African banking: Barclays and Absa fall out over bank sales
Cross-border partnerships are tricky at the best of times. Each side tends to be wary of the other. Often cultural differences come to the fore. And then there’s the internal politics. So the failure of Barclays and Absa, the South African bank in which Barclays holds a 60% stake, to reach agreement on the sale of the UK bank’s other African businesses will only reinforce the impression that the relationship is tense.
The sale of Barclays’ African businesses, comprising Botswana, Ghana, Kenya, Tanzania, Uganda, Zambia and Zimbabwe, to Absa was supposed to be a key pillar behind the UK bank’s investment in 2005 in the South African lender. But in late February the deal fell through as neither side could agree on the valuation. "There’s a big gap between the price we’re willing to pay and the price Barclays is willing to accept," said Steve Booysen, Absa’s chief executive, during a televised presentation, without elaborating on the differences in valuation.
Naturally, Barclays’ officials are putting a positive spin on the failed transaction and talks are continuing to try to combine operations in Tanzania. "The profitability in the sub-Sahara and African businesses has grown very significantly over the course of the last two years since Frits [Seegers, chief executive of global retail and commercial banking] took control," said John Varley, Barclays’ chief executive, during a presentation in February.
"So as an example, if I look at the non-Absa sub-Sahara and African businesses during 2007, [we saw] profit growth [of] 47% versus [the previous] year. As a result two things [are] happening. One, emerging markets business is becoming more valuable in the estimate of stock markets around the world.