Category Archives: ABSA

Barclays Kenya unveils AFMI 2018 – the Absa Africa Financial Markets Index

Barclays Kenya launched the second edition of AFMI 2018 – the Absa Africa Financial Markets Index, revealing performance improvements at a time of economic turmoil on the continent and also the addition of new countries to the index that now tracks twenty African economies.

In the time since Barclays launched the initial Africa Financial Markets Index in 2017, they have seen good engagement from policymakers striving to improve their appeal to investors through the AFMI 2018 index which measures countries across six pillars of market depth, access to foreign exchange, market transparency/regulations, capacity of local investors, macroeconomic opportunity, and enforceability of legal agreements. This year, three new countries – Angola, Cameroon and Senegal joined the index bringing the countries tracked to 20 and the country measures were also tweaked to include elements of financial inclusions and levels of investor education

The AFMI 2018 was again topped by South Africa, the most advanced financial market in Africa, followed by Botswana, Kenya, Mauritius and Nigeria. Kenya, Morocco and Seychelles all improved in the rankings while Mauritius and Namibia slipped slightly. Nigeria was credited for improving in its administrative efficiency and tax reforms. 

Jeremy Awori, Managing Director of Barclays Kenya said that emerging markets were under great pressure with currencies dropping, interest rates rising, political instability, falling commodities etc. and these highlighted how strong domestic financial markets could be used to cushion African economies from headwinds. He said that while  Kenya topped the access to foreign exchange pillar of the index, and had improved in the enforcement of  legal agreements, showing it was on a path to be a regional financial hub, there was still need to need to improve capacity of local investors, and grow the diversity of investor products. He added that Barclays Kenya was the first institution to list an ETF – an exchange-traded fund at the Nairobi Securities Exchange (NSE) and was also providing thought leadership on international swops and global master repurchase agreements.

Guests at the launch included Geoffrey Odundo, CEO of the NSE, and Paul Muthaura, CEO of Kenya’s Capital Markets Authority (CMA). Odundo said that while the 2006-08 IPO era unlocked retail investor capital, there was much more opportunity for investors to get good returns in the secondary markets including through REIT’s and that the NSE was currently piloting on offering derivatives. Muthaura spoke of initiatives to connect investors across African investors including a pilot exchange partnership between Kenya and Nigeria, and the African Securities Exchanges Association which was looking to enable trading links between the six largest exchanges on the continent.

Anthony Kirui, Head of Markets at Barclays Kenya said the country had an array of fixed income securities, but attention needed to shift to re-opening bonds as opposed to issuing new paper. He added that there was a need to create a primary dealership and a true OTC market and to also address the reluctance from local owners to list on stock markets. Muthaura said that one factor in the lack of new listings at the NSE was due to companies, who may have been candidates for listing to get new capital, now opting for the abundant and cheap funding from banks that were flush with cash in the era of interest rate caps

In East Africa, Uganda was stable (at No. 10) on the index while Rwanda and Tanzania dropped slightly, the former due to discrepancies in the implementation of rules and the latter due to lack of capacity of local investors. Ethiopia was at the tail end of the Index due to not having a security exchange and corporate bond markets, but that is likely to change as the country pursues reforms such as freeing the foreign currency exchange rate and planning for privatization of Ethiopian enterprises.

The AFMI 2018 report was done with the Official Monetary and Financial Institutions Forum (OMFIF) and can be downloaded from the Absa site.

Barclays Africa to rebrand as Absa Group

The journey has been a dozen years in the making but Thursday brought confirmation that Barclays in Africa would be re-branded as Absa following shareholder and regulatory approval.

The official statement from Barclays Africa on the change notes that:

  • A priority for Barclays Africa is to restore leading positions in core business areas, while expanding into new markets, enabling the group to deliver double-digit growth.
  • The Group will expand its corporate and investment banking unit to certain international jurisdictions, with offices set to open in London and later in New York, trading as Absa Securities, and offering opportunities for our clients to financial markets offshore, and providing access to corporates and institutions seeking to invest in Africa. 

Barclays is in twelve countries in Africa, including Ghana, Uganda, Zambia and Kenya and the re-brand is expected to be phased gradually.

Barclays Exiting Africa: Part II

Almost a year after Barclays Africa announced a decision by (parent) Barclays PLC to exit Africa, they released their Barclays 2016 results (PDF). While the world is now a different one after BREXIT and President Donald Trump, the exit plans are still on course.

Excerpts of the some statements released on Thursday 

  • Revenue from (the rest of) Africa) has been growing at about 16% a year, compared to 5% in South Africa, but, the rest of Africa (excluding SA) is still just 23% of revenue for Barclays Africa. They expect that rest of Africa growth should exceed South Africa’s
  • They have agreed with Barclays PLC on terms of the “separation payments and transitional services  – Barclays PLC will contribute £765m, comprising of £515m in recognition of the investment required in technology, rebranding and other separation projects, £55 million to cover separation related expenses, £195 million to terminate the existing service level agreement relating to the rest of Africa operations”.
  • Barclays PLC will contribute an amount equivalent to 1.5% of Barclays Africa market capitalization towards a black economic empowerment (BEEP) scheme and Barclays plans to create an equity plan for employees in the next 12 to 18 months.
  • They will continue to use the ‘Barclays’ brand in the rest of Africa for three years from the date on which Barclays PLC reduces its shareholding in BAGL to below 50%.
  • During 2016, Barclays PLC reduced its shareholding from 62.3% to 50.1%. Other shareholders include Public Investment Corporation (SA) 6.86%, Old Mutual Asset Managers 3.31%, Allan Gray Investment Council 2.16%, Prudential Portfolio Managers 2.01%, Schroders Plc 1.93%, BlackRock 1.69%, Vanguard Group 1.66%,  Dimensional Fund Advisors 1.65%, and Sanlam Investment Management (SA) 1.62%.

June 1 2017 update

  • Barclays Africa Group Limited today announced that following the completion of South Africa’s largest bookbuild in South African Rands, Barclays PLC has sold 33.7% of Barclays Africa’s issued share capital at a price of R132 per share.
  • This results in accounting deconsolidation of Barclays Africa from Barclays PLC.
  • Barclays PLC sold 285,691,979 Barclays Africa ordinary shares at a price of R132 per share, which results in Barclays PLC reducing its shareholding to 23.4%, with a further 7% to be taken up by the Public Investment Corporation at a later date, following receipt of the necessary regulatory approvals.
  • The significance of this sell-down is that Barclays PLC is no longer the controlling shareholder of Barclays Africa, which now has a diverse shareholder portfolio made up of very supportive, long-term, institutional and individual investors.
  • Ownership of Barclays and Absa operations in Africa does not change as a result of the reduction in shareholding. The 11 banks that form part of Barclays Africa will continue to be led and operated by people with deep local knowledge and a diversity of skills and experience.
    £1 is $1.25, £1 = KES 128.5, and  £1 = 16.1 ZAR.

Banking in SA

SA banking
What’s different about banking in South Africa? Absa is now apart of Barclays and I visited a branch to compare some major differences.

One significant difference between Kenya and South Africa banking is their (SA)recognition that banking is a necessary service which should be affordable. While Barclays is considered to be one of the more expensive banks to use in Kenya, Absa along with the other major SA banks have embraced mzansi which is a voluntary industry effort (financial services transfer charter) to offer accounts for the unbanked, poor, or low-income citizens. Kenya has an unregulated banking sector in which the only option for many such citizens is to seek a cheaper bank such as Co-operative or Equity banks.

Some uniquely Absa services unseen in Barclays Kenya include;
– Izokuphilisa or Absa micro-loans of up to 8500 rand (about 85,000 shillings).
– Mzansi money transfers though which anyone (even non-Absa customers) can use Absa to transfer up to 25,000 rand (250,000) shillings per month to anyone else
– Funeral savings plans
– Full Shari’ah banking including vehicle & asset financing as well as Absa Islamic will writing. (Barclays and KCB have both introduced Islamic banking in Kenya in the last year)
– SA banks sell insurance, something CFC and CBA would love to be able to do at their branches in order to maximise returns on their investments in the insurance industry. A sample Absa insurance plan guarantees additional payment of 50% if death occurs while one is a fare paying passenger on licensed public transport (i.e. matatu) . AIDS is also not a hindrance to obtaining an insurance policy.
– Absa internet access (AIA) for online account users and provides unlimited internet use at a monthly fee
– They have multilingual brochures – typical ½ brochure in English and the back half in Zulu, Afrikaans, or any of the other 11 official languages depending on the region of the country where the branch is located. In Kenya, it’s rare to find brochures in any language other than English.
– On the other hand, it is difficult to exchange foreign currency. Kenya has freed up exchange regulations allowing seamless transfers at forex bureaus and banks while in SA it requires one to show an ID (or passport) and answer a few questions.
– Security is less visible since there are no guards in the bank branches.

Business Rumours from South Africa

Barclays Kenya to become Bank Absa?
Barclays and Absa are planning to create the biggest bank in the African market. In a second phase to the transaction, Barclays plans to sell its African businesses outside of SA to Absa which is expected to happen within the next two years.

MTN coming to Kenya?
MTN is committed to following its growth roadmap in Africa, despite hurdles associated with investing in the cellular telecommunications sector on the continent. Behind the scenes, MTN is finalising a deal in East Africa.