Barclays Plc’s exit from Zimbabwe will have catastrophic effects on the country’s efforts to attract foreign direct investment (FDI), analysts have warned.
BY MTHANDAZO NYONI
Last week, British multinational banking giant, Barclays Plc, announced that it was putting Barclays Zimbabwe in its non-core division with an intention to sell in future.
Barclays Plc owns 68% shareholding in Barclays Zimbabwe. It said it could not continue to combine Barclays Bank Zimbabwe with Barclays Africa Group Limited as the business “is no longer a good fit with Barclays’ core strategy”.
It also said it would reduce its 62,3% interest in Barclays Africa Group Limited over the coming two to three years to a level which would allow it to be deconsolidated from a legal and regulatory perspective.
Analysts told Standardbusiness the exiting of multi-international companies like Barclays from a certain continent usually created an impression that something was not right economically with that particular area.
“Investors have a tendency to follow trends. European investors in particular, prefer working with these international banks when they come to Africa and in this case, Barclays’ exit could jeopardise this.
“Therefore, Africa as a continent and Zimbabwe as a nation will suffer in terms of FDI,” said economist Reginald Shoko.
Shoko said the move by Barclays seemed to be driven more by the economic downturn in South Africa. He said this was the reason the pull-out was not immediate but a structured process.
He said given the fact that Zimbabwe was already using an international currency (US$) under the multiple currency system, the country would continue to enjoy financial stability, whether or not Barclays left the market.
However, former Finance minister Tendai Biti warned that the international bank’s pull-out could compromise FDI in Zimbabwe and Africa at large.
As such, Biti said Zimbabwe’s economy was going to be affected gravely.
Economist and public policy analyst Butler Tambo said the development would leave Zimbabweans with no cheaper offshore loans.
“Zimbabwe will no longer be getting cheap offshore loans because Barclays Plc had access to cheap loans from international financial institutions.
“It will become difficult for whoever is going to buy a stake from Barclays to get cheap loans due to issues of reputation,” he said.
Tambo said there were many reasons why Barclays Plc was considering selling off its stake in Zimbabwe.
One reason, he said, was that the bank was once fined $2,5 million by the American government for transacting with individuals and institutions listed under sanctions.
But economist John Robertson said as Barclays Bank Zimbabwe was an independent subsidiary, it was likely that its local banking business would continue, unaffected by the pull out.
“In years to come, when the country recovers, Barclays overseas might consider its investment options and might put more capital into the local bank, but as this current withdrawal affects the whole of Africa, Zimbabwe’s case for support will have to be a very good one,” Robertson said.
Barclays has operated in Zimbabwe since 1912, making it the second oldest bank in the country after fellow British bank Standard Chartered.
In its financial results for the year ended December 31, Barclays Zimbabwe’s net interest income was up 18% to $16,6 million from $14,1 million in the same period in 2014.
Total income was down 0,4% to $46 million. Profit after tax was 41% to $6,6 million from the $3,9 million recorded in the same period in 2014.
Loan loss ratio was 1,2%, up from 0,4% in 2014. The bank attributed the increase to the growth in the loan book and the basis of general provisions having been reviewed to reflect emerging trends from the global and local economic cycles.