Fitch cuts Barclays Africa after parent says to sell down stake

Citing a lower likelihood of support from the bank’s British parent as it sells down its stake.

Credit ratings agency Fitch downgraded South Africa’s Barclays Africa Group, citing a lower likelihood of support from the bank’s British parent as it sells down its stake.

Barclays plc said on Wednesday it would sell its 62% holding in Johannesburg-listed Barclays Africa down to a minority stake over the next two to three years.

Fitch announced late on Friday that it had downgraded the African unit’s foreign currency and local currency long-term issuer default ratios to BBB-, from BBB and BBB+ respectively, saying it sees a limited probability of support from Barclays in the transition phase up to the point of sale.

“The downgrades reflect Fitch’s view that there is a lower support propensity from Barclays for Barclays Africa Group and Absa given the parent’s intention to sell its controlling stake in Barclays Africa Group (which fully owns South African domestic bank, Absa) and deconsolidate the subsidiary,” Fitch Ratings said in a statement.

The ratings agency added that it considers Barclays Africa Group to be of limited strategic importance to Britain’s Barclays and will not be able to fully rely on potential institutional support from the parent.

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Methinks it’s time to get out of Barclays Africa after the downgrade and the parent’s announcement.

I often wonder why ex Chairman Danie Cronje and his board entered into a transaction on Absa with Barclays Plc after they also withdrew from South Africa years ago.

The Facts About Africa

ABSA chairman Danie Cronjé has questioned the South
African attitude of simply accepting that conditions in the
country will deteriorate. He believes South Africans
themselves are responsible for the local outbreak of Afropessimism.

First published in the December 2000 edition of Insig
magazine ( interview with Danie Cronje)

”Two institutions have contributed much to the understanding
of African economic failure — the Centre for the Study of
African Economies at Oxford University in Britain and a team
at Harvard University in the United States, led by Jeffrey
Sachs (one of the world’s foremost development
economists).
Their findings were really quite simple: Africa’s failures are
in the main the result of bad economics (closed economies
excluding private enterprise); bad politics (low levels of
political rights); risk levels that are too high for investors;
and insufficient capital.
The central causes are bad economics and bad politics.
First, let us consider closed economies. Africa’s economies
have largely been rooted in socialism – at the time of uhuru,
Kaunda, Nyerere, Nkrumah and many other African leaders
opted for socialism. As a result, Africa experienced the same
economic degradation as European socialist countries such
as East Germany”

Another bank to exit might be Nedbank with all the Old Mutual rumors around.

End of comments.

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