The Absa shareholders who could end up coughing up

NEWS ANALYSIS

The government must sue to recover up to R2.25-billion from Absa, as repayment for an apartheid-era lifeboat, the public protector has provisionally found.

If that doesn’t change, the people of Qatar may be mildly miffed at having to shell out their R75-million share. South African government employees may not be thrilled either.

As the Mail & Guardian first reported on Friday, a provisional finding from public protector Busisiwe Mkhwebane holds Absa liable for the repayment of a R1.125-billion gift – an unlawful bailout – from the government to the Bankorp group in the early 1990s. Absa acquired Bankorp while that transaction was in place.

With interest the total amount to be claimed would exceed R2.25-billion, but interest would be capped at an amount equal to the original debt, according to the public protector’s provisional report.

Absa has argued it is not liable for the repayment and the initial finding is expected to be challenged by several parties, perhaps even before Mkhwebane issues a final report, the remedial action of which could be binding.

If the money were to be reclaimed, however, it would ultimately come out of the pockets of current shareholders. And Absa’s current shareholding is very different from that of 1995, when the Bankorp bailout was wound up, or even the early 2000s, when the government declined to try to recover any part of the gift.

Absa is a unit of Barclays Africa, which is in turn majority-owned by Barclays Bank PLC, the British-based multinational.

By shareholding, 50.1% of a claim against Absa will be for Barclays PLC’s account, be it by way of reduced dividends or as a dip in profit that affects the share price. That makes Barclays PLC’s share of the maximum claim some R1.13-billion.

Barclays PLC has no controlling shareholder. When last reported, its single largest shareholder, multinational investment giant Capital Group, owned just under 7% of the company. That makes its beneficiaries, everyone from American retirees to the European rich, responsible for a share of the Bankorp gift worth just under R80-million.

The second biggest shareholder in the British company is an investment fund run by the government of Qatar. That holding company’s share of the maximum repayment would be R75-million.

A wide range of South Africans would also find themselves coughing up.

Investors in vehicles such as unit trust and pension funds with asset managers Stanlib, Old Mutual and Investec, hold a combined 8.52% share of Barclays Africa. Their share would be some R190-million.

Another major local shareholder, at 6.81%, is the Public Investment Corporation, which invests the pension funds of government employees. Its share would be about R153-million.

But all indications are that these ultimate shareholders – and payers, if payment is ever made, will be no more than a little bit vexed.

Barclays Africa is a publicly traded company and its share price showed no real reaction to the news of the potential R2.25-billion payment, at times trading higher than in previous weeks.

“In the context the numbers just aren’t that big,” said Jan Meintjes, portfolio manager at Denker Capital, who specialises in the banking sector, on why the share price did not react.

“It will constitute around 2.5% of the net asset value of the Absa group, and it is roughly equal to 15% of total profits that Absa made last year.”

Assuming the full amount is paid, it would probably mean a reduction of about 3.5% in the value of Barclays Africa, Meintjes said. But investors are not counting that as likely. “There is an inherent scepticism in the market that this will stick,” Meintjes said.

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Phillip De Wet
Guest Author

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