Standard Chartered and Barclays Bank are both reducing their presence in African markets.
Internal strains, which have been compounded by Basel III capital requirements and volatile economies, are affecting global banking institutions’ appetite for doing business in Africa.
On April 14, Standard Chartered Bank announced plans to quit seven markets in Africa and the Middle East: Angola, Cameroon, Gambia, Jordan, Lebanon, Sierra Leone and Zimbabwe. In two others, Tanzania and Cote d’Ivoire, the bank’s focus will solely be on its Corporate, Commercial and Institutional Banking (CCIB) business.
Judith Tyson, a research fellow at the UK-based global think tank the Overseas Development Institute, reckons the decision was always in the offing. “The bank has been grappling with internal issues, including a struggle for profitability and cost management,” she says.
A week after Standard Chartered’s announcement, Barclays Bank cut its shareholding in Absa Bank by half, six years after exiting the continent in 2017. From 15%, Barclays now controls a 7.4% stake in Absa following the $687 million sale.
These departures have structural impacts on African economies and the banking sector, according to Zied Loukil, a partner at France-based financial advisory firm Mazars. He says the continent’s banking sector will suffer in terms of integration with global financial systems. It could also cause a decline in external resources and risk marginalization of the banking sector.
For regional African banking conglomerates, however, it plays to their strengths. These homegrown banks have achieved successes by moving down market, into retail and financing of small and midsize businesses. And with the exit of multinationals, new opportunities are opening up among top corporates and high-net-worth individuals. However, Loukil says pan-African banking groups remain fragmented and have not yet reached an adequate size to meet the challenges of financing the continent.