Tag Archives: Barclays

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 launches the Africa Financial Markets Index 

Barclays launched their first edition of the African Financial Markets Index (AFMI) that ranks and compares the depth of financial markets in seventeen African countries. The countries were score against six broad pillars of (1) Financial markets depth, (2) Access to foreign exchange,  (3) Market transparency & the regulatory environment, (4) Macroeconomic opportunity, (5) Enforceability of agreements and (6) Capacity of local investors.

South Africa came out on top of the AFMI with 92 out of 100. It was classified as a highly developed market but (with a) challenging macroeconomic outlook; It was followed distantly by Mauritius (66), Botswana (65) and Namibia (62).

Kenya was ranked fifth (59), just ahead of Nigeria (53) Ghana (49) and Rwanda (48), and Kenya was found to be the most sophisticated in East Africa due to innovations and reforms by the Nairobi Securities Exchange (NSE) and the Capital Markets Authority (CMA).  Kenya’s scores were quite consistent across the six pillars with recent developments including the de-mutualization and the IPO of the NSE, the launch of a first exchange-traded fund by Barclays Kenya, and the launch of the M-Akiba bond.

Kenya is the seventh largest stock exchange by market capitalization and sixth by bond listings. But George Asante, Managing Director and Head of Markets at Barclays Africa said that Kenya lacked deep-pocketed market-makers who could broker deals, and take price risks and also that Kenya needed to develop a primary dealership network. He added that the participation of local investors in long long-term investing was quite limited and local investors are critical as they buffer volatility caused by foreign investors. Assets were concentrated among buy-and-hold investors, rather than pension funds and insurers. Kenya’s domestic institutional investors have $12.6 billion of assets but this only works out to  $173 per capita and he suggested that Kenyan markets and regulators needed come up with more securities listings, instruments, and innovations.

Barclays Bank of Kenya Managing Director Jeremy Awori said that “The AFMI will be produced annually to drive conversations, track progress and address gaps in financial markets.” Already countries like Rwanda and Morocco want to use the index data to improve their financial markets.  At the tail end of the AFMI was Egypt, Mozambique, Seychelles and Ethiopia. Ethiopia was scored as “a fast-growing economy but with no financial markets depth or local investor capacity.”  

Guests at the launch included Jeffrey Odundo, CEO of the NSE, and Paul Muthaura, CEO of Kenya’s CMA. Muthaura said the CMA had a master plan to make Kenya a choice destination for capital flows by 2023, while Odundo said the NSE has broadened its  revenue and product base (by introducing REIT’s, ETF’s, M-Akiba and next derivatives, and a new law to govern securities lending), and was working to make Kenya more visible. They are active members of the Africa Securities Exchange Association and will host a “Building African Financial Markets” seminar in Nairobi in April 2018. They also plan to join the World Federation of Exchanges.

The AFMI report can be downloaded here from the Official Monetary and Financial Institutions Forum website; OMFIF produced the report with Barclays Africa

Barclays Africa Macro Economic Report

Africa is poised for third wave of growth that could return it to the Africa rising heights that preceded the global financial crisis. These are some of the highlights from a report released by Barclays Africa in Nairobi on their macro economic outlook for 2017-2018.

Barclays Africa Chief Economist Jeff Gable said that global growth was 3.7% and is at its strongest in 5 years with the growth synchronised in all regions – US, Europe (strongest in a decade), Asia (recovering from 2017), and Latin America (coming out of recession). Global concerns include the politics of rage and nationalism waves, US political uncertainty (with President Trump),  China’s economic adjustments and fluctuations in commodity demand.

Africa has shown itself to be resilient and is receiving foreign direct investments (FDI) flows at levels not seen in a decade. South Africa gets the top share of FDI (followed by Morocco, Egypt,  Nigeria, Kenya), with most deals coming from the USA – 91 investments (followed by France, China, UK, Dubai) but with the largest source of funding, by far, from China ($36 billion).

Gable sees African countries as better able to address macro economic conditions this time around, such as through making infrastructure pay off by focusing on smaller affordable achievable projects (such as Uganda oil and Tanzania gas), diversifying commodity-driven economies, and managing foreign exchange and debt with the lessons learnt from the earlier dip. He expects that a majority of African countries will continue to grow at a faster pace than in recent years and that average growth will be 4% across the continent.

Some risk concerns are that not many African countries can afford to pay for what they are spending and they are exposed to continued outside borrowing at a time that Sub-Saharan Africa credit ratings are declining and there are discussions about uncertain macro economic policies from Angola, Mozambique, Nigeria, Tanzania South Africa, and Zambia as well as other discussions on political strains in Ethiopia, Kenya Tanzania, Uganda, Zambia, and Zimbabwe.  Another concern is that climate change will disproportionately affect Africa. 

Earlier in the day, Barclays Bank of Kenya Managing Director, Jeremy Awori cautioned on the year-old interest rate cap law in Kenya that had constrained private sector growth, and bank earnings He said banking industry earnings had shrunk 8% as at the third quartet of 2017,  compared to average growth of 15% in previous years and that private sector credit may have shrunk during the year.

Barclays Africa Macro Economic Report launch.

Other highlights of the Macro Economic Report:

  • Kenya’s credit rating has been stable since 2010, but Moody’s are now reviewing it for downgrade (due to to large deficits, high borrowing costs, and policy uncertainty). What concerns Moody’s is not Kenya’s debt size, but its replacement of long-term concessionary debt with short-term commercial debt.
  • Barclays Africa forward exchange rate forecast for the Kenya shilling to the US dollar is 106 at the end of 2018, 108.5 in 2019, and 110.8 in 2020.
  • Interest rate caps have been tried in many countries besides Kenya. The intent is the same, but Kenya’s Central Bank won’t be able to do anything about interest rate caps until next year.
  • For Kenya, tourism and agriculture (after the drought) are moving up, but manufacturing is lagging, and the Purchasing Managers Index (PMI) showed dramatic improvement in December 2017 after plunging to lows in October 2017 during the election season.

The annual Macro economic report was produced by the Barclays Africa research desk. It will be followed by another release by Barclays – of their Africa Financial Markets Index which is a survey of 17 African stock markets.

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.

What Africa means to Barclays

Last week, Barclays Africa released their our 2015 Integrated Report (PDF). It comes in the  backdrop of the Barclays Africa sale that is still reverberating, with denials that the Bank will be divesting from Africa.

It notes that :

  • The Barclays PLC sale is meant to deconsolidate Barclays Africa from an accounting and regulatory perspective and that the Barclays Africa chairman, Wendy Bull, has already resigned from two Barclays (UK) PLC boards so there’s no conflict of interest.
  • The 2015 results demonstrate that we are delivering against our strategy and ambition. We made a profit of R14.3bn, with headline earnings up 10% and a return on equity of 17%.
  • Barclays Africa has a presence in 10 countries. Kenya is the second largest of the 10, but they all trail South Africa by a large margin (79% of the group revenue is from South Africa,). Tanzania has similar numbers to Kenya, but they are contributed by two different banks (BBT and NBC)
  • Barclays parent owns, 62%. The other top 10 shareholders include Public Investment Corp (SA) with 5.6%, Stanlib assets 2.2% and others with 1% each including old Mutual, Sanlam, Prudential, Vanguard, and Blackrock.
  • Barclays Africa has 12.3 million customers.
  • Retail & business banking account for 72% of revenue, corporate & investment-banking 20%, and wealth management 7%.
  • They paid 8.6 billion rand in dividends, 7.3 billion in taxes and 20.9 billon rand in salaries to their 41,000 employees across Africa.

Barclays Africa CEOThe report (We actively sought shareholder views so as to further develop our remuneration reporting) has a levels of disclosure,that would be welcome in Kenyans banks and companies  who have endured a horrible year of governance issues with almost 20 companies declaring profit warnings after previous ‘robust’ years, under long-serving CEO’s.

  • It details the salaries and bonus of the CEO (Rand 28 million), top executives, and non executive (independent) directors of board members (which included the Barclays Kenya chairman).
  • It also lists the performance dashboard of al the executives, and of all the key segments of the bank in their own pages.  Not like Kenyan banks which have the Chairman’s statement noting the tough economy, then (after magic happens) the super profit that was achieved.
  • It lists key matters discussed by the board , tabled month by month, and incorporates the balanced scorecard.
  • No individual director or group of directors has unfettered powers of decision-making.

1 Rand  was about Kshs 7.2, and 1 Rand was about $0.07 in December 2015.