SARB works with Barclays to manage risk

SA’s Reserve Bank will collaborate with Barclays to manage the flow of money as the UK bank prepares to reduce its stake in Barclays Africa.

Johannesburg - The South African Reserve Bank said it will collaborate with Barclays to manage the flow of money and minimise risk of causing fluctuations in the rand as the British bank prepares to reduce its stake in Barclays Africa Group Ltd.

The UK lender has had a “constructive and open dialogue” with South Africa’s financial authorities about its intentions, National Treasury and the central bank said in an emailed statement on Wednesday. Barclays has shown commitment to structure a transaction that will minimise the impact on the countries where Barclays Africa operates, they said.

Read: Barclays reveals legal issues hanging over Absa

Barclays plans to sell down its 62.3 percent interest in the Johannesburg-based lender, formerly known as Absa, over the next two to three years to less than 20 percent as part of a wider overhaul of the UK lender by new Chief Executive Officer Jes Staley. Barclays’ stake in the bank is valued at almost R77 billion ($4.9 billion) and any share sale may cause a movement in the rand, which has already slumped to a record low against the dollar this year.

“The Reserve Bank will work with Barclays and Barclays Africa to ensure that any potential risks from the transaction are mitigated and appropriate measures will be taken to manage capital flows arising from the transaction,” statement shows.

Apart from selling down its stake in Barclays Africa, the British lender may also dispose of its operations in Egypt and Zimbabwe, which it still controls. Barclays Africa has operations in 10 countries on the continent including Botswana, Ghana, Tanzania, Uganda and Zambia. The African lender and authorities in countries including Zambia, Tanzania and Kenya have been forced this week to address fears that the bank will shut down and give assurances that Barclays Africa’s operations will continue unaffected.

Barclays Kenya is running on “a very normal basis” and customer savings are safe, Managing Director Jeremy Awori said in Nairobi Tuesday.

Read: Barclays on the right path - Staley

As word of the planned sale leaked, Barclays could have done more to reduce concerns among investors, said Simon Brown, Johannesburg-based chief executive officer of trading company JustOneLap. “News leaks, and companies need to know that and keep ahead of the news. Companies are far too lax about keeping investors informed.”

While Barclays hasn’t identified a potential buyer, the sale of a stake in Barclays Africa is an opportunity for black South African investors to boost ownership and in line with efforts to improve economic equality following the end of apartheid. The Public Investment Corporation, which manages the bulk of the South African government’s pension money, has also said it may be interested in increasing its holdings.

“Black economic empowerment investors would very likely participate in these share placements as many of the previous BEE banking deals have matured,” said Adrian Cloete, a banks analyst at PSG Wealth, a Cape Town-based firm that manages more than 300 billion rand. “There would be strong demand from institutional investors for Barclays Africa at the current valuations.” Smaller parcels of shares could be placed among South African and offshore fund managers at a relatively small discount to the market price, he said.

Barclays Africa has risen 6.6 percent since the parent company said on Tuesday it will reduce its holdings, while the British lender has dropped 8.2 percent.

BLOOMBERG