are many international and established local banks operating in Africa. I do not see these institutions as competitors. I look at Barclays and see where we can and do add value, where can we deliver for our clients and ensure that we can do that at a very high level of standards and service.
Provided we do that, I am confident that the Barclays franchise will grow. I always tell my bankers that while our clients do well, our business will also flourish. It’s a relationship business.
What are the compelling aspects and the challenges of doing business in Africa?
When you do business in Africa, you have to be focused on what you do and your strategy – where you add value and where you don’t add value. You have to be disciplined to stay true to that strategy.
People say that Africa is the continent of opportunity. And it is. But from a banker’s perspective it has to be executable and bankable opportunities. You can get lost in a world of opportunities. You have to know where you can actually deliver, and how you deliver to a high value.
This will depend on your knowledge of a particular market, your engagement with stakeholders including line ministries and regulators, and the quality of your due diligence. We live in a world of risks. The important thing is to be able to understand those risks and how to mitigate them. If you are comfortable with those risks, then fine. This is a global phenomenon.
In the markets we are focusing on – Nigeria, South Africa and wider East Africa and Egypt – there is a huge entrepreneurial spirit. Our focus is to support this entrepreneurial spirit through financing, knowledge and linking them up with other like-minded players in other markets.
The growth opportunities are huge. Private wealth in Africa is estimated to reach $3tn over the next decade. That is about a 38% jump from where it is today.
In the next gen tech start-ups sector there has been a huge growth between 2015 and 2020 – an estimated 40-45% increase in Meditech, Agritech and Fintech. The sector has been getting a lot of traction and interest globally. At Barclays we have introduced Digital Ecolabs and Tech Incubators for young entrepreneurs.
Africa is a compelling story because there are very few areas in the world where you can see the level of growth dynamics that I have been talking about.