Photographer: Waldo Swiegers/Bloomberg

Barclays Africa Faces $88 Million Payout for Buying Bankorp

Updated on
  • Public Protector finds bank unduly benefited from state loans
  • Financial aid given to Bankorp and Absa seen as ‘irregular’

Barclays Africa Group Ltd., the South African lender formerly known as Absa, may have to pay the government an amount equivalent to 8 percent of its annual profit after the country’s anti-graft ombudsman said the bank unduly benefited from state support when it bought ailing Bankorp before the end of apartheid.

“The illegal gift granted to Bankorp and Absa is in the amount of 1.125 billion rand,” Public Protector Busisiwe Mkhwebane told reporters in Pretoria on Monday. “Two investigations into the matter established that the financial aid given to Bankorp and Absa was irregular.”

Absa bought Bankorp from its shareholder Sanlam Ltd. in 1992 after the central bank helped keep it afloat. The Reserve Bank supported Bankorp out of concern that its failure might destabilize the financial system, which had recently suffered three bank collapses. Absa bought Bankorp for 1.23 billion rand ($95 million), with the central bank having loaned about 1.5 billion rand to Bankorp in total.

“Absa met all its obligations in respect of the loan provided by the SA Reserve Bank by October 1995,” Barclays Africa said in an emailed statement. “It is our firm position that there is no obligation to pay anything to the South African government.”

The bank has received the Public Protector’s report, Barclays Africa said in a separate email. “We are currently studying the report and will consider our legal options, including seeking a High Court review.”

The amount of 1.125 billion rand represents the interest accrued from the central bank’s loans, Mkhwebane said. The Public Protector recommended the government recover the funds from Absa and that the Reserve Bank cooperate with the police’s Special Investigating Unit in recovering “misappropriated public funds.”

An investigation in 1999 said the loans were granted at a rate of 1 percent and invested at 16 percent. Three years later, a separate six-member panel found that the Reserve Bank shouldn’t try to recover the money it lost providing financial aid to Bankorp.

Barclays Africa’s shares fell 1.1 percent to 144.86 rand at the close in Johannesburg, its lowest in more than two weeks and the worst performer in the six-member South African banks index. The stock earlier dropped as much as 2.9 percent.

— With assistance by Amogelang Mbatha

(Updates with Barclays Africa comment in fifth paragraph.)
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