Barclays’ Exit Biggest Pullout Yet in S. Africa
Britain’s Barclays Bank announced Monday that it is pulling out of South Africa after 61 years here, raising concerns that other European companies will join the American exodus from this politically and economically troubled country.
Chris Ball, Barclays’ local managing director, said that the London parent is selling its 40% share of Barclays National Bank here to the Anglo American Corp., the giant South African mining and industrial conglomerate, and two associated companies for $265 million, less than the stock’s market value.
Apartheid a Factor
Although declining profits and other business considerations were involved in Barclays’ decision to pull out--the largest withdrawal yet in dollar terms--Ball told newsmen that “political factors,” including anti-apartheid protests in Britain and the new American economic sanctions on South Africa, “have precipitated this transaction.”
At a news conference in London on Monday, Barclays Chairman Timothy Bevan acknowledged that the anti-apartheid campaign has played a role in the bank’s pullout.
“There has been a noticeable but not significant loss of business,” he said. “The profit loss has not been substantial, but it has been high-profile.”
Bevan, who visited South Africa recently to complete the deal, also said the parent bank found this nation’s future too uncertain and the process of political, economic and social reform too slow to justify its continued presence here.
“Our decision was a commercial one,” he said, “but it was based on the political and moral situation. All three are part of a circle.”
Basil Hersov, a leading South African industrialist and the chairman of Barclays National Bank here, described the move as “a major disinvestment,” surpassing those announced recently by such American giants as General Motors, IBM, Coca-Cola and Eastman Kodak, and he warned that the withdrawal would have a serious and inevitable psychological impact on the country.
“Political pressures on Barclays to withdraw from South Africa finally became irresistible in the view of the London board,” Hersov added. “Barclays London felt the stage had been reached when the cost of being in South Africa in terms of the obstructions and difficulties this generated for Barclays operations in other parts of the world was no longer tenable.”
The move was immediately hailed by anti-apartheid campaigners in London as “a tremendous breakthrough” in their efforts to isolate South Africa politically and economically until the white-led minority government here yields power to the country’s black majority.
“We regard this as an historic victory in the whole campaign for sanctions against South Africa,” said Mike Terry, executive secretary of Britain’s Anti-Apartheid Movement. “We have had successes with sports boycotts, arms embargoes and cultural links. But this is our first major victory in the corporate field.”
Claims 12,000 Accounts Lost
Vicky Phillips, president of the National Union of Students, claimed that the two-year campaign against Barclays in Britain had cost the bank an estimated 12,000 accounts, mostly among young potential depositors.
“I think (the pullout) is a major victory in the . . . campaign against Barclays Bank and also a major morale booster to all the people in South Africa and Namibia who are fighting against the apartheid regime,” she said.
The South African government refused to comment on the Barclays move despite the implied criticism of its policies as well as the clear lack of confidence in its ability to resolve the country’s deepening crisis.
Barclays’ withdrawal will prove to be “an economic earthquake,” financial analysts here said, warning that it will inevitably shake business confidence in South Africa’s future. For years, Barclays National was the country’s largest bank but slipped to second place a year ago behind Standard Bank, also British-owned.
Other Pullouts Predicted
Many other foreign companies, lacking Barclays’ substantial market share, will now pull out, they predicted, and other repercussions, including much reduced access to international money markets and increased concentration of domestic capital in South Africa, will be felt for many years.
Barclays is the first major European investor to withdraw from South Africa in recent months despite mounting protests in Britain, France, the Netherlands and several other West European countries over their economic ties with South Africa. Since January, 1985, more than 70 American companies have left or announced their intention to leave--a trend that is accelerating.
“If Barclays with all its money and years here thinks that it is not worth staying,” a West European diplomat commented, “then the company with a profitable but small South African subsidiary will have to ask itself what gives it the confidence to remain. Many will conclude, quite naturally, that the prudent thing to do would be to leave quietly.”
For South Africa, the withdrawal of foreign companies means not only increased capital flight but also fewer overseas markets, restricted access to world capital markets, less modern technology and management know-how and the country’s economic relegation to the Third World.
“Barclays and the others who are leaving are not just saying that the protests are getting to be too much or that some moral imperatives have persuaded them to leave,” said Michael Leibowitz, a securities analyst here.
“They are also saying, ‘South Africa, you are not worth it.’ They are saying that, in economic terms, we are too small, too troublesome and too unpromising for a major effort--better they put their money somewhere else. That’s a big change for us. We have been knocked out of the first division of countries economically and relegated to the third division or worse.”
Sold at Steep Discount
So anxious was Barclays to leave, in fact, that it not only sold its shares at a steep discount to Anglo American and its two associates, De Beers Consolidated Mines Ltd. and the Southern Life Assn. Ltd., which had been minority stockholders, but will take payment in “financial rands.” These are worth less than half the value of “commercial rands” but are the only way that capital may be withdrawn from the country.
As a result, Barclays would only realize about $113 million from the sale of the bank if it withdrew the money at present exchange rates.
Despite the government’s unhappiness over foreign divestiture, the deal has been approved by both the South African Reserve Bank and the Johannesburg Stock Exchange.
Ball said there will be little change in day-to-day operations of the South African bank, which has been autonomous for many years and which will retain close but informal links with Barclays in London after the sale. The bank’s name will be change some time next year, he added.
‘To Give It a Full Go’
He chose to see Barclays’ withdrawal as an opportunity for the South African bank, Ball said. “We have assumed control of our own destiny,” he told newsmen. “This is now our bank, and we are going to give it a full go. I think you can expect to see a new sense of excitement in the bank in the coming year.”
To ease the fears of Barclays’ 25,000 employees around the country, couriers were dispatched with videotaped messages from Ball and other top bank officials expressing this confidence in the future of both the bank and the country.
In London, Bevan said: “There’s been a real change in the attitudes toward South Africa in the last 18 months. It was time for us to come out.”
Bevan cited as one example of this new attitude the harder mood of the U.S. Congress which last September proved strong enough to override President Reagan’s veto in order to impose additional sanctions against the Pretoria government.
Eye on North America
Barclays has targeted North American markets as key areas for future growth, and South African investment was considered a serious liability in such a development strategy.
Investors with access to the London Stock Exchange viewed Barclays’ pullout as good news for the bank; at one point Monday, the stock was up 25 points in early trading. However, the stock price fell back once details of the deal were absorbed, including the realization that to dispose of its South African holdings, Barclays had sold assets valued at around $300 million for an effective price of about $113 million.
“We sold for far below the market price,” admitted Barclays spokesman Geoffrey Kelly.
The Barclays sale is likely to shift pressure to Britain’s fifth largest bank, Standard Chartered, which has 12% of its assets in South Africa and more than half its 2,000 retail branches there.
While Standard Chartered has a large global retail banking arm, including the Union Bank in California, it has only a few retail branches in Britain. In recent years, the bank has reduced its holdings in its South African subsidiary from 43% to 39%, but a spokesman indicated that there were no immediate plans to reduced this stake further.
Other large British companies with stakes in South Africa include British Petroleum, ICI and Shell Oil.
Times staff writer Tyler Marshall in London contributed to this story.