The Eagle Flies Away

By Janice Castro.

For 61 years Britain's Barclays Bank has been a pillar of South Africa's financial community. And for the nearly 2 million South Africans of British descent, the bank's eagle logo has been a symbol of their country's few remaining links to the land of their ancestors.

No longer. Britain's second largest bank last week announced it was selling its share of Barclays National, South Africa's biggest commercial bank, for $116 million to a consortium of South African firms, including Anglo American, a diversified mining and manufacturing company, and the De Beers diamond concern. The divestiture, which followed a gradual reduction of the British bank's holdings in Barclays National to 40.4% by last year, was made in the face of rising worldwide sentiment against apartheid and doing business in South Africa. Said Sir Timothy Bevan, chairman of Barclays: "I'm not a coward, but it's no good being totally brave and unrealistic. World opinion is important. It affects commerce."

Barclays' exit, which comes after pullouts by such American industrial giants as General Motors, IBM and Eastman Kodak, is the largest divestiture so far by a European firm. The South African Barclays affiliate employs 25,000 persons at more than 500 branches. More important, Barclays is the first major British enterprise to unload its holdings in South Africa. Britain is South Africa's largest outside investor, with assets worth an estimated $8.5 billion, or 40% of the foreign holdings in the country. If other British firms decide to follow Barclays' example, the exodus could have severe economic and political repercussions for Pretoria.

Initially, however, the Barclays move will have little negative economic impact on South Africa. Barclays National will be operated by its new owners in much the same manner as it was when the British firm held a major stake in the company. Chris Ball, the managing director of Barclays National, noted that the South African firm would now be free to compete around the world with the British bank. Said he: "We are a very powerful bank, and we can continue extending our business abroad." Experts consider the bank's $116 million price tag a bargain for the South Africans. Moreover, because of tight currency rules that prohibit export of capital except at unfavorable exchange rates, the British Barclays will keep the proceeds from the sale on deposit in South Africa for at least a year.

The government of Prime Minister Margaret Thatcher has opposed sanctions against South Africa on the ground that they hurt the country's blacks as much as they do its white rulers, but had no comment on Barclays' action. Privately, some British officials were not pleased. Said one senior government aide: "If South Africa has picked up a valuable asset on the cheap, it can't exactly be seen as a major blow to the country."

But South Africa may eventually run short of capital needed to buy out foreign firms. For that reason, British and U.S. companies have an incentive to leave while reasonable deals are still available. Warned an editorial in the Star, Johannesburg's largest daily newspaper: "The present disinvestment stream could become a flood, as foreign companies rush to cash in their chips while the going's good." Pretoria is hoping that Barclays' departure is not the first wave of the flood.

With reporting by Peter Hawthorne/Johannesburg and John D. Wright/London