It’s all terribly exciting: enough cash to finance half of the current account deficit, the biggest foreign investment of the post-apartheid era, and a seismic jolt for the cosy cartel upon which our banking system reposes.
Barclays’s bid for Absa, ask almost anyone, is a R33-billion ‘vote of confidence” from the great raptorial beasts of the global financial system in an economy that has stopped snuffling along at aardvark level, and begun to hunt in earnest.
Maybe. But the reason the world’s ninth-biggest bank is here is plain: Absa achieved a 33 % higher return on equity last year than its new parent. South Africa’s pissed-off but passive consumers are easy meat in a market that is more concentrated, and less contestable, than it has ever been.
Since the demise of ‘A2” banks such as Saambou, BoE, and Mercantile Lisbon, there has been nowhere to go but the big four, who control 95% of the market, as well as the payments system that keeps it working. Price competition is negligible, products are interchangeable, and service indistinguishable. You may prefer the decor at Standard, the affinity card at Nedbank, or the rewards scheme at First National. More likely you have never changed your bank, which doesn’t matter because there is very little to choose between the pillars of the system.
The hope, of course, is that the arrival of big new player fresh from the brutal highstreets of Britain, may open things up a little.
Penny Hawkins, an independent economist who has done work for the Treasury on enhancing competition in the banking sector, says Barclays’s arrival could help, particularly if it improves the flow of information to the public.
‘You need a body of consumers that can rationally make choices and act upon them,” she argues.
Executives at the other banks seem to agree, saying in casual headlinese that they expect a shake-up. Much has been made of the fact that big international banks can borrow money more cheaply than local institutions, which may mean they can lend it more cheaply too.
But if Barclays wants the juciest possible slice of this market it may not be too eager to return pricing power to the people. Absa’s clients are already borrowing as if the only cloud in the sky is the phytochemical haze from their brand new cars; they are shopping, but they aren’t shopping around.
What we really need is another big take-out, and we need it soon, lest local banking stocks float unaffordably high on their R33-billion thermal. Two global institutions fighting a proxy war through their local subsidiaries would really start to make a difference.
The most exhausted rumour in town concerns a bid by Standard and Chartered for FirstRand, and other possibilities drift across the highveld in the contrails of executive jets. Let them come.
The regulatory issues have already had a thorough working out from Minister of Finance Trevor Manuel in his consideration of the Absa transaction. The four pillars remain, to ensure systemic stability. Manuel’s insistence that Absa maintain local listings and headquarters should placate those patriots who are worried that foreign owners will not share the commitment to development and transformation that they believe — on slender evidence — can be extracted from locals.
Manuel has even insisted that Absa has a South African CEO, a stipulation of purely political moment, designed to quiet those who are at once rude about capitalism, and naïve about banks.
In the week leading up to the announcement of the deal the daytime talkshows were dominated by callers fretting that a South African icon was about to be swallowed up. One African National Congress MP told Vuyo Mbuli she felt a glow of pride whenever she saw an Absa logo in a neighbouring country. It’s an odd sentiment, given Absa’s history, but thinking back, I can understand it.
My boyhood was a brown and smoky time; the sky beyond the suburbs stained by burning barricades, the future a military drab. But the colour of money was blue. There were two-rand notes with the Sasol refinery on the back, crisp in a birthday envelope, but mostly there was Barclays’s turquoise, franked with an imperial eagle.
My parents banked there, in a neighbourhood branch that smelled of new carpets, and sometimes in the great neo-classical mausoleum on Adderly street, with its vaulted ceilings and dark wood. Barclays, as my grandfather never failed to remind me, was English and England produced order, reliability, and gentlemen.
In a muddled 10-year-old political consciousness, Barclays stood for us: Anglophone, progressive, correct, while the financial institutions that eventually merged to form Absa stood for them: Afrikaans, conservative, horrid. I vaguely remember my father using a Volkskas advertisement as an occasion to explain the Broederbond and ethnic capitalism, which sounded nasty.
When Barclays disinvested and First National signs went up I understood it was a victory, but I hated the new name, and the kitschy thorn-tree logo of a bank with no links to the world beyond the walls, so I was pleased when my mother had a fight with her branch manager and switched our accounts to Standard.
The point is to have a stable, competitive banking system with wider access and better products. That, as the record clearly shows, has nothing to do with being South African.