Britain’s second biggest retail lender, Barclays Bank has announced its Africa exit and intention to sell its £3.3 billion assets. The timing could not be more innocuous – Barclays Bank Kenya just celebrated its centenary anniversary last week with a pompous ceremony that belies the circumstances of its parent group, Barclays Africa Group Limited (BAGL), Barclays Bank Kenya (BBK) and its country head, Jeremy Awori.
BBK and its CEO Jeremy have put on a stoic face and increasingly look in denial. It is understandable. For the umpteenth time this year, BBK has cited its strong balance-sheet, heritage and commitment to Kenya to rebut the news. They are in good company.
It is not just the Barclays brand on the ropes. The UK Brand too is. Barclays Africa has an admirable foot-print and brand recognition – 45,000 staff – a third of Barclay’s total workforce; 1,267 branches across 12 African countries, including leaders South Africa, Nigeria, Ghana, Egypt, Kenya and Mozambique; but the brand, like the ‘made in UK’ brand, has lately been having challenges getting traction, growth and profitability in Africa.
Jeremy is an experienced hand, having been recruited from Standard Chartered Tanzania, another UK financial services icon, where he was CEO Tanzania and its regional sales and performance director for its Dubai operations.
He replaced another corporate high-flier, Adan Mohammed, the current Industrialization and Enterprise Development Cabinet Secretary. Adan, who was then the MD for East and West Africa and also headed the Kenyan operation, had just been promoted to Barclays Bank’s Chief Administrative Officer (CAO). Jeremy became a direct report to Adan.
Prime Minister David Cameron’s announcement last week that the referendum on whether to exit or stay in the EU will be held on June 23, 2016 lays down the marker into the summer slugfest having failed to get a deal of several concessions UK was seeking from his EU counterparts on conditions for the UK’s continued stay. He hopes he will win the referendum. This is a huge gamble for him, the UK and its firms.
Are there are any correlations and parallels between the fortunes of British firms and Britain’s waning economic, and political influence in Africa, a century after first venturing here? What does this mean for British firms, Africa and the Commonwealth Club, which have had ties, sometimes bitter, like the Mau-Mau reparations for historical injustices?
A number of hitherto pre-eminent British firms in the region, like Unilever and Eveready, just like London’s waning influence in highly-leveraged global geopolitics, have increasingly morphed from a vanguard work-horse to what euro-skeptics and hard-core nationalists across the political and economic divide like the UK Independence Party’s (UKIP) Nigel Farage call a flailing show-horse. They posit that there is an urgent need for a sweeping rebrand and re-orientation of the nation, firms and its people.
While supporters of remaining in the EU reiterate that study after study shows the benefits of the UK remaining within the EU, the former characterization of the UK is resonating with voters –some current straw polls show voters evenly split and balanced on a knife between whether to stay or leave.
Just like the US Republican presidential party candidate Donald Trump’s current campaign tagline, ‘let’s make America greater Again’ is resonating with disgruntled voters and shaking up the republican establishment’s notions about America and its leadership on the global stage -without much recourse to the mechanics and economics of the implications of this choice -Farage’s UKIP and its backers propound reasons that would only serve to isolate and roll-back Britain’s place in the comity of nations. Does it mean the end of the regional integration project and economies of scale across the globe?
An exit, euphemistically referred to as a ‘Brexit’, is a scary prospect not just for Mr. Cameron and his Conservative Party in government, but also for British firms, its economy and the global economy. The G20 Council of Ministers just issued a warning shot about Brexit over the weekend –that it would unleash an exogenous global economic shock on the already anemic global economy, further firming up fears of a prolonged economic recession.
But things were never always this gloomy for Her Majesty’s Government and Service. Having entered Africa, and Asia-Pacific, through colonialism at the turn of the 19th century, and cementing its apogee in the early to mid 20th Century through Christianity, Education, and trade via mercantilistic firms. The imperious Imperial British East Africa Company (IBEAC) and East India Company (EIC) on the Asian company prospered and fueled London’s expansionist ambitions and prestige status on the global stage.
Then change came, forever immortalized by that immortal quote in 1960 in Cape Town by the then UK’s Conservative premier Harold MacMillan about ‘the wind of change blowing through the African continent, and whether the British liked it or not, that growth of national consciousness is a political fact’. It was not on a silver platter though. Indigenous independence political agitators, and a changing geopolitical architecture like the UN conspired to toss out colonialism. And now a different but related set of economic circumstances seems to be unraveling Britain’s insurable economic interests.
The UK has been a reluctant Eurozone member, initially spurning the European Coal and Steel Community (ECSC) formed by six countries in 1950 as only 10% of its exports went to them. The ECSC prospered into the European Economic Community (EEC), EU’s predecessor, while the UK formed the European Free-Trade Association (EFTA) in 1960 with six much smaller European countries. It floundered. Premier MacMillan, impressed by the EEC’s stellar economic performance, broke the obstinacy, eventually joining in 1973.
At independence, Britain did not just exit Africa. It framed its econo-political engagement in more nuanced terms through the Commonwealth Secretariat, bilateral relations and trade. British firms continued trading profitably. So did development aid in social sectors. But as the independence generation, weaned on the Westminster model and nostalgic about the legacy thinned out and gave way to a younger, urbane, discerning post-independence generation, agnostic to legacies, cutting deals in a unipolar world, the British brand is finding it hard-pressed to retain its brand affinity and value. It must seek ways to remain relevant and material. China, though in a slow-down, is Africa’s largest trade partner at US$220 billion in 2014. America, Asia, Japan and too have been on the ascendancy and intra-African trade has boomed.
The brand has been hemorrhaging over the years, and there has been asea-change from the halcyon days.
CMC Holdings and its Land-Rover franchise in Kenya are another case in point. Former President Moi is reputed to have personally logged over 200,000 miles in his Land-Rover 109, earning the brand its pride of place as the official government vehicle over the 36 years that President Moi and the Founding father Kenyatta led the nation.
Then came Mwai Kibaki in 2003. By commission or omission, his government replaced the ubiquitous Land-Rover with the Japanese Toyota. Kenya moved from dependency on Appropriations in Development Assistance predicated on the west within 3 years. China, Japan and India are now Kenya’s biggest bilateral trade partners and lenders.
In March 2008, iconic British automotive brand, Jaguar Land-Rover (JLR) was bought by Indian conglomerate Tata Automobiles for $2.3bn (£1.15bn). Land-Rover’s local franchise holder, CMC Holdings, stuck up in the old ways, and caught up in a web of boardroom intrigues, lost the franchise to RMA Africa in 2013.
CMC was bought out by Al-Futtaim Group a Dubai-based firm, for Ksh. 7.5 billion in 2014, and delisted from the bourse, but not before costing the careers and fortunes of a couple of septuagenarian corporate titans and former power-men in previous governments.
Barclays is not the first Bank to exit. BNP Paribas and Societe Generale exited Benin two decades ago. They were almost oligopolistic. Financial services never collapsed. Indigenous banks grew and prospered. Both have dashed back in.
Unfortunately, financing intra-European trade is the main driver of European banking, fueled by anachronistic regulations that reinforce a death spiral vortex. Laws prohibit lending against foreign assets. Many banks have huge assets that no one borrowing even at 1% per annum. Some countries have negative interest rates. Quantitative Easing is proving ineffectual.
Release those huge pools of liquidity to credit hungry emerging markets to buy European intermediate goods e.g. energy equipment and technology, medical supplies, infrastructure equipment and services, giving a lifeline to European exporters.
As David Cameron and the UK Trade & Industry (UKTI) Department at the British High Commission steel themselves for the scheduled whirlwind tour of Africa later this year to make up lost ground and shore up the brand in Africa – assuming Cameron wins the referendum vote and Britain stays in the EU – it helps to rethink the brand. There are no easy options.