Britain's top banks are pulling out of Africa and casting doubt on the economic growth prospects of a continent that has been riding o...
Britain's top banks are pulling out of Africa and casting
doubt on the economic growth prospects of a continent that has been riding on
the narrative of ‘‘Africa Rising’’ for more than a decade.
UK’s financial conglomerate Atlas Mara Ltd (Atma), which had
acquired banks in seven African countries, is at the tail end of exiting the
continent. It has termed its African investments “risky” and the sub-Saharan
African macroeconomic environment as “challenging”.
The bank's holding company, which is listed on the London
Stock Exchange, says currency volatility and drying up of liquidity in African
markets adversely impacted its operations prompting the board to reconsider
divestiture and new funding options to shore up the Group’s balance sheet.
Low liquidity support
According to Atma’s annual financial statements for the 14
months to February 28 this year, the difficult operating environment on the
continent has been exacerbated by the Covid-19 pandemic with many African
central banks struggling to provide liquidity support for local banks impacted
by the crisis.
“At the same time political pressures led to the imposition
of regulatory restrictions on interest rate increases, imposition of fees and
other actions that would ordinarily be available to defend liquidity and
capital, if not profitability,” the company says.
According to the report the equity market decline in Africa
last year was 60 percent worse than in other emerging markets, reflecting a
particular “riskoff” view of Africa investment.
“With already constrained fiscal environments and relatively
limited assistance from central banks, African markets have been unable to
mount eco - nomic responses as impactful as those in the US or the EU, and
local currencies, debt and capital markets remain under considerable pressure,”
said Michael Wilkerson, the Group’s chairman.
From September 2020 to date, Atma has completed divestment
in Mozambique, Rwanda, Tanzania and Botswana, and discussions are ongoing for
the sale of its Zambian subsidiary.
The company, which was formed in 2013, had planned to
acquire banks and sustain its operations in 15 African countries.
According to the report, major currency depreciations across
the African markets in which the company operates resulted in a more than $145
million reduction in the dollar value of the company's assets, and a decrease
in the company's debt capacity.
“Despite the challenging macroeconomic environment in
Africa.
"I am also pleased to report resilient operating
performance from our underlying banks during the financial year,” said Mr
Wilkerson.
Barclays Plc, whose operations on the continent span more
than 100 years, marked its complete exit from the region in December 2017 by
reducing its shareholding in South Africa’s Barclays Africa Group from 62.3
percent to a non-controlling stake of 14.9 percent.
In 2016, the lender announced its plans to exit the African
market by selling off its entire 62.3 percent shareholding in Barclays Africa
Group, the holding company of its African subsidiaries, or reducing it to a
non-controlling interest over a two-three-year period.
Barclays Plc sold off business units it did not consider
core operations and shifted attention to consumer, corporate and investment
banking in Europe and the US.
Following the exit of Barclays Plc, Barclays Africa group,
which is currently 40 percent majority owned by South African investors,
rebranded all African operations to Absa Barclays Africa Group, now Absa Group
Ltd, is listed on the Johannesburg stock exchange and owns stakes in 14
countries across the continent including Kenya, Uganda, Tanzania, Mauritius,
Namibia, Zambia, Seychelles, Ghana, Nigeria, Mozambique, Botswana and South
Africa.
Meanwhile, Standard Chartered Bank Plc said in April this
year that it plans to close half its branches and reduce global office space by
a third, as it seeks to save costs by permanently adopting changes to working
practices and retail banking that were adopted due to the coronavirus pandemic.
According to the UK’s business publication Financial Times,
the emerging markets-focused lender would take a provision of $500 million this
year to cut its network to 400 from 776 branches after they experienced reduced
usage during worldwide lockdowns in 2020.
The lender’s physical footprint has been declining over the
past five years.
It operated 1,068 branches across Asia, the Middle East and
Africa in 2016, but coronavirus has led to an increase in online and mobile
banking.
In 2014, Standard Chartered also hinted at plans to close up
to 100 bank branches in Asia, Africa and the Middle East in an attempt to
improve its profitability by cutting about eight percent of its global network
of the then more than 1,200 branches, to save $400 million a year.
External funding
needs
According to the International Monetary Fund, sub-Saharan
countries face additional external funding needs of $425 billion up to 2025 to
help strengthen the Covid-19 pandemic response spending and accelerate income
convergence.
The region’s low-income countries require $245 billion in
external funding in the same period.
According to the IMF’ s Regional Eco - nomic Outlook Report
(2021), Africa will be the world’s slowest growing region this year despite a
more buoyant external environment largely due to the unprecedented health and
economic crisis caused by the pandemic The continent’s economic growth
contracted by –1.9 percent in 2020.
According to IMF, 17 African countries were either in debt
distress or at high risk of distress in 2020, one more than before the Covid-19
crisis Outflows from emerging and frontier markets in sub-Saharan Africa
totalled $5 billion between February and June last year.
According to the World Bank, the projected growth for Africa
in 2022 and 2023 remains just below four percent, continuing to lag behind the
recovery in advanced economies and emerging markets, and reflecting subdued
investment in sub-Saharan Africa.
The World Bank says the region faces worsening impact of
climate change in addition to mounting fiscal pressures and rising debt levels,
as countries implement measures for a sustainable and inclusive economic
recovery.
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