Johannesburg - As British bank Barclays yesterday announced plans to pull out of the African continent in the next three years due to regulatory hurdles, it emerged that it was rocked by legal problems, including being subject to an investigation into suspected money laundering at Absa Bank, its African unit.
According to the Barclays annual report, Absa had identified potentially fraudulent activity by certain of its customers using import advance payments to effect foreign exchange transfers from South Africa to beneficiary accounts in Asia, the UK, Europe and the US.
“As a result the group is conducting a review of relevant activity, processes, systems and controls. The group is keeping relevant agencies and regulators informed as to the ongoing status of this matter,” the annual report said.
Barclays Africa chief executive Maria Ramos said yesterday that it was “early days” to talk on details on the money laundering allegations.
The embattled international bank told the market it would sell its 62.3 percent stake in Barclays Africa in the next two to three years, despite the subsidiary having posted a boost in earnings and revenue in the year to December.
“We are today announcing our intention to sell down our 62.3 percent interest in our African business, Barclays Africa, over the coming two to three years, to a level which will permit us to deconsolidate it from an accounting and regulatory perspective, subject to shareholder and regulatory approvals if and as required,” the parent company said.
Barclays, which was previously the trail blazer in the global financial sector, said it would focus on two divisions, Barclays UK and Barclays Corporate and International.
Ramos said the spin-off of African assets was not a reflection on investor aversion towards the continent and that regulatory burdens specific and particular to Barclays as a UK-headquartered and globally significant financial institution had significantly decreased Barclays Africa’s stand-alone returns for Barclays.
“The decision is not driven by sentiment about Africa and South Africa, but on the regulatory environment and other issues facing Barclays,” she said.
Ramos said she had no regrets about the establishment of Barclays Africa and was optimistic that new partners would be found.
Possible delays
“Our engagement with Barclays starts now. We will engage with Barclays on what is the most satisfactory solution. I don’t know what that will look like,” Ramos said during a press conference at Absa’s head office in Johannesburg.
Theo Botha, a shareholder at Absa, said Barclays might need more than three years to sell the African assets.
“Maybe they will need more than three years to sell. For example, if you look at Old Mutual, it wanted to sell Nedbank for years; it never really happened. There must be regulatory issues when a big shareholder pulls out,” he said.
Barclays Africa has 12 million customers across the 12 countries in which it operates and has assets worth more than R1 trillion.
In the year to December, it reported a 17 percent increase in headline earnings from the rest of Africa to R2.3bn and in South Africa, its biggest market, headline earnings rose by 8 percent to R12bn.
Revenue grew by 6 percent to R67.2bn, while operating expenses increased by 5 percent to R37.7bn.
Shares rose 2.13 percent to close at R138.89 yesterday.
BUSINESS REPORT