Absa big brass is downplaying the return of Barclays to South Africa, saying the UK group offers a different proposition.
Absa was spun out of Barclays eight years ago when the UK financial services group left the continent. In 2023, Barclays announced the establishment of a wealth office in South Africa targeting wealthy individuals.
“We are clear about our strategy. I am aware Barclays has established a wealth office in South Africa,” says the CEO of Absa corporate and investment bank (CIB), Charles Russon. “We have to stay focused on what we have to do. They have a different business and proposition; we have to deliver on our strategy.”
Absa CIB, which contributed 49% of Absa Group’s headline earnings for the year to December, wants to expand further on the continent. He said the Middle East, India, Dubai, Saudi Arabia, Qatar are areas of increasing importance to Africa, and the CIB is preparing to launch an office in Beijing in May.
“Our strategy remains the same. We want to grow into Africa and support our clients with their ambitions across the continent. We also want to connect our global partners around the world to Africa,” Russon said.
The growth in Absa CIB's footprint took off in 2018 with the opening of an office in the UK and another in the US two years later. He said a presence in Beijing adds to corridors in the UK, US and cements strategic relationships with Chinese clients in Africa.
“It has become clear that the Middle East is of increasing significance in terms of Africa and their involvement with Africa. We are seeing increasing flows into Africa which originate through that Middle Eastern corridor. The big difference is obviously it is not one country, whereas China is a single country.”
He said CIB has China desks “in most of our countries in Africa, because they are Chinese corporations doing business in Africa. You have to service them on the ground but if you want a strategic relationship you need to have relationships at head office level, as well as understand where they want to go strategically, and how to support them.”
In the rest of Africa, Russon said, CIB’s footprint was the deepest in East Africa. “We have a presence in Uganda, Kenya, Tanzania, that is one of our strengths, our Kenyan business is one of our biggest.”
This week Absa reported a flat headline earnings increase of 1% while group revenue grew 8% to R104.5bn. Group impairments increased 13% to R15.5bn, underscoring a weaker-than-expected operating environment. South Africa, Absa’s biggest market, grappled with power disruptions, logistic issues, sticky inflation and higher interest rates while growth in African regions was ahead of South Africa.
The group’s customer base expanded 4% to 12.2-million in 2023 from 11.7-million a year earlier.
CIB wants a 50-50 revenue split between South Africa and the rest of the continent.
It is not diversification for the sake of diversification, it is supporting our clients where they want to do business, whether they be global corporations doing business across Africa, whether they be South African clients doing business across Africa or regional clients doing business across Africa
“I think our revenues were 37% outside SA, and 63% in South Africa. If you look at it now, we are 42% outside South Africa. South Africa has not stagnated, we have grown our SA business, but our business outside is growing faster. If you look at the current year, our revenues in ARO [Absa regional operations] grew 22% while our South African business grew 5%.”
He said diversification was paying off. “It is not diversification for the sake of diversification, it is supporting our clients where they want to do business, whether they be global corporations doing business across Africa, whether they be South African clients doing business across Africa or regional clients doing business across Africa.”
Russon said the government had the responsibility of promoting policy certainty to woo investors in the South African market as the country grapples with sluggish economic growth.
“In the absence of that, I think it becomes difficult to persuade your respective investment committees that it makes sense to apply capital into a particular country or a particular market. The government does have the responsibility to provide absolute clarity around policy certainty.”
He said there was closer alignment between the public and private sectors, which will help grow the economy — referring to the work between the private sector and the presidency to address dysfunction of the logistics network, Eskom, crime and corruption.
“I believe the private sector has a significant part to play in the tent and being welcome in the tent. I think if both of those are at play, South Africa’s chances of moving forward and ultimately achieving real economic growth are greatly advanced.
“If there is a collective will around strategic priorities it hopefully starts to create an environment for growth. That is what we need, we need the pie to get bigger,” said Russon.
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